Profit from Scarcity: 'Resource Efficiency' Investing

Sunday, 29 Sep 2013 05:52 PM

By Michael Kling

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The world is running out of resources. Everything from energy, water, food, and minerals is becoming increasingly scarce. But instead of stockpiling gasoline and bottled water, some investors hope to profit from the trend through the strategy known as resource efficiency investing.

The key is to invest in companies that alleviate shortages by improving efficiencies in critical industries — companies specializing in renewable energy, efficiencies, clean-up and recycling.

"We invest in optimization and resource efficiency as a solution to resource scarcity," Bruce Jenkyn-Jones, managing director of Equities for Impax Asset Management told CNBC. "There are plenty of opportunities to use resources more efficiently and minimize the impact on the environment, from energy to water, materials, rare earth metals, and food and agriculture."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

Impax, which is based in London, likes companies focusing on waste management and recycling, particularly clinical waste, and waste from hospitals and industrial facilities.

"Handling of hazardous materials is not only difficult, but can be difficult to get permits to do, and even when the technology itself is not sophisticated, it's a market where regulations create barriers to entry," Jenkyn-Jones told CNBC.

Impax also invested in LKQ, a company that recycles auto parts.

"In a future where there are more people using more metals and plastics, the economic drivers of recycling become compelling," he said, "and that can include extracting value from metals in cars, like LKQ."

Then there's water. Since just 4 percent of the world's water is fresh, recycling and desalinating will become more and more prevalent. Impax is taking a behind-the-scenes strategy in that sector, investing in companies providing pumps, filters and maintenances services to existing desalination plants.

"Global investment activity in the sector is significant and growing exponentially," states Inspired Evolution, which specializes in resource efficiency investments in sub-Sahara Africa, on its website. "High growth opportunities are emerging in the agribusiness, cleaner production, pollution control, waste management and transportation sectors, as well as the core areas of energy and water."

In one of its latest projects, the company invested in a biomass-to-energy project in South Africa that plans to produce charcoal briquettes from sugar cane. Even though environmental and social issues are vitally important for the economic development in sub-Sahara Africa, no fund manager is specializing in clean energy and resource efficiency investments in the region, the company notes.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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