This is for investment professionals only and should not be relied upon by private investors.
Water & waste – The right kind of global growth?
Discover the link between water and waste investing and the growth of global sustainability
FIVE DRIVERS
Waterworlds, wastescapes and cashflows
Learn an investor’s perspective of the growing water and waste industries
INDUSTRY PERSPECTIVE
“We are high conviction, long-term investors”
Bertrand Lecourt, portfolio manager, on the key goals of Fidelity’s Sustainable Water & Waste Fund
PORTFOLIO MANAGER Q&A
CONTENTS
The world must improve its management of water resources and physical waste if it is to grow sustainably. Investors, meanwhile, want to contribute to sustainability in tangible ways easily related to their daily lives – while also finding interesting investment opportunities. In this guide, Bertrand Lecourt, portfolio manager of Fidelity’s Sustainable Water & Waste Fund, and a 20-year water and waste veteran, charts out the long-term drivers of both sectors. He offers a pen portrait of their diverse value chains, and a behind-the-scenes tour of how his fund navigates between financial and sustainability goals. We hope the visual and interactive elements of this guide help you explore two of the most critical global industries. This theme is fundamental to how we live and inspirational in terms of how companies are building a more sustainable world.
TAPPING INTO WATER & WASTE
SCROLL DOWN
Investing in the future of water & waste
Shakespeare, A Winter’s Tale, Act 4, Scene 4
“To unpath’d waters,
undream’d shores”
Important information The value of investments (and the income from them) can go down as well as up and you may not get back the amount invested. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. This fund can invest in overseas markets and so the value can be affected by changes in currency exchange rates. It can also invest in emerging markets which can be more volatile than other more developed markets. The fund may use derivatives for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger-than-average price fluctuations. The Investment Manager’s focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that could, at times, compare less favourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. Investments should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document and annual and semi-annual reports, free of charge on request by calling 0800 368 1732. Issued by FIL Pensions Management, authorised and regulated by the Financial Conduct Authority and by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. UKM0520/31139/SSO/NA
InvestinG in the future of water & waste
“If you stop water, the economy stops,” says Bertrand Lecourt, who likes to adopt a fundamental, long-term perspective. He points out that for thousands of years, as civilisation developed, humans built their economies around the twin challenges of managing water and waste.
“People settled near the seas, the rivers, the lakes, and then used water for agriculture and energy. As communities got bigger, our cities needed clean water to be healthy. And all along, our increasing wealth has generated more and more physical waste.” But investment in managing water and waste has come in waves.
Clean cities
Lecourt, a 20-year water and waste veteran, says five drivers operating for thousands of years on water and waste management are now being leveraged by our modern world. “The first is urbanisation,” he says. As the global population grows it is moving to cities, including a rising number of megacities of more than 10 million inhabitants.
Water world
The second driver is that as wealth grows, consumption accelerates. “As you get richer instead of buying two shirts you buy four, and that means more water because everything you buy is water.”
Water pressure
His third key driver is pressure on infrastructure. In the developed world, infrastructure is aging. “Pipes are getting old, you need to repair them,” he says, or water leaks out.
It’s a striking vision of a water-borne economy. In Lecourt’s world, a T-shirt represents roughly 2,700 litres of water; eating a kilogram more meat demands up to 15,500 litres of water; a cup of coffee is 140 litres of water. This magnification of water demand is becoming even more important as Asian and other emerging economies generate a middle class with new consumer tastes.
Growing global consumption drives waste as well as water management. “95% of everything we buy is likely to become waste within two years: it’s the other side of consumption,” according to Lecourt.
“By 2050, nearly 70% of the global population may live in cities,” he says. These cities will demand more intensive water and waste industries with higher standards.
The coronavirus outbreak has reminded us that we are physical, not digital, beings and that large concentrations of people must be well managed. “It’s going to be about making sure you have a clean city environment, with great waste management and sanitation capacity,” says Lecourt.
“We see in London a waste water system developed 150 years ago to accommodate perhaps one million inhabitants and now around 10 million people use essentially the same system. You simply have to improve it, for example, with the new super-sewer now being put into play.”
Studies have shown that as GDP increases, the amount of waste per head also increases. And many of the most populous countries in the world, such as China and India, are increasing GDP at a fast rate.
