Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
ESSENTIAL RESOURCES
iShares’ Essential Resources Thematic ETFs are a range of funds that that track indices provided by S&P Dow Jones Indices.
Video 02:38
DISCOVER iSHARES’ ESSENTIAL RESOURCES THEMATIC ETFs
Omar Moufti, Lead strategist on thematics for iShares EMEA, focuses on the Essential Resources themes and introduces iShares’ Essential Resources Thematic ETFs.
THEMATIC THINKING
Capital at risk
Marketing material
Food, water, air, energy and metals are some of the basic resources for life essential to meeting rudimentary needs and underpinning our economic development. Geopolitical and natural events have highlighted how some can be in short supply and spawn serious repercussions for global economies.
This is part of a wider structural trend of increasing population, rising demand for resources, and climate change, putting strain on the world’s limited natural capital. The need for better resource management has never been so timely. Companies able to offer solutions and alternatives may benefit from this long-term opportunity.
Food and Agriculture
1. First, the world’s food supply chain needs to be made more robust. Agribusiness companies, from agri-equipment makers to the agriscience space, can help to increase crop yields, as we grapple with feeding more people using more limited resources.
Water and Sanitation
2. Water stress is rising around the globe, heightened by increased weather volatility. We face a challenge of providing access to clean water for all and at all times. This means expanding & renewing infrastructure for safe drinking water, wastewater treatment and even stormwater drainage.
Air
3. Wood’s carbon-absorbing qualities and regenerability could position it as a more sustainable option to high-polluting plastics in packaging and to steel and cement in construction, to the benefit of timber & forestry management companies.
Energy
4. The transition to a low-carbon economy begins with the highest emission segment: power generation. Industrial advances, subsidies & incentives, a drive for energy independence, reduced emissions targets; all are combining to boost investment in clean energy infrastructure & technology.
Metals
5. Metals and minerals such as copper, lithium, nickel, are vital inputs in clean technologies from wind turbines to electric vehicles. The acceleration in the low-carbon transition presents growth opportunities for miners and producers of these essential metals.
Beyond addressing some of the long-term and even shorter-term challenges we face, these Essential Resource themes align with a number of the UN Sustainable Development Goals that the world aims to achieve by 2030. From Zero Hunger, Clean Water & Sanitation, to Climate Action.
WHAT IS THE THEME?
Essential metals have a foundational role in emerging technologies. Minerals, such as copper, lithium, nickel or rare earth possess unique characteristics, necessary for constructing low-carbon technologies and renewable energy systems. Coupled with supply chain challenges, this also presents growth opportunities for miners and producers of essential metals.
6x
Electric cars require six times as many minerals, with an average of 207 kg per vehicle, compared to just 34 kg per vehicle in conventional cars.1
5x
Export restrictions on critical raw materials have increased more than five-fold in the last decade with 10% of global value of exports of critical raw materials now facing at least one export restriction measure.2
$360-450B
Required investment to meet minerals demand in the Net Zero Scenario, 2022-2030.3
Source:
1. IEA, The Role of Critical Minerals in Clean Energy Transitions, May 2021
2. OECD, April 2023
3.IEA, Energy Technology Perspectives 2023, Jan 2023
WHY NOW?
Demand fueled by the transition to a low-carbon economy
The transition to a low-carbon economy, underpinned by the production of new technologies, has the potential to generate an increased demand for specific minerals.
Navigating supply challenges
Increased incidences of droughts and floods require greater investment to ensure water access for all at all times.
Strategic & geopolitical priority
Numerous nations and businesses are adopting strategies to safeguard their access to these vital minerals, employing regulations, policies, or corporate acquisitions to achieve this objective.
FOCUS ON FUND
Why invest in METL?
- Benchmarked to the S&P Global Essential Metals Producers Index which aims to track companies engaged in the mining or manufacturing of products using cobalt, copper, lithium, nickel, palladium, platinum, or rare earth metals, among others.
- Access to companies engaged in the mining or manufacturing of metals which may be required for the global energy sector’s shift from fossil-based systems of energy production and consumption to renewable energy sources.
- The fund is screened for non-compliance with global standards (e.g. UNGC) and controversies.
WHAT IS THE THEME?
Water is a key basic resource, often forgotten in the developed world, but underpinning economic prosperity nonetheless.
The growing global population, alongside increased urbanisation, incomes, and weather volatility, are putting pressure on the world’s water resources. Investment in water services is likely to continue at a sustained rate to ensure demand can be met.
1B
Additional people living in arid areas by 2050 (areas in extreme, high and medium water stress).1
$70T
(or 31% of global GDP) will be exposed to high water stress by 2050, up from$15T in 2010.2
$360-450B
Required investment to meet minerals demand in the Net Zero Scenario, 2022-2030.3
Source:
1. World Resources Institute, August 2023.
2. Aqueduct, August 2023.
3. Global Commission on the Economics of Water, March 2023.
WHY NOW?
Population growth
Population growth, urbanisation and rising incomes could continue to support increasing demand for water, with an expected shortfall of the demand by 40% by 2030.1
Weather volatility
Increased incidences of droughts and floods require greater investment to ensure water access for all at all times.
Diverse segments
Invest in the water theme via water distribution and treatment, engineering services, machinery manufacturing, sanitary equipment, etc.
Source:
1. Global Commission on the Economics of Water, March 2023.
FOCUS ON FUND
Why invest in IH20?
- Benchmarked to the S&P Global Water Index which aims to track companies involved in water-related activities, including water utilities & infrastructure and water equipment & materials.
- Future growth potential through exposure to the powerful trend for growing water demand.
Risk: There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up. - Diversification through a broad range of companies in water-related businesses globally.
Risk: Diversification and asset allocation may not fully protect you from market risk.
