Some context on the environmental impact of a sustainable water strategy

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This article was written by Impax Asset Management, a specialist asset manager investing in the opportunities arising from the transition to a more sustainable global economy.

As a key natural resource, water plays a major role in industries across the economy as well as being essential to support life. However, it is predicted that by 2050, 52% of the world’s population will live in water-stressed areas. Balancing demand between agriculture, fisheries, industrial activities and personal use can become more difficult in areas of rising population and/or climatic changes.

Water saved

Impax has identified an investment opportunity in technologies providing sustainable alternatives to water-intensive materials. For example, cotton production is significant in that it can take 20 000 litres of water to produce only 1kg of cotton, and up to 2 700 litres to produce one cotton T-shirt. Despite this, commercial cotton production has developed rapidly, especially in Central Asia and America.

A leader in this area is a company that produces high-quality viscose fibres derived from cellulose and wood pulp. These cellulose-based fibres replace cotton in clothing and textiles, but use only 5.7% of the water needed for cotton viscose fibres. In addition, the majority of the water used relates to cooling processes and is returned to its fresh water source unpolluted.

The company’s fibre production equated to 5.2 million megalitres of water saved in comparison to cotton fibres in 2016[1].

Water provided and treated

Rapid industrial growth not only requires water as a resource, but also contaminates fresh water sources when waste is released back into the environment. For example, in 2012, China’s discharge of wastewater reached 68.5 billion tonnes, a figure similar to that of the annual flow of the Yellow River.

It is estimated that about one third of industrial wastewater is released into rivers and lakes without treatment, while nearly 80% of China’s cities have no sewage treatment facilities. In 2011, the Chinese government reported that 43% of China’s rivers were so polluted, they were deemed unsuitable for any form of human contact. Raising water quality has now become a strategic area of investment and creates opportunities for companies to expand water infrastructure and treatment services.

A public utilities company listed in Hong Kong that Impax invests in sees a long-term opportunity in providing access to clean drinking water across China. The scope of their business covers sewage treatment, waste incineration, water distribution and construction projects[1]. It is already involved with over 450 operational or soon to be operational water plants across 25 provinces[1]. The company provided approximately 3 million megalitres of safe, clean water throughout China in 2016[2]. Companies such as this can help mitigate industrial pollution and protect fragile communities and ecosystems.

This article is an extract from Impact @ Impax Environmental Impact Report 2017.

[1] For more information, please contact Impax

[2] Company data, Impax’s impact database

Hubert Aarts

Co-Head of Listed Equities, Executive Director, Impax Asset Management

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