He’s keen on increased recycling as a partial solution but points out that “you still need a company to transport waste, clean it, and do something with it.”
“And approximately 50-60% of global waste is not even properly collected,” Lecourt says, with emerging economies needing to develop waste management approaches as their economy grows. A new generation of water and waste services is about to be born.
The fourth driver is increasing regulation. For example, the European Union is aiming to recycle more municipal waste and packaging, while China is introducing laws to help clean up polluted arable land. “Water and waste regulation is a positive thing,” he says, “because it also helps ensure that investment creates real value and that the consumer can afford it.”
Tougher standards are giving birth to entirely new markets. Lecourt cites a new market in systems for treating the ballast water that stabilises ships as they traverse the globe. The accidental introduction of foreign species when ballast water is discharged has become a major threat to aquatic diversity, so new filtration technologies are being deployed.
Waste side story
His final driver is resource scarcity. “There is a limit to the amount of fresh water in the world,” he says, with various studies showing that a major water gap is developing between existing accessible supplies of fresh water and the amounts drawn off by humans for domestic, industrial and agricultural use.
Meanwhile, the places we can dump waste without processing or recycling it are running out or being regulated away. “We expect the waste market to double or triple in the next decade,” says Lecourt, “as the world stops burying waste in a hole and instead turns it into useful materials and energy.” In addition, he sees particular momentum in the emerging markets, “but you can have great value pockets in very boring European regulated-water stories.”
The key is to be able to compare the risk/return benefits of different water and waste investments around the globe and through time. His 20 years of experience in the sector, combined with Fidelity’s benchmarking approach to global investing, come in handy.
Sustainable stories
Lecourt’s five fundamental growth drivers won’t go away and they underpin an unusual investment story. “Water and waste are a different kind of growth,” he says, “not tech growth but likely to grow nicely, at rates above GDP.”
Both sectors exhibit cyclicality but usually not quite like other industry sectors. “If you have a big market crisis, water and waste investments might well fall, but historically the underlying earnings visibility tends to be very stable.”
That goes back to the fundamental nature of the industry. “In a crisis, people still have showers, go to the toilet and want their bin emptied whether that bin is 30% or 70% full,” says Lecourt.
But with most water and waste companies locally based, can the industry rise to the global scale of the sustainability challenge? “I’m pretty optimistic,” Lecourt says. “Humans are global and our economies are integrated. Making sure our global water, waste water and physical waste is managed in the right way comes back to awareness and behaviour – and those are catching up fast.”
“Water and waste regulation is a positive thing, because it helps ensure investment creates real value”
Water & Waste – Five Drivers
Discover why the world needs water and waste investment
Rising consumption is driving up water use
Discover the litres of water it takes to produce common consumer goods
“95% of everything we buy is likely to become waste within two years: it’s the other side of consumption”
Water & waste
Wasting the earth
Global waste
Waste disposal methods
Per capita waste
The world generates over 2 billion tonnes of municipal solid waste, which may rise to 3.4 billion tonnes by 2050
Global waste is mostly dumped in the open (33%) or in landfill (37%), with lower amounts recycled and composted (19%) or incinerated (11%)
By 2050, daily per capita waste generation is projected to increase by 19% in high-income countries and over 40% in low- and middle-income countries
All statistics from: Silpa Kaza et al., What a Waste 2.0, World Bank Group, 2018, pp.3-5
The right kind of global growth?
