Responsible Investing A-Z: R is for resource efficiency

This article is sponsored by Nuveen

Our planet is under pressure from a rising population and growing per capita consumption of energy and materials. We must use our finite natural resources more wisely and efficiently to sustain quality of life for future generations. The old model of extracting, using and disposing of natural resources needs to be replaced with circular supply chains, where materials are treated more thoughtfully.

Technological advances are creating opportunities to improve efficiency and reduce carbon intensity across a variety of sectors linked to natural resources, including agriculture, municipal and industrial material recycling, freshwater resources and building materials.

Nuveen’s investments in this area are varied, from using next-generation window glass, to reducing waste in the fresh produce supply chain, to investing in systems that bolster recycling efforts in India. This strategy does not require us to compromise on return expectations. On the contrary, inefficiencies in linear supply chains, increased regulations and increased consumer demand for sustainable products are creating a business environment where sustainable innovations can thrive.

In the natural resource space, there are many problems – like specific waste streams or inefficient industrial processes – that can be improved through technological advances. We get excited about companies where the initial benefits – from a single installation, for example – can scale to create a much larger impact. Our job is to make sure the business case is sustainable so it can be rolled out widely enough to move the needle across that sector.

For example, we’re invested in a company called View, which has invented a new, high-tech generation of window glass. This can reduce a building’s lighting, heat and A/C energy use by 20 percent while also creating a healthier workplace. We’re excited about View not because it can make one or two buildings greener, but because it can be rolled out widely and create a new standard for glass in the built environment.

We ask ourselves a similar set of questions each time we evaluate an investment in this space. As we are focused on companies at the stage of commercialization, we only pursue technologies that are fully proven. We also dig deep into potential execution risks, especially around construction, and want to see evidence for strong market demand and pricing. And we’re always asking ourselves if the management team has the right mix of skills to execute on its vision.

Directly or indirectly, climate change touches nearly everything connected to resource efficiency. First, it is causing some of the problems we’re trying to solve. To give just one example, the challenge of growing enough food to feed the world is made harder by increasingly volatile weather. Second, most of the opportunities we look at are designed to reduce emissions in one way or another. There are tremendous emissions benefits from repurposing waste, reducing transportation miles, making supply chains more circular, and limiting resource extraction rates. There is not one silver bullet that can slow climate change on its own. Instead, we want to be part of a broader movement to transform a range of resource-intensive activities.