While impact investing is frequently associated with direct private equity and debt investing, the reality is that impact and financial returns may be enhanced by also investing in publicly traded companies providing solutions at scale. Investing in publicly traded companies addresses two of the biggest challenges impact investing has faced in its nascent stage– creating impact at scale and providing new sources of attractive opportunities for impact investor capital. The provision of water and food are central sustainability challenges that provide good examples of the complementary nature of private equity investments that provide focused solutions and publicly traded solution providers impacting the challenges at scale.
The Challenge: Water
An estimated $22 trillion investment will be required to meet the need for this precious resource through 2030, which will be the largest component of global infrastructure spending in the next 20 years.
Impact at Scale (Public Equities):
Public equities companies across each of these segments are contributing to creating water solutions at scale.
- Water and Waste Water Utilities – Companies managing infrastructure and delivery of water and/or treating waste water for reuse or safe remediation back into the environment.
- Water Infrastructure – Companies providing pipes, pumps, seals and valves as well as design, engineering and construction services.
- Water Technology – Companies providing filtration, disinfection, test and measurement products and metering.
The Challenge: Agriculture
A growing global population along with increased affluence and changing diets in the developing world will continue to drive increased demand for food. Demand is expected to expand by 27 percent in 2030, accelerating to an increase of at least 70 percent by mid century. With approximately 38 percent of the earth currently used for farming, the supply of arable land for farming is relatively fixed.
Impact at Scale (Public Equities):
Sustainably meeting the world’s food needs will require an integrated approach that considers the need to increase crop yields while minimizing environmental impacts and ensuring equity across large and small players in the agricultural value chain. Companies providing agricultural solutions operate across 4 sectors:
- Agricultural Producers – Farmers who provide grains, vegetables and livestock.
- Agricultural Suppliers – Companies providing fertilizers, seeds, crop protection and machinery that enable the Producers to increase crop yields.
- Agricultural Services – Companies providing vital services to ensure quality and manage and transport increasing volumes.
- Agricultural Processors – Companies that take raw products and process them for delivery to consumers.
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