Only 2.5% of the earth’s water is freshwater, most of it frozen or underground. Lakes, rivers and other accessible surface water form only the tiniest (1%) part of this global freshwater resource
5. Resource & scarcity
Regulation and standards are tightening all over the world with the EU aiming to recycle 70% of municipal waste, new laws in China to tackle soil pollution, and the global shipping industry investing in ballast water filtration
4. Regulation
UK water pipes leak enough water to fill over 1,200 Olympic swimming pools per day
3. Infrastructure gap
The global middle class is likely to rise from 3 billion in 2015 to well over 5 billion in 2030 – driving up water use and waste generation
2. Consumption growth
1. Urbanisation and population growth
68% of global population may live in cities by 2050, requiring new water and waste infrastructure
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T-shirt
2,700
Pair of shoes
8,000
CLOTHING
One egg
FOOD
200
1kg of meat
15,500
1kg of cheese
5,000
Cup of coffee
BEVERAGES
140
250ml of beer
75
Computer
PURCHASES
31,500
Car
144,300
Click to explore global waste growth
Bertrand Lecourt, portfolio manager, tells us why the long-term structural drivers of this theme are powerful for both investors and the world
Source: Estimates based on Waterfootprint.org; accessed Spring 2020; approximations only
While farming uses most fresh water globally, industrial demand for water has tripled over the last century, and domestic use of water has risen by 600% since 1960.*
*Source: Betsy Otto and Leah Schleifer, Domestic Water Use Grew 600% Over the Past 50 Years, February 10, 2020
Source: UN, World Urbanization Prospects: The 2018 Revision, p.xix
Source: Homi Kharas, The Unprecedented Expansion of the Global Middle Class: An Update, 2017, Brookings, p.13-16
Source: Discover Water
Source: Fidelity International, Case study: Waste Side Story – The Other Side of Consumption
Source: National Geographic, Freshwater Crisis
Source: Sara Walker et al., Water Could Limit Our Ability to Feed the World, November 2019
Freshwater withdrawals
Domestic
10%
Industry
22%
Farming
68%
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Tap to explore global waste growth
Subhead: 25/39 Body copy: 23/37 Source: 20/28 Icon: 18px BOX/Graphs 32/38 Large quote 34/46
Every country around the world has substantial water and waste industries but, according to Fidelity’s Lecourt, they are all very local. “So you don’t have a Google of water, you don’t have a Google of waste,” he says. But over his career he’s watched the market scaling up.
Gradual growth
That industry growth is driven by his five long-term water and waste drivers – see Five Drivers article – especially rising consumption as richer consumers buy more products that consume water and generate waste. But as households get richer in developing countries, they also have more capacity to pay directly for higher quality water and waste services.
“30 years ago, you probably had around 30 serious companies to play with as an investor. Today you have 330 or more companies,” he says. “Likewise they are bigger in size, so the total market cap for investment might be $1.5-1.6 trillion – again 10 times bigger than it was 30 years ago.”
The cost of water and waste services is increasing but it continues to represent a relatively small proportion of each household budget, Lecourt says. So even in developed economies, households often don’t notice the monthly cost, especially on the waste side. Not many people can tell you how much they are paying for rubbish collection, he points out.
Lecourt says the positive trend over time suggests there is considerable potential for an active water and waste portfolio manager to outperform the broader equity markets. Of course, past performance may not be a reliable indicator of future results.
Relative rates
One way to track the effects of long-term growth drivers is to compare the relative performance of water and waste indices to the MSCI All Country World Index.
Tech tortoise
The growth potential of new technologies in water and waste is also exciting, but Lecourt warns that in these industries nothing happens overnight. “You can see it coming, but it takes time and, especially with water, must be carefully tested before it’s scaled.”
He says a range of new sensor technologies are coming in so that, instead of replacing all their pipe infrastructure, companies can adopt a more surgical approach. He’s also interested in new robotic, filtration and metering technologies.
“On the waste side things are also changing a lot. Rather than simple landfill, you have new technologies that allow you to extract the gas to make electricity, direct the waste into energy to make power, and recycle waste, whether it’s metal or plastic.”
But the new technologies need to be embedded in existing local processes and services. “So although there’s a lot going on now in water and waste, sometimes I prefer to call it ‘slow tech’,” he jokes. As a long-term investor, he’s attracted to the idea of slower, compounding growth in a regulated, relatively steady investment landscape.
The waste market, meanwhile, is largely made up of service companies and many have increasingly specialist skills. “You have waste companies that deal with hazardous waste from chemicals to metal dust,” says Lecourt. “I try to have a bit of everything but the best of everything in a well-balanced mix,” he says.
Valued variety
It’s also a diverse landscape. Lecourt thinks that maybe only a fifth of his potential water and waste investment market is represented by classic water utilities. “We invest in utilities but also in the companies that provide pipes, valves, meters, design, engineering, tests, and other equipment and services along the water value chain,” he says. His holdings supply not only consumers but many of the world’s industries.
Combining water and waste in a single portfolio (see box below) adds another layer of diversification. A company that repairs pipes in Chicago and a waste energy company in Shanghai will tend to be exposed to very different market forces.
Like most industry sectors, water and waste related stocks can still be prone to cyclical or event-driven equity market volatility (see chart above). Yet both should benefit over time from Lecourt’s five long-term growth drivers such as rising consumption and more demanding regulation.
