Sanitation theme offers hidden gem to institutional investors

27/11/18

• NN Investment Partners (NN IP) sees investment in sanitation as an opportunity for investors to make a positive impact while achieving attractive returns • NN IP invests in companies with strong innovative business models that offer transformational solutions for societal challenges

Poor sanitation cost the world USD 222.9 billion in 2015, according to LIXL Group Corporation’s “true cost of sanitation” report*. This figure constitutes an average 0.9% of annual GDP for the countries impacted by poor sanitation, which has risen from 0.7% five years ago. India has suffered the most with USD 106.7 billion wiped off its GDP in 2015. Inadequate sanitation results in serious public health issues and heavy economic losses, but can equity investors make a positive impact in this area while achieving attractive returns?

Investors could consider private sector companies that create innovative business models to stimulate better sanitation and make accessible health-related products in countries such as India, where companies are already achieving good financial returns. There are multiple projects in both the public and private sector available to invest in, increasing the number of options available to investors and providing them with a chance to diversify their portfolios.

Hindustan Unilever’s (HUL) corporate initiatives, for example, which promote water recycling and good hygiene practices through programmes such as the Suvidha Centre, not only make a positive impact but also make business sense. They help HUL’s parent company Unilever’s brands grow faster, strengthen its reputation and reach people in what were once inaccessible areas. Unilever’s ESG products reach nearly 2 billion people per day.

Among local Indian companies, Godrej Consumers is a household name. The company thrives by making quality green products for consumers, including its market-leading, paper-based insecticide product ‘Good Knight Fast Card’. Its popularity has generated value for both the company and its consumers. Lixil Group’s ‘Safe Toilet’ was developed as an inexpensive solution to the hygiene needs of people in water-scarce regions. So far they may have a small profit contribution, but the market potential is enormous. Lixil aims to sell 1 million units in India and has already introduced its toilets in 10 countries with plans to develop more than 100 related products, such as washbasins by 2021.

Huub van der Riet, Lead Portfolio Manager, Impact Investing at NN Investment Partners, comments: “Sanitation is about promoting health to communities by providing a clean environment and breaking the cycle of disease spreading. Clean sanitation will undoubtedly have a positive impact on the economic output and GDP of developing countries. Investing in projects and companies designed to promote this is an opportunity for investors to support positive social change across the world and achieve attractive returns.

“The NN Impact Opportunities Equity Investment Strategy invests in listed equities of companies that offer material, intentional and transformational solutions for key global challenges alongside a financial return. The companies NN IP invests in typically have strong innovative business models with attractive returns, a healthy growth outlook and show a real potential to positively transform their environments. As these companies develop products and offerings to alleviate the effects of poor sanitation on the world’s population, there is a great opportunity for institutional impact oriented investors in this space.”


* LIXL Group Corporation's "True Cost of Sanitation" Report, 2015

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About the author

Huub van der Riet

Huub van der Riet

Lead Portfolio Manager

Experience since 1995

Business Experience

2013-to date Head of Thematic Equity

Huub is Head of the Thematic Equity portfolio management team and Lead Portfolio Manager of the Thematic Equity strategies.

2011-2013 Senior Portfolio Manager at NN IP

Huub is a Senior Portfolio Manager of the Thematic Equity strategy

2010-2011 Head of Sector Funds at NN IP

2007-2010 Head of Global Consumer Equity at NN IP

2001-2007 Portfolio Manager at NN IP

1998-2001 Portfolio Manager European Equities at AEGON Asset Management

1995-1998 Portfolio Measurement & Attribution Analysis of Investment Policies at ABN AMRO Asset Management, Amsterdam

1994-1995 Empirical Investigation at Invest Financial Services

Qualifications

VBA (Dutch equivalent of CFA)

MA in Finance, Investments & Treasury Management from the Vrije Universiteit in Amsterdam in 1995

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