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Water, energy or food: Next opportunities

Climate change has prompted the development of new solutions designed to enable companies, investors and governments around the world to fulfill their commitments. Global warming, together with population growth, is leading to shortages of food, energy and water. Resources that once appeared limitless are now revealing themselves to be scarce.

Growing demand for food threatens global food security, and water supplies are endangered by melting glaciers. In addition, low investment in mining is leading to a growing shortage of raw materials such as lithium. As a result, the stock of these resources associated with sustainable solutions is dwindling, despite the fact that they are and will be the main drivers for the energies of the present and the future.

The need to address this increase in demand is multiplying the scope of investment opportunities. One example is water: the investment opportunities in this area range from management and treatment through infrastructure to water supply. There are many companies in this area around the world that are listed on the stock exchange.

The goal is to produce these resources continuously while, at the same time, reducing our environmental footprint. These growing trends make it possible to distinguish three areas in which to ride the wave of investment in scarce resources:

1. Lithium and rare earths

Lithium is used in mobile energy applications and it is essential for the progressive electrification of land transport (batteries) and the operation of wind power plants. To meet global climate targets, the IEA estimates that lithium use for batteries must increase 40-fold by 2040. Lithium prices are up 52% so far in 2021 (as of 31 July), according to Benchmark Mineral Intelligence.

Rare earths and their alloys are used in vast range of applications such as computer memory, DVDs, rechargeable batteries, mobile phones, catalytic converters, magnets and fluorescent lighting.

2. Water

Virtually all commercial activities in a society, from agriculture and electricity generation to the production of consumer goods, depend on the availability of water. Although it has become a precious commodity in many areas of the world, the price of water is still too low to accurately reflect its value. Globally, the volume of renewable water available per person per year decreased by approximately 40% between 1992 and 2014, according to a study by Robeco-SAM (Water: the market of the future).

Smart water meters, pipe inspection robots, micro-pollutant treatment and smart sprinklers are just a few examples of the broad scope for innovation in the field of water efficiency.

3. Foodtech

Consumer demand and focus have changed. Growing consumer interest in sustainability, health and fresh produce has put significant pressure on the food industry to innovate.

Agricultural innovators have created exciting new ways to harness the power of technology to improve the world's food supply. Innovations in agro-technology protect crops and maximise production, enabling structural changes in the agricultural system so that major sustainability goals, such as the reduction of greenhouse gases, can be achieved.

At Santander Private Banking, we believe that innovation related to the production and development of these scarce resources represents an investment opportunity as they will drive the energies of the future. As a result, we will track progress and select the best companies operating in these fields as part of the Future Wealth advisory framework.