Another reason is that the finance world tends to divide investments into industry sectors and geographical zones. “The market is not used to applying a strong investment story through all global geographies and all industry sub-segments,” says Lecourt, who says he’s learned to “think diagonally.”
Rare research
Finding the best opportunities in a sector full of locally based, mid-cap companies is hard work. That’s one reason water and waste remain under-researched by the investment markets.
Lecourt says the new MiFID II regulations have also deterred investment in research. “But at Fidelity we have 150 analysts and 16,000 company meetings a year – we see a company every eight minutes,” he says, helping him to uncover global water and waste opportunities.
He worries that some investors might confuse his fund with traditional industry sector plays, which tend to be used tactically over the shorter term, e.g., investing in a particular sector when the oil price goes up (or down). He prefers to build diverse portfolios of water and waste investments with the goal of allowing returns to compound over the longer term, which he calls “diversification plus momentum.”
Portfolio play
Lecourt argues that building a fund focused on the long-term story of water and waste is in tune with new thematic approaches to portfolio diversification. “You can have a water and waste fund, a demographic fund, a healthcare fund, a consumer fund, and they may not overlap too much,” he says.
He says his strategy combines environmental and financial sustainability at various levels. “Investing for the long term in these companies might even help hedge rising water and waste bills towards retirement,” says Lecourt.
Water & waste – diverse value chains
Explore the broad investible universe of water and waste
“We invest in utilities but also in the companies that provide pipes, valves, meters, design, engineering, tests, and other equipment and services along the water value chain”
“Not many people can tell you how much they are paying for rubbish collection”
One reason is that water and waste are key parts of a fundamental input/output process seen even at the cellular level: “A cell takes water and matter, transforms it into energy and produces waste water,” he says, just as our bodies, our cities and our global economy take raw materials including water as inputs and transform them into useful products, by-products and waste. Because the water and waste sectors are part of the same basic transformational process, growth in both sectors is driven by the same five long-term drivers: urbanisation, consumption, infrastructure investment, regulation and resource scarcity.
Another similarity is that in both industries “most firms really transport and clean,” meaning the consumer is really buying into a service. And both services interact in good and bad ways. Re-using a plastic cup means using water to clean it. On the downside, “You need to deal with your waste efficiently or it can end up back in the water,” with microplastics a particular problem. That brings Lecourt back to his input/output analogy. We’ve treated water and waste as separate rather than as components of the wider consumption process, he says.
“Plastic is great in the sense that is light, it is resistant. The problem is that our society has not thought about what to do with products when they reach the end of their life. That should be compulsory in the research and development of goods,” he says. New technologies are only part of the answer. “The producers of goods, the packaging companies, the consumer, and the water and waste companies will all have to talk to each other”, he says, if the input/output process is to be managed in a sustainable, joined-up way. As a long-term investor, that’s a conversation he wants to promote.
Water and rubbish might not seem to have a lot in common. But for Bertrand Lecourt there are fundamental reasons to combine them, aside from any portfolio diversification benefits.
Pure water, dirty waste – Two sides of the same coin?
Bertrand Lecourt offers an investor’s perspective of the growing water and waste industries
Water prices offer significant upside in developing countries
CLICK FOR LARGER VIEW
Room for global water prices to grow
CLOSE GRAPH
Water and waste indices vs MSCI All Country World Index
Underlying relative performance
01 / 04
02 / 04
03 / 04
04 / 04
Integrated water tariff ($/m3) vs GDP/head ($) vs population size (bubble)
Source: Fidelity International, Global Water Intelligence 2015 Survey
Source: Fidelity International, Bloomberg, 31 May 2020. Waste Index represents BNP Paribas Global Waste Management Index, Water Index represents S&P Global Water Index. All indices represent total returns in USD.
• Water and waste related stocks can be prone to cyclical volatility but offer strong growth opportunities • There is significant upside potential for an active water & waste portfolio manager to outperform broader equity markets
Past performance is not a reliable indicator of future results.
