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Disruptive technology – new growth opportunities in environmental markets


At Impax, BNP Paribas Asset Management’s partner specialising in environmental markets, we conduct our own proprietary research. This includes visiting the facilities of the companies in which we invest and meeting its managers. Through this process, we recently identified three compelling developments in environmental markets that could provide environmentally-conscious investors with attractive investment opportunities.

1. Electrification of transport systems

There have recently been announcements of high speed and metro rail developments across the globe, including India’s USD 50 billion railway corridor project and a multitude of routes throughout Africa, often driven by Chinese funding and the use of Chinese equipment, construction and operations expertise.

The electrification of transport involves more than rail. Many countries (China and India in particular) are pushing for more use of electric vehicles (EV).  There are generous incentives to help manufacturers and consumers achieve this goal, and the cost of EV technology is falling. In 2016 there was a 45% increase in EV sales year-on-year globally, and this trend looks set to continue.

Impax has been working with Imperial College London on analysing how the future of transportation in the context of electrification could look. We will have more on this in the coming months.

2. LEDs and next generation ‘connected’ lighting

Light emitting diodes (LED) lighting markets are expanding at 15-20% a year, driven both by energy efficiency regulations that are leading to the phasing out of incandescent and halogen lighting, and the falling costs of technology. However, LED penetration is still low, at around 5%, but is expected to grow to 20% by 2020, creating a significant investment opportunity.

We also believe that there is huge potential for ‘connected’ lighting, which adds sensors to lighting infrastructure to collect, analyse and use data. Examples of applications include automated dimming, tracking of machinery or assets in a factory, and targeted marketing to customers in retail environments.

3. Water in the era of the ‘Internet of Things’ and ‘Big Data’

Technological advances are changing the ways in which water is managed and used. Advanced metering solutions are growing at nearly twice the rate of traditional water meters. This growth reflects strong support from utilities companies, which are adding smart meters to their asset base on which they earn a regulated return, while also reducing their operating costs.

Longer term, we believe that utilities companies will focus on achieving a more effective management of their infrastructure, particularly reducing leakage rates and avoiding catastrophic failures through improved integration of sensors and monitoring technology.

Finally, smart pump technology is also developing rapidly, including the launch of waste water pumping systems with integrated intelligence. These systems can adapt performance in real time and provide feedback to pumping station operators, increasing efficiency and reliability.

Opportunities for investors

Our focus on environmental solutions providers offers investors access to high-growth markets and companies taking an active part in the current shift to a more sustainable and lower-carbon global economy. The company’s deep research process and expertise can help assure investors that we continue to seek the most attractive opportunities in the fields of resource efficiency and environmental markets.

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Investments in the aforementioned fund are subject to market fluctuation and risks inherent in investing in securities. The value of investments and the revenue they generate can increase or decrease and it is possible that investors will not recover their initial investment. Source: BNP Paribas Asset Management Holding.