Water and waste: the next super-trend

Ed Monk

Ed Monk - Fidelity Personal Investing

Imagine the advantage you would hold if you knew what the world is going to look like in 30 years’ time.

Armed with that information, you could stock up on shares from companies that you know will provide tomorrow’s world-beating innovations, sit back and wait for the billions to roll in.

The problem, of course, is that history is littered with grand predictions about changes to the way we will live in the future, and the technology we need to help us do it. Most have fallen flat on their face.

If you’re old enough to remember Tomorrow’s World - the BBC TV show about new technology that ran through the 70s and 80s - you will know what I mean. We were supposed to have personal robot butlers waiting on us by now, and yet I washed and dressed myself this morning.

That’s because it’s seldom the companies or the products you think that make the biggest mark. Back in 2007, for example, anyone looking to invest in the area of internet-enabled smartphones would have had an obvious choice.

Nokia was dominant in mobile handsets and was soon to release the N95 - it’s first smartphone. The product had tech-types in a frenzy. One review from 2007 that I found called the N95 “in a league of its own. It represents the very pinnacle of technological miniaturisation”.

Sure, Steve Jobs had just launched the first iPhone but few expected that to reach beyond a niche of dedicated Apple fans. Too expensive, the reviews said, without any features that weren’t available elsewhere for less. Indeed, Nokia went on to dominate smartphones sales in 2007, owning 49% of the market.

And we know what happened next.

Picking individual winners is hard, then, but that’s not the same as picking a broad trend. You didn’t need to know that Apple would go on to become the biggest company in the world to know that hand-held computers that let you carry the internet with you were a very significant development.

Increasingly, investors are looking for similar trends to back with their money. These trends might include aging populations, which will force great changes and new areas of demand in developed economies like the UK and US. Or robotics, including driverless cars, that could revolutionise how we travel and work.

The management of water and waste is another of these. It’s based on the growing evidence that innovations in how water is distributed, and how to keep cities clean and liveable, will be in great demand in the decades ahead. As the developing world catches up and populations there shift from rural to urban living, water and waste related problems will become even more acute.

Funds are being launched to address this need, including the Fidelity Funds - Sustainable Water and Waste Fund, managed by Betrand Lecourt. It invests not only in companies with products to meet the growing demand, but also in the sectors that will naturally benefit from it, meaning returns aren’t reliant only on finding the next great innovation.

Bertrand said: “The story of water and waste is as old as the story of civilisation, yet companies in this sector remain relatively unexplored by investors.

“Investment opportunities in these sectors are driven by ever increasing demands for clean water and sanitation needs, as well as a better ability to manage the waste created by populations growing larger, wealthier and increasingly urbanised. There is no economy without water and there is no sustainable economy without waste management.”

By investing according to trends like water and waste sustainability, you can back a predictable long-term change, without having to nail the far harder task of picking the eventual winning product or company.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Overseas investments will be affected by movements in currency exchange rates. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.