Global Waste Index
-0.6
15.8
5.4
1.2
Global Water Index
2.4
13.1
6.5
5.0
8.0
MSCI ACWI (N)
-5.4
17.5
11.8
-1.3
31.05.15 – 31.05.16
31.05.16 – 31.05.17
31.05.17 – 31.05.18
31.05.18 – 31.05.19
31.05.19 – 31.05.20
“We have 150 analysts and 16,000 company meetings a year – we see a company every eight minutes”
Technologies include in-pipe static and mobile sensors, pressure/acoustic sensors, ground penetrating radar, infra-red thermography and network monitoring software
Leak detection
Urgent need to replace major infrastructure, e.g., pipelines, flood prevention, in coming years
Water infrastructure
Water ballast needs filtration to prevent threats to aquatic diversity
Shipping
Rising standards require better chemicals, filters, etc
Sewage treatment
Improved metering, billing and other smart tech
Domestic and commercial supply
Improvement in testing and labs, filtering technology, and water use optimisation and consulting services
Water supply services
Greater volumes of water storage and transport required, new reservoirs
Water storage
Advanced technology required to service the global water industry, e.g., pump, valve, filter, sensor and software manufacturers
Water intake and other technology
Farming and irrigation can account for 70% of water use* with increasingly sophisticated systems
Brownfield sites need to be remediated and re-used
Site remediation
Street cleaning, sanitisation and bins collection
Municipal waste
New ways to avoid waste generation or to re-use materials
Sustainable packaging
Recycled waste helps food production
Agricultural fertilisers/composting
Waste must be transported efficiently
Waste transport
Sorting and recovery facilities and technologies convert waste into new resources
Recycling
Rising air quality standards require new technologies and services
Air pollution services
Onsite waste management, collection and remediation/cleaning services for many different industries
Industrial/hazardous waste services
Waste increasingly used to create energy and refuse-derived fuels
Waste-to-energy plant
For illustrative purposes only.
Philippines
India
Tunisia
China
Mexico
Russia
Argentina
Chile
Turkey
Brazil
Poland
Portugal
Spain
Italy
Korea, Rep.
Japan
Singapore
Sweden
New Zealand
Belgium
Canada
United States
France
UK
Netherlands
Germany
Switzerland
Australia
Denmark
*Source: Betsy Otto and Leah Schleifer, Domestic Water Use Grew 600% Over the Past 50 Years
New technologies are only part of the answer. “The producers of goods, the packaging companies, the consumer, and the water and waste companies will all have to talk to each other”, he says, if the input/output process is to be managed in a sustainable, joined-up way. As a long-term investor, that’s a conversation he wants to promote.
07 / 07
“Plastic is great in the sense that is light, it is resistant. The problem is that our society has not thought about what to do with products when they reach the end of their life. That should be compulsory in the research and development of goods,” he says.
06 / 07
On the downside, “You need to deal with your waste efficiently or it can end up back in the water,” with microplastics a particular problem. That brings Lecourt back to his input/output analogy. We’ve treated water and waste as separate rather than as components of the wider consumption process, he says.
05 / 07
Another similarity is that in both industries “most firms really transport and clean,” meaning the consumer is really buying into a service. And both services interact in good and bad ways. Re-using a plastic cup means using water to clean it.
04 / 07
Because the water and waste sectors are part of the same basic transformational process, growth in both sectors is driven by the same five long-term drivers: urbanisation, consumption, infrastructure investment, regulation and resource scarcity.
03 / 07
One reason is that water and waste are key parts of a fundamental input/output process seen even at the cellular level: “A cell takes water and matter, transforms it into energy and produces waste water,” he says, just as our bodies, our cities and our global economy take raw materials including water as inputs and transform them into useful products, by-products and waste.
02 / 07
01 / 07
TAP TO VIEW: Underlying relative performance
TAP TO VIEW: Room for global water prices to grow
< SWIPE LEFT ON IMAGE FOR REST OF GRAPH
• Water and waste related stocks can be prone to cyclical volatility but offer strong growth opportunities
• There is significant upside potential for an active water & waste portfolio manager to outperform broader equity markets
02 / 02
01 / 02
What is the key goal of the fund?
conviction,
The goal is to reward long-term investors with a diversified, defensive growth story by investing in companies which are highly transparent and demonstrate a sustainable cash flow framework. And we do this through a high conviction, global equity strategy focused on companies in, or connected with, water and waste management.
How do you try to find the best investments?
