CONTRIBUTORS
Stephen Dover, CFA
Chief Market Strategist
Head of Franklin Templeton Institute
This is a chapter from the Franklin Templeton Institute paper, Energy transition: Accelerating investment opportunities. To read all chapters in this paper, download the complete PDF or click here.
Chapter preview
The energy-water-food nexus is vast in scope and importance, so the number of potential investment themes—and therefore sources of alpha—emerging from it is practically without limit.
In his ongoing efforts to explore future sources of alpha, Chief Market Strategist, Stephen Dover, presents a few vignettes that suggest possible investment opportunities at the intersection of energy, water and food over the medium to long run. In this chapter, we look at the following scenarios:
- Almost everywhere in the world, the infrastructure for collecting, storing and delivering water needs to be rebuilt or built from scratch, an undertaking that will involve trillions of dollars in infrastructure investments. It will also involve a massive energy expenditure . In the United States alone, an estimated 60.6 terrawatt-hours (TWh) of energy—or nearly 20% of US energy consumption—in 2018 was used to deliver irrigation water.1
- We discuss “green fertilizer” by diving into the In the Haber-Bosch process, where both water and electricity are key components in electrolysis. As a result, chemists have long attempted to find and implement a more energy-efficient, water-efficient and environmentally-sound fertilizer production process.
- Finally, we look at how economic growth and the adoption of 21st-century water and agritech/farming practices, including GMO crops and livestock, will enable global per-capita caloric intake to grow in the next 20 years.
Stephen Dover, CFA
Chief Market Strategist
Franklin Templeton Institute
This is a chapter from the Franklin Templeton Institute publication, Energy transition: Accelerating investment opportunities. Arguably, humanity’s greatest current challenge is the need to shift to low and net-zero carbon in a little less than 30 years. New technologies are accelerating the renewable energy transition while reducing environmental impacts. The renewable energy sources of today and the future require new and smarter technologies as well as the rapid creation of new infrastructure. These challenges create investment opportunities as investors have a critical role given the capital required to fund this transition. To read the full paper and explore views from across our specialist investment managers, download the complete PDF or click here.
Endnote
- Source: Sowby, R. and Dicataldo, E. “The energy footprint of U.S. irrigation: A first estimate from open data.” Energy Nexus. June 16, 2022.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
Equity securities are subject to price fluctuation and possible loss of principal.
Investing in the natural resources sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector—prices of such securities can be volatile, particularly over the short term.
Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt.
Investments in fast-growing industries like the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement.
Real estate securities involve special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives.