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03/07/2012
1
Mega trends for a Sustainable World
Picking winners from today’s growth themes
Mark Campanale, Advisor, Pictet Funds
June 2012
mark@campanale.co.uk
BP oil spill in the gulf of Mexico
1
03/07/2012
2
Drought in UK 2010-2012
2
Fire in Russia
3
03/07/2012
3
Floods in Thailand
4
Changing climate; global population growth; rising food
demand; the challenge of access to water; rapidly
ageing western world populations.
All of these are examples of “megatrends.”
These are trends which are profound developments that are
likely to fundamentally shape the progress of human
civilisation over decades. As entrepreneurs react to these
challenges, new businesses will be created and
technologies developed.
Understanding the Mega trend opportunity
5
03/07/2012
4
The key trends in the clean tech
Investment theme
Sources: University of Bern (Siegenthaler et al., Science 2005; EPICA community members, Nature 2004),
(1) IPCC estimate, average of possible scenarios, (2) Deuterium: proxy used to estimate temperature in
Antarctica
Today, there is a global
consensus that man-
made climate change is
real
Energy security and
independence are vital
for global economy
Clean energy benefits
from strong support
through government
and public opinion
Energy efficiency
provides a huge field for
improvements
an energy shift Correlation between CO2 concentration and temperature
500
450
400
350
300
250
200
150
100
50
0 -100,000 -200,000 -300,000 -400,000 -500,000 -600,000
Years
CO2
parts per
million
0
Forecast 2050 (1): 480
ppm
CO2 concentration
Temperature
Today: 382 ppm
Rising Greenhouse Gases Need to be Stabilised
03/07/2012
5
Water Demand
Sources: U.S. Census Bureau, German Ministry of Environment
1890 1940 1950 1960 1970 1980 1990 1995 2000 2010 2025
1000
900
800
700
600
500
400
300
200
100
0
Global Water Consumption
Rela
tive G
row
th r
ate
Global Population
Global Water Consumption is Rising
Projections
Agriculture – solving global imbalances
Source: U.N., World Population Prospects, FAO, Pictet, The Mosaic company - ML Agri conference, 2008
• Direct human consumption of
grains and vegetables is
similar irrespective of income;
protein and vegetable oil
consumption grows with
increase in wealth.
• McKinsey: “…about 1.1 billion
people will join middle class
income groups in China and
India alone between 2005 and
2025.”
• Investments in the agro value
chain are an integral part of
solving the global food
challenge
0
1
2
3
4
5
6
7
8
9
10
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Po
pu
latio
n in
bn
.
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Ha
of a
rab
le la
nd
pe
r ca
pita
World population (lhs) Arable land in ha/capita (rhs)
Around 80m extra people have to be fed each year
World Population Per Hectare of available land
03/07/2012
6
Natural Resource Demand is Rising
Source: UN Population Division, FAO, USDA, EIA, WRI, UN Joint Database, Goldman Sachs Research Estimates
World development indices 1950 to 2030E (rebased to 100) 1
95
0 =
10
0
900
800
700
600
500
400
300
200
100
0
1950 1960 1970 1980 1990 2000 2010E 2020E 2030E
Population
Energy demand
Urban population
Grain consumption
Real GDP per capita
Carbon emissions
Projections
What are the key thematic opportunities?
• Renewable energy
• Water
• Sustainable timber
• Agriculture
03/07/2012
7
Thematic Investment opportunities
8. New Technology
3. Acceleration
4. Hyper complexity
12.
Globalisation
6.
Commercialisation
7. Affluence
14. Health
9. Polarisation
10. Dematerialisation
11. Individualisation
5. Networks
13. Democratisation
2. Environment 15. Ageing
1. Knowledge
Sources: CIFS Copenhagen, Pictet
Water
Clean Energy
Timber
Digital
Communication
Agriculture
Generics
Biotech
Security
Premium Brands
Cleantech:: Enabling Sustainable Prosperity
ENERGY: Includes
Energy Generation,
Storage,
Infrastructure and
Efficiency
TRANSPORTATION:
Includes vehicles
design, fuels and
logistics
AIR &
ENVIRONMENT:
Includes
remediation,
emission control,
trading and offsets
RECYCLING &
WASTE: Includes
various recycling
services and waste
treatment services.
WATER: Includes
filtration, purification,
water conservation and
wastewater treatment
MANUFACTURING/
INDUSTRIAL:
Includes monitoring/
control appliance and
smart production industries.
MATERIALS:
Includes
environmental
friendly nanotech,
biotech, chemical
materials
AGRICULTURE:
Includes land
management, natural
pesticides, natural
fertilizers, irrigation,
Source: KBC Kleinwort
03/07/2012
8
Investment theme: Why water ?
