Last updated: 10:03 / Tuesday, 9 December 2014
RobecoSAM, Sustainability

How Can the Global Economy Adapt to Resource Scarcity?

How Can the Global Economy Adapt to Resource Scarcity?

The supply of resources is limited. Yet global demand for resources such as metals, fuel, water and minerals is increasing as the world’s population continues to grow. How can the global economy adapt to resource scarcity?

Resource scarcity prompts resourcefulness

According to the UN, the world’s population is expected to grow by another 3.7 billion, reaching a total of 10.9 billion by 2100. At the same time, changing consumer habits as a result of growing disposable incomes in the emerging markets and increasing industrial activity are putting additional pressure on natural resources essential to long-term economic prosperity.

The effects of rising demand are compounded by steepening costs
 of securing an adequate supply of resources. Most of the easily accessible resources have already been extracted. Geographical, political and environmental constraints mean that many supplies of critical resources such as oil or some metals are increasingly found in remote, difficult to reach places – such as deep sea areas or the arctic – making it difficult and expensive to extract them. In many cases, their extraction comes with added environmental, social and other indirect costs. All of this is contributing to price volatility and rising prices of production inputs. As a result, the global economy now sits at a crossroads. In order to prevent the depletion of natural resources critical to economic growth, we must transform industrial processes to become more resource efficient, develop substitutes for supply constrained resources and promote the reuse and recycling of limited resources.

But throughout history, human ingenuity and innovation have enabled us to adapt to resource scarcity by substituting away from supply-constrained resources and developing technological advances that have enabled productivity gains and the more efficient use of resources. Examples include energy-efficient LED lighting technology, or the aerospace industry, which has increasingly relied on lighter materials to reduce fuel consumption of their aircraft. These are the very mechanisms that have enabled humankind to cope with population and economic growth in a resource constrained world.

Companies that translate our resource challenges into opportunities by developing resource efficiency solutions that increase productivity or lower input costs will benefit from reduced risks associated with price fluctuations, environmental liabilities and regulation, and an enhanced reputation, boosting their competitiveness. And investors who identify these game- changers can benefit from superior risk-adjusted returns.

At RobecoSAM, we are convinced that companies that introduce innovative solutions to our resource challenges are more likely to enjoy a long term competitive advantage. Building on our in-depth understanding of long- term sustainability trends, we identify and invest in innovative game chang- ers that are leading the way in providing resource efficiency solutions. Our listed equity themes and private equity funds translate resource-related challenges into specialized investment portfolios containing future-oriented companies that are providing innovative solutions to resource scarcity in the areas of water, energy, climate, agribusiness and smart materials and infrastructure.

Ultimately, investing in the resource efficiency theme enables investors to mobilize capital to preserve resources critical to economic
growth, generating a positive impact on the environment and society.