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Report "UBS research focus" of UBS Wealth Management Research
Mind over matter
UBS Wealth Management Research forecasts that major productivity gains are imminent in the production and distribution of life's basics - energy, water and food. Improvements will be driven by the urgent need to avert growing scarcities and even shortages in these essentials. Based on this demand, Wealth Management Research identifies a number of interesting investment opportunities. Three clear trends are combining to foster the efficiency gains that will also drive global economic growth:
High food and energy prices create strong incentives for investment in these sectors. This is the only way that producers can satisfy growing demand.
A profound population shift from rural to urban areas.
Government regulation of emissions and international agreements aimed at reducing the impact of climate change.
In their new, in-depth study entitled "Mind over matter," the analysts at UBS Wealth Management Research investigate the economic consequences and investment opportunities of the growing global demand for the basics of life - energy, water and food.
Wealth Management Research forecasts that global economic output will quadruple by 2050. One contributing factor will be population growth, which the UN forecasts to rise from the current 6.7 billion to over 9 billion by mid-century. However, for this level of economic growth to materialize, sharp increases in efficiency must be achieved in the basic sectors of energy, water and food. And these productivity gains must be made without destroying our already damaged natural environment.
Higher prices will force consumers and producers to make more efficient use of scarce resources. And continuing urbanization - in 2009, city-dwellers will outnumber the rural population for the first time - is also contributing to greater efficiency. Finally, stricter environmental regulations will lead to greater efficiency.
Efficiency delays doomsday scenarios and helps save money
There are many tools already available to help society realize its long-term growth with healthy economic results. The focus is on more efficient utilization of existing resources. Increased efficiency can help avert the doomsday scenarios that are frequently invoked, such as climatic catastrophes, widespread deforestation and the exhaustion of petroleum and groundwater reserves. Increased efficiencies can avert these scenarios while offering good returns to those who invest in the companies that will lead this effort.
Energy: In the energy sector, Wealth Management Research shows how improved technology saves energy in many sectors. For example, demand for all types of building insulation should increase. Building management systems also offer large potential savings. Manufacturers of energy control systems, efficient heating, ventilation and air conditioning systems and hot water systems offer attractive investment opportunities in this area.
Food production: Fertilizers, crop protection, seeds, machinery and improved irrigation systems all can all help to achieve the productivity increases in food production that are needed to meet growing demand. Wealth Management Research also identifies interesting investment opportunities in these areas.
Water: Water is a scarce resource that traditionally has been perceived as being virtually free. Given the growing demand for this precious resource, there will be rising need for investment. To use water more efficiently, manufacturers and operators of water treatment plants, producers of pumps, piping, valves and monitoring equipment will all become more important in the future, making them attractive to investors.
Assuring adequate supplies of life's basics--energy, food and water--is one of the greatest challenges to sustainable, long-term, global economic growth. In its "UBS research focus", Wealth Management Research shows that efficiency increases can meet this challenge. It also highlights the opportunities for investors to participate in this development through strategic investments.
Sandro Merino, Head Wealth Management Research Europe
Tel. +41-44-234 67 58