I. Challenge An unsustainable status
quo… • total use of water increased
9X since 1900 • driven by 3 very thirsty
stakeholders • creating a water availability
challenge
II. Industry …leads to growth in water
services industry… • Creating a USD 500bn
market growing at 6% per year
• Recycling a limited resource and protecting the environment
• mostly owned and operated by public entities
III. Investment …creating opportunities for
equity investors • USD 1tr per year global
investment needed • under improving political
environment(s) • offering attractive risk
adjusted returns
Solar energy reached $137 billion of investment, wind was $75 billion
But the top-line hides what is happening in the past few years – increased capital allocations
2011 was record year for investment
5%
Growth 33%
Growth
Source: Goldman Sachs, 2012, New Energy Finance Note: Adjusts for reinvested equity. Total value includes estimates for undisclosed
deals.
5%
Growth
20%
Growth
$151bn
2007
$180bn
2008
$186bn
2009
$247bn
2010
$260bn
2011
Global Investment in Clean Technology For the first time, 2011 global investment in new renewable power plants
(USD 240 billion) surpassed fossil-fuel power, which stood at USD 219 billion
03/07/2012
9
Allocations to clean energy
Expected allocation to clean
energy investments by 2012
Expected change to clean energy
allocations by 2012
Source: New Energy Finance, 2009
Based on 106
Institutions
with
$1tr AUM 3%
22%
75%
Less
Unchanged
More 57%
54%
50%
48%
42%
36%
32%
41%
40%
44%
48%
55%
54%
65%
Projects
Public Equity
Carbon
Private Equity
Timber and forestry
Venture
Capital
Agricultural commodities
More Less No change
Institutional Investor Intentions, New Energy Finance Survey
Cleantech Private Equity Funds and Advisors Targeted at clean technologies and growing in number
03/07/2012
10
Growth in the Listed Environmental Universe
250
662 75
399
50
307
2000 2010
Emerging Asia
Leaders ex-Emerging Asia
Environmental
Opportunities
*Estimated Size
Source: Impax and Bloomberg
* *
Number of
companies
By Number of Companies, by market
Lets pick two “natural assets”
• Sustainable timber
• Agriculture
03/07/2012
11
Timber Demand: steady growth until 2030
Source: FAO – State of the World’s Forests 2009; FAOWRI/FAO statistics, 2005
Demand drivers
Population growth
(housing, basic needs,
hygiene) directly linked
to demand growth
Higher GDP p.c.
changes consumption
patterns: household
paper, print, packaging,
high-end uses
Bioenergy (fuel wood,
cellulosic ethanol)
increasingly important
Further ’environmental’
options: amenity value,
biodiversity, land
development, mineral
rights
Paper & board
Source: NCREIF Timberland Index, Bloomberg Please note this data refers to private equity timberland investments
0
500
1000
1500
2000
1986
1989
1992
1995
1998
2001
2004
2007
2010
NCREIF Timberland Index
MSCI World (NR)
NCREIF Timberland index vs MSCI World
Timberland: historical performance 1987- 2011
03/07/2012
12
Global agricultural trade: 60 years of 2x GDP growth
Growth in agricultural
trade has
experienced very low
cyclicality and no
correlation to
commodity prices
Megatrends focus on
companies that
benefit from:
• infrastructure
development
• cross-border
volume growth
Source: FAO Database, Pictet
Value of Global Agricultural Imports and Exports have seen ~ 7.9% CAGR since 1960’s
0
200
400
600
800
1,000
1,200
1970 1975 1980 1985 1990 1995 2000 2005
Imports Exports
USDbn
7.9 %
CAGR
Constructing a thematic portfolio
• Renewable energy
• Water
• Sustainable timber
• Agriculture
03/07/2012
13
Top-down strategic weights in themes
Source: Pictet
Pictet-Environmental Megatrend Selection
Timber 1/6
Agriculture 1/6
Clean Energy 1/3
Water 1/3
• Strategic thematic
weights
• Monthly rebalancing
triggered by
performance
differences of the
individual themes
• Daily publication of
NAV
Water Energy Land Resources
Themes
Combination of four investment ideas in one investment fund
Investment universe
(*) This market cap as per May 31, 2010, compares with the market cap of the Footsie 100, with EUR 1.75 tr
Source: Pictet Asset Management
Over 900 companies across 4 themes
Investment universe by sub-
theme
Investment universe by
geography
5%
30%
24%
41%
Developed Asia Pacific Emerging Markets
Europe North America
11%4%
10%
3%
13%
14%
11%7%
1%
19%
7%
Agricultural Supply Chain Services Carbon FreeEnergy Efficiency Environmental ServicesFarm Inputs FarmingLow Carbon Energy Packaged WaterTimber Water SupplyWater Technologies
03/07/2012
14
The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees
that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.