WHAT IS THE THEME?
The adoption of renewable energy systems can play a pivotal role in reducing carbon emissions. It can also aid tackling energy security, offering lower-carbon emitting solutions and a path forward for energy needs.
The production costs of renewable energy now compete favourably with traditional power sources, hastening adoption of these energy alternatives.
$1.34t
Allocated by governments for clean energy investment support since 2020.1
86%
of all the newly commissioned renewable capacity in 2022 had lower costs than fossil fuel-fired electricity.2
83%
of new power capacity expansion in 2022 came from renewable sources reaching a record high, from 57% in 2018.3
Source:
1. IEA, Government Spending Tracker, June 2023.
2. IRENA, Renewable Power Generation Costs in 2022, August 2023.
3. IRENA, Renewable Capacity Statistics 2023, March 2023.
WHY NOW?
Improving economics
Renewable energy has become economical, with production costs from solar photovoltaic being 29% less expensive than the cheapest fossil fuel option in 2022 (vs. 710% more expensive in 2010).1
Reducing pollution
Increasing social and regulatory pressure to reduce CO2 emissions. Replacing traditional energy sources with renewables is key to this goal.
Reducing pollution II
The S&P Global Clean Energy index screens out stocks with abnormally-high carbon footprints.
Source:
1. Blackrock; IRENA Renewable Power Generation Costs in 2022 published in 2023. Based on the levelised cost of electricity (LCOE).
FOCUS ON FUND
Why invest in INRG?
- Benchmarked to the S&P Global Clean Energy Index which aims to track companies that produce energy from solar, wind, hydro, biomass and other renewable sources, as well as companies that build and provide clean technology.
- Future growth potential: through exposure to the trend for clean energy.
- Reduce an equity portfolio’s carbon emissions: invest in clean energy.
WHAT IS THE THEME?
Forest ownership and proper management reduce illegal logging and ensure that forests grow and develop effectively, and earn a yield from timber sales and other fees (e.g. camping). Such assets may be all the more attractive in periods of low bond yields. And with the development of carbon trading schemes, a new revenue source is developing, remunerating forests for their CO2 absorption and storage.
Growth in demand for timber comes from a growing population, from the construction and paper and packaging industries.
159 bn
Parcels shipped globally in 2022, almost twice as much as the amount shipped in 2018 (87 bn). By 2028, estimates show that more than 220 bn of parcels will be shipped globally fuelling demand for paper.1
25 storeys
and 86.6m, the height of Ascent in the USA, is the world’s tallest timber building completed in 2022. Wood is increasingly being favoured in various building construction, especially for its thermal insulation properties.2
1 ton
Is the approximate amount of CO2 stored in 1 cubic meter of wood. Wood’s renewable and carbon-absorbing potential could position it as a preferred material to steel or cement. 3
Source:
1. Pitney Bowes, 2023.
2. Dezeen, March 2023 - Top 10 tallest mass-timber buildings around the world.
3. Canada Wood Group “Influence of Material Use in Green Building Policies (A convenient truth)”, May 2022.
WHY NOW?
Forest stewardship
Forest offers a variety of benefits, financial, and non-financial including a timber yield, a living environment, or carbon absorption features among others.
Reducing pollution
Forests naturally absorb and store large quantities of atmospheric CO2, a deed increasingly remunerated by carbon trading schemes.
Paper please
Wood and paper are becoming choice materials as the detrimental lifecycle impact of plastics becomes better understood.
FOCUS ON FUND
Why invest in wood?
- Benchmarked to the S&P Global Timber & Forestry Index which aims to track companies engaged in the ownership, management or upstream supply chain of forests and timberlands.
- Exposure to broadly diversified Timber & Forestry companies with direct investment into 25 global companies.
Risk: Diversification and asset allocation may not fully protect you from market risk. - Exposure to the growing trend for using wood and forestry products.
Risk: There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.
WHAT IS THE THEME?
Over the next 30 years, two billion additional people will have to be fed.1 At the same time, the availability of essential resources for agriculture, namely land, freshwater, and labour, is not increasing.
Thus, investment into agricultural production appears set to continue, particularly with new technology such as precision agriculture which aims to improve farmer profitability, efficiency, and industry sustainability.
Source:
1. United Nation, World Populations Prospects, July 2022.
2
Billion people will be added to the world’s population by 2050, increasing demand for basic necessities such as food with more than 9.7 billion people to feed.1
382
Is the average number of recorded natural disaster events over the last 5y, compared to an average of 180 between 1970 and 2000 showcasing the need for resilient agricultural production amid climate change.2
$21B
By 2030, precision agriculture sales are expected to reach $21B, at a 12.8% compound annual growth rate.3
Source:
1. United Nation, World Populations Prospects, July 2022.
2. Our World In data, March 2023.
3. Grand View Research, “Precision Farming Market Size, March 2022.
WHY NOW?
Calorie consumption growth
The combination of population growth, urbanisation and rising incomes is increasing calorie consumption globally.
Make more with less
Feeding this growth requires better yields with the same or sometimes reduced resources.
New technology
Investment into seeds, equipment, chemicals and processes is a major opportunity.
FOCUS ON FUND
WHY INVEST IN SPAG?
- Benchmarked to the S&P Commodity Producers Agribusiness Index which aims to track companies involved in agricultural business activities around the world.
- Exposure to broadly diverse range of companies across the agricultural supply chain.
Risk: Diversification and asset allocation may not fully protect you from market risk. - Direct investment into companies globally.
Risk: There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.
The S&P Global Water Index, S&P Global Clean Energy Index, S&P Global Timber & Forestry Index, S&P Commodity Producers Agribusiness Index are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by iShares. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by iShares. iShares ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Index.