Investing in water: Making an impact without sacrificing performance

Water & Environment 12/23/2020
We invest in what we believe are essential assets, those that are critical to the economy, have historically provided a steady cash flow and benefit society. Water is one of the most essential assets - the companies that manage, treat, and distribute water are critical to economic growth and social stability.
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Why invest in water?

Technology disruption driving massive capital investment

  • Multi trillion dollar infrastructure and technology investment backlog provides long-term visibility into earning growth and expected to drive low double digit total returns

Compelling source of return and diversification potential in a broad portfolio

  • Water sector has historically outperformed broad world equity markets by 190 basis points (bps) with relatively low historical correlation to broad equity markets

Positive impact to society with ESG focus

  • Every $1 invested in water generates $4 economic return by improving health, increasing productivity and creating opportunities for education, employment and livelihoods*

*www.water.org

Steady outperformance compared to general U.S. and international markets

Source: Bloomberg. Period: 9/30/2010 to 9/30/2020
  S&P Global Water Index MSCI ACWI Index S&P Global Infrastructure Index
Total Return 11.1% 9.2% 5.5%
Sharpe ratio 0.38x 0.67x 0.42x

Source: Bloomberg. Annualized total return from 9/30/2010 to 9/30/2020. Sharpe ratio is a measure that indicates the average return minus the risk-free return divided by the standard deviation of return on an investment. It is not possible to invest directly in an index. Please see end of presentation for descriptions of these indices. Index performance is not representative of Fund performance. Past performance is no guarantee of future results.

Historically low correlation to broad equity markets

Source: Bloomberg as of 9/30/2020. It is not possible to invest directly in an index. R-squared (R2) is a statistical measure that represents the proportion of the variance for a dependent variable that’s explained by an independent variable or variables in a regression model.

Strategy impact

Why now?

Investment is needed now to solve the current and future water crisis. Water demand is expected to exceed water supply by ~40% by 2030.

Source: 1Sensus.com, 2McKinsey Global Institute: Infrastructure Productivity (January 2013), 3OECD (July 2017), 4Bank of America Merrill Lynch: Blue Revolution (April 2014) and 5UBS Global Research (November 2016)

Disclosures


This commentary is provided for discussion and informational purposes only to provide background information with respect to the market generally, and is not an offer to sell or the solicitation of an offer to buy an interest in any current or future vehicles or funds controlled by Ecofin, and you acknowledge that you are not relying on the information contained in this presentation as the basis for any such investment decision you may make in the future. Prospective investors should not construe this overview or any other communication as legal, accounting, tax, investment or other advice, and each prospective investor should consult with their own counsel and advisers as to all legal, tax, regulatory, financial and related matters concerning an investment.

This commentary contains certain forward-looking statements. These forward-looking statements include all statements regarding the intent, belief or current expectations regarding matters covered and all statements which are not statements of historical fact. The forward-looking statements involve known and unknown risk, uncertainties, contingencies and other factors, many of which are beyond our control. Since these factors can cause results, performance and achievements to differ materially from those discussed in the presentation, you are cautioned not to place undue reliance on the forward-looking statements.

Index Definitions: The S&P 500® Index is an unmanaged market-value weighted index of stocks, which is widely regarded as the standard for measuring large-cap U.S. stock market performance. Returns include reinvested dividends. The S&P Global Water Index provides liquid and tradable exposure to 50 companies from around the world that are involved in water related businesses. To create diversified exposure across the global water market, the 50 constituents are distributed equally between two distinct clusters of water related businesses: water utilities and infrastructure, and water equipment and materials. The S&P Global Infrastructure Index is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability. The MSCI ACWI is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. It is not possible to invest directly in an index.