Source: Lipper m onthly data, c reated with MPI Stylus
Megatrends: Peer group performance
as of 31.05.2012
Cum ul a ti ve P e r fo r m a nc e
i n EUR, 0 9 /1 0 - 0 5 /1 2
70
75
80
85
90
95
100
105
110
115
120G
row
th o
f 1
00
EU
R
09/10 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 03/12 04/12 05/12
5 th to 2 5 th Percenti l e 2 5 th to Median
Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e
Pic tet-Envi ronmental Megatrend Selection-P EUR MSCI World NR USD
YTD 1M 3M 6M 1Y
Pictet-Environmental Megatrend Selection-P EUR 4.90 -2.47 -3.22 7.25 -5.32
MSCI World NR USD 5.80 -2.20 -1.02 9.66 3.46
Peer group Median 4.81 -3.01 -3.56 7.25 -7.43
Peer group Average 4.13 -3.38 -4.70 5.97 -9.82
The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees
that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.
Source: Lipper m onthly data, c reated with MPI Stylus
Agriculture - peer group performance
as of 29.02.2012
Cum ul a ti ve P e r fo r m a nc e
i n EUR, 0 5 /0 9 - 0 2 /1 2
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
165
170
Gro
wth
of
10
0EU
R
05/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 02/12
5 th to 2 5 th Percenti l e 2 5 th Percenti l e to Median
Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e
Pic tet-Agr i cul ture-P EUR MSCI World NR USD
YTD 1M 3M 6M 1Y
Pictet-Agriculture-P EUR 7.84 2.32 9.40 4.66 -6.47
MSCI World NR USD 6.89 2.64 10.78 16.54 1.50
Peer group Median 9.08 1.88 10.69 6.37 -4.45
Peer group Average 9.17 2.21 11.21 6.40 -5.01
03/07/2012
15
Water - review of performance
Performance chart
50.00
70.00
90.00
110.00
130.00
150.00
170.00
190.00
210.00
230.00
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Jan
09
Jan
10
Jan
11
Jan
12
Value
Ind
ex
ed
pe
rfo
rma
nc
e
Pictet - Water - P EUR MSCI World
Pictet Water converted to GBP
The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees
that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.
Source: Lipper m onthly data, c reated with MPI Stylus
MSCI World
YTD 3M 6M 1Y Ann. 3Y Ann. 5Y Pictet-Water-P EUR converted to GBP 8.87 3.96 9.27 2.85 MSCI World 5.56 2.06 6.90 -2.04 12.14 2.40
Ann. SI 6.54 1.33
12.66 SI
117.31
17.63
Cumulative Performance since inception
4.38
as of 30.04.2012
The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees
that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.
Source: Lipper m onthly data, c reated with MPI Stylus
Clean Energy - Peer group performance
as of 30.04.2012
Cum ul a ti ve P e r fo r m a nc e
0 5 /0 7 - 0 4 /1 2
30
40
50
60
70
80
90
100
110
120
130
140
Gro
wth
of
$1
00
05/07 09/07 12/07 03/08 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 04/12
5 th to 2 5 th Percenti l e 2 5 th Percenti l e to Median
Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e
Pic tet-Clean Energy-P USD MSCI World NR USD
YTD 1M 3M 6M 1Y Ann. 3Y
Pictet-Clean Energy-P USD 6.23 -1.82 0.09 1.61 -24.11 1.72
MSCI World NR USD 10.30 -1.14 5.03 7.54 -4.63 15.61
Peer group Median 6.04 -2.03 0.32 -0.23 -27.81 -3.23
Peer group Average 5.91 -2.99 0.01 -1.39 -29.52 -2.41
03/07/2012
16
The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees
that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.
Source: Lipper m onthly data, c reated with MPI Stylus
Timber - review of performance
as of 31/03/2012
C u m u l a t i ve P e r fo r m a n c e
0 9 /0 8 - 0 3 /1 2
50
60
70
80
90
100
110
120
130
140
Gro
wth
of
$1
00
09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 03/12
Pic tet-Timber-P USD M SCI Wor l d NR USD
YTD 1M 3M 6M 1Y Ann. 3Y
Pictet-Timber-P USD 12.63 -0.50 12.63 24.60 -13.26 25.21
MSCI World NR USD 11.56 1.29 11.56 20.03 0.56 20.24
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