Megatrends:
Climate change and resource scarcity

termometer

An expanding population and the rising demand for food, energy and materials continue to strain the finite resources of the planet. The need for solutions that improve energy efficiency, lower food waste and provide alternatives to scarce resources has never been greater. Underlying these trends is the persistent increase in global emissions which has led to intensifying debates around climate change and how we can resolve it.

Learn more about the megatrends shaping our future of economies, business and society.

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The earth in the hot seat

In 2018, global emissions continued their march higher growing 1.7% yoy (year on year).1 In turn, the US National Climate Assessment report noted that sea levels are now rising twice as fast as 25 years ago, while re-insurance company Swiss Re estimated recently that natural catastrophes and extreme weather events caused $146 billion (all amounts given in USD) in damages in 2018. The social and economic consequences of climate change are substantial. How can this be slowed?

Investing in energy efficiency and renewable energy

Investing in energy efficiency and renewable energy is an important step. The good news is that clean energy today is cheaper than it has ever been. The average price of a solar module has fallen 88% since 2010, while the cost of wind turbines has declined by over 40%.2 In some countries, clean energy sources are comparable to natural gas and coal power in terms of unit costs and rely less on government subsidies each year.

Source: 1. Global Energy & CO2 Status Report, The International Energy Agency, Mar 2019. 2. Bloomberg, Dec 2018.

Getting more out of less

Similar solutions are needed in agriculture as the need for nutrition rises with per capita GDP in large emerging markets. This greater demand will have to be satisfied with fewer resources too; worldwide, land area dedicated to agriculture has not increased in the last 20 years, while agriculture's share of employment has dipped to about 25% from 42% just 30 years ago. To produce more with less, productivity improvements need to be relentless.

Graph showing per capita meat consumption versus GDP

Source: Eurostat - Jul 2019, US Census Bureau Feb 2019, Japan National Statistics - Aug 2019.

What are the investment opportunities?

We strive to identify innovators who provide solutions to climate change including producers of solar panels, wind turbines and electric vehicle technologies. We also seek substitutes to scarce materials, especially those used in new, essential technologies such as batteries and smartphones. Better recycling practices are part of the solution and can also reduce material pollution. This is an increasingly important theme as consumers and regulators turn their attention towards single use plastic and sustainable packaging.

Productivity in food production

Finally, the need for increased productivity in food production present opportunities to chemicals and fertiliser companies, to machinery producers who reduce the need for human labour, as well as new technologies such as drones, predictive weather analytics and precision agriculture that are necessary to increase yield across the world.

Investing in climate change and resource scarcity with BlackRock & iShares

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