There are 10 fundamental factors I look at such as earnings momentum, cash generation, and balance sheet strength. Then we compare companies against each other. The Fidelity system helps us to benchmark investments but also sets the absolute targets we can expect in one or two years. For example, how much dividend growth potential can I obtain and with what risk?
You might see a great pump business in the UK which looks cheap, but is there a cheaper one in the US? Likewise, while the biggest momentum is in the waste market and emerging markets, there are great value pockets in regulated European water companies. At every point in time, we compare the risk/return benefits.
We try not to have extremely large positions in single stocks and we don’t turn over the portfolio very much: last year I probably did fewer than nine trades. That means we can spend a lot of time getting to know the companies and building relationships. We are high conviction, long-term investors.
There are not many funds with such a sharp focus – do investors like that?
We’ve reached €1.3 billion AUM (as at 30.04.20) since launch in November 2018 (SICAV) and I think that’s partly because people can relate to water and waste within their everyday lives. It’s a powerful global story but it impacts us all on a local level.
We’re possibly the only fund that has this dedication to waste. I have flexibility in terms of the portfolio balance, but we are about 60% water and 40% waste today.
If you take a traditional European fund, it might conventionally include some consumer, some banks, a bit of oil and gas, and some tech. We’re investing in water and waste companies that people might otherwise not own.
In pursuing sustainable investing, how do you balance Environmental, Social and Governance (ESG) scoring of firms against the wider impact of their service or product?
You are right, there are two angles here. The first angle is to make sure that we invest in companies with strong ESG ratings. We begin by using external ratings to benchmark each company. At Fidelity we’ve also developed ESG ratings by our own financial analysts. More than 150 analysts globally not only look at financials and fundamental research, but also give an ESG rating to issuers.
The internal ratings give us a more timely view because external ratings can take 6-12 months to change. It also means that if a company is not rated by the external agency we can deploy our internal ESG rating. That helps us remain compliant with our ESG thresholds, which oblige us to have at least 70% of companies with top ESG ratings in the portfolio.
Most of the companies we invest in are going in the right ESG direction, but some are small, or were derived from family businesses, perhaps in emerging markets. So governance may not be great. We have to meet our general portfolio ESG threshold, but we do have the freedom to accompany select businesses on their journey to higher ESG scores.
That’s important because of the second sustainability angle. Whatever their present ESG score, companies in our portfolio potentially have a great impact on global sustainability by providing water and waste management. We are working to raise awareness of the importance of that impact in various ways including a recent paper on waste.
Finally, could investing in water and waste management offer other benefits in these troubled economic times?
It’s one of the best ways to stimulate an economy because every single house in the country is connected to water, and waste companies often operate within 50 km of a given city. When you invest in them, you employ local people from all backgrounds, from no degree to higher degrees, from waste collectors to those operating the waste energy plant. Unlike, say, buying a solar panel, nearly all the money stays local and improves everybody’s life.
long-term investors”
high
“We are
We talk to Bertrand Lecourt, portfolio manager, about the key goals of Fidelity’s Sustainable Water & Waste Fund
Bertrand Lecourt describes his approach to investing in the global water and waste industries
“We expect the waste market to double or triple in the next decade, but you can have great value pockets in very boring European regulated-water stories”
Case Study:
READ THE PAPER
“Companies in our portfolio potentially have a great impact on global sustainability by providing water and waste management”
BERTRAND'S BIO
Bertrand is an experienced manager with more than 18 years specialising in the research and management of water and waste sectors. He joined Fidelity International in 2018 as the Portfolio Manager for Fidelity Funds Sustainable Water & Waste Fund. Previously, Bertrand worked at Polar Capital and prior to that at Aquilys Investment Management. He has also held research and research management roles in Deutsche Bank, Dresdner Kleinwort Benson and Goldman Sachs, which provided him with rich experience in the research and management of water and waste strategies. Bertrand has received several awards in the course of his experience with these organisations. Bertrand graduated with an MSc in International Finance from HEC School of Management, MSc in International Banking & Finance from Birmingham University and a DEA in Monetary Economics from Orleans University.
Bertrand Lecourt
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Waste side story – the other side of consumption
FUND DETAILS
FUND STRENGTHS
INVESTMENT PROCESS
FUND PERFORMANCE
Fund AUM: OEIC: £19m SICAV: €1.3bn
Source: Fidelity International, as at 30 April 2020
Fund type: Global equity
Reference index: MSCI All Country World
Launch date: OEIC: 9 December 2019 SICAV: 7 November 2018
Number of holdings: 35-50
• Bertrand has deep experience of investing across these sectors
• First UK fund to combine water and physical waste sectors
• Sectors benefit from powerful, long-term ‘megatrends’
• Companies in these sectors are typically under-researched providing a rich, investable universe
• Flexibility to invest across the value chains of both sectors on a global scale
• Supported by the breadth and depth of Fidelity’s vast research platform
The Fidelity Sustainable Water & Waste Fund employs a distinctive, replicable bottom-up investment process, focusing on quality and growth, with an overarching emphasis on sustainable investments. It is a research-driven approach involving fundamental research, leveraging Fidelity’s proprietary research and additional market data. We have a rigorous stock selection process using a multi-factor model, including proprietary and external ESG research combined with fundamental analysis. The investment universe with exposure to the water and waste theme contains over 330 investable stocks. We apply our models and fundamental analysis to these opportunities, which eventually leads to the construction of a c. 35-50 stock portfolio.
Saurabh Sharma, co-manager, Fidelity Sustainable Water & Waste Fund
SAURABH'S BIO
Saurabh has been an Assistant Portfolio Manager of the Fidelity Funds - Sustainable Water & Waste strategy since 3 February 2020. His role involves analysis/due diligence on investment ideas, thematic and ESG research, and engagement activities. He works on specific research projects, attends company meetings and site visits, as well as participates in research and investment team meetings. Saurabh is also an Associate Investment Director in Fidelity’s equity team and has over 9 years of industry experience. Prior to joining Fidelity in 2014, he worked as an equity research analyst for GlobalData from 2010 to 2011 and for Moody’s Analytics (erst. Copal Amba) from 2011 to 2014. He is a Chartered Alternative Investment Analyst; has an MBA in Finance from IBS, Hyderabad, India; a Bachelor of Commerce Hons. in Accounting and Finance from the University of Calcutta; and a CFA (ICFAI) from the Institute of Chartered Financial Analysts of India (ICFAI).
Saurabh Sharma
1. Bottom-up analysis for quality using ten key factors to rank companies. 2. Assessment of absolute upside potential: Five valuation techniques used to gauge upside. 3. Final selection based on concentration risk, liquidity risk, market timing, technical support, and possible catalysts and events.
Source: Fidelity International. For illustrative purposes only.
The research and stock-selection process can be broadly categorised into three stages
Fidelity Funds - Sustainable Water & Waste Fund W-ACC-GBP
-
2.7
MSCI AC World (N)
7.5
Excess return
-4.8
Source: Fidelity International, 31 May 2020. Performance is for Fidelity Funds - Sustainable Water & Waste Fund W-ACC-GBP, since launch to 31 May 2020. Basis nav-nav, net of fees in USD, with gross income reinvested. Comparative Index: MSCI AC World Index (N). Actual performance for the SICAV and OEIC could vary for various reasons, including but not limited to differences in currency.
Fidelity Sustainable Water & Waste Fund
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Covid-19 causes market volatility
Performance of Fidelity Funds Sustainable Water & Waste Fund (SICAV launched Nov 2018)
• Focused on investing in companies with strong sustainable characteristics
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1. Bottom-up analysis for quality using ten key factors to rank companies.
2. Assessment of absolute upside potential: Five valuation techniques used to gauge upside.
3. Final selection based on concentration risk, liquidity risk, market timing, technical support, and possible catalysts and events.
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Bertrand is an experienced manager with more than 18 years specialising in the research and management of water and waste sectors. He joined Fidelity International in 2018 as the Portfolio Manager for Fidelity Funds Sustainable Water & Waste Fund. Previously, Bertrand worked at Polar Capital and prior to that at Aquilys Investment Management.
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He has also held research and research management roles in Deutsche Bank, Dresdner Kleinwort Benson and Goldman Sachs, which provided him with rich experience in the research and management of water and waste strategies. Bertrand has received several awards in the course of his experience with these organisations. Bertrand graduated with an MSc in International Finance from HEC School of Management, MSc in International Banking & Finance from Birmingham University and a DEA in Monetary Economics from Orleans University.
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“More than 150 analysts globally not only look at financials and fundamental research, but also give an ESG rating to issuers”
