Re-thinking our resources: increasing efficiencies

Discover the companies we believe are driving increased resource efficiency, from food production and transportation to access to water.
July 2021


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Economist and demographer Thomas Malthus earned a reputation as one of history’s great gloom-mongers with his prognostications of inevitable famine as human populations grew, saying in 1779, “The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race”, before adding that if war and disease didn’t keep populations down, “gigantic inevitable famine stalks in the rear.” Thus, humanity was caught in a demographic trap, condemned to starve in lean years each and every time it overbred in good ones.

An inaccurate forecast?

But of all history’s inaccurate forecasts, this particular one from Malthus was amongst the worst. The global population was about 1bn when Malthus was wringing his hands, whilst last year it is estimated to have hit 7.8bn people. Yet, as we discussed in our Health and Well-Being article last month, despite this nearly 8x increase in the world’s population, famines have become less common during the last several centuries, not more. Of all the countries in the world, the Food and Agriculture Organization of the United Nations calculates that in only two does the average daily calorific intake sit below 2,000 calories – the average necessary male/female daily intake – whereas when Malthus was writing, only one or two countries on Earth had breached this threshold, and most of the world’s population from Europe to Japan lived in seasonal fear of starvation.

Something incredible happened in the ensuing years

Humanity worked out how to grow more off the land. Much, much more, and with less susceptibility to bad weather or crop-killing diseases. There are many ways in which this was done, but one of the most important was the mechanisation of agriculture: the replacement of exhaustible, time-intensive human-led farming with tractors, harvesters, planters and other machinery that can work relentlessly, in almost any conditions, generating far more output than even a team of humans could dream of doing. It is estimated that 150 years ago, it took 25 men an entire day’s work to harvest and thresh a ton of grain. With a modern combine harvester, a single person can do it in 6 minutes. In other words, a 2500-fold increase in productivity has been achieved. Pre-mechanisation, it used to take 30 minutes to milk 10 litres, whereas with a modern milking machine it takes under a minute to generate the same amount of milk.1

Spotlight on Kubota

Kubota, Japan’s leading manufacturer of agricultural machinery, is a business that is keenly aware of its role in helping a growing global population to feed itself more efficiently. There are over 4 million Kubota tractors out in fields across the globe helping generate food off the land. It is at the forefront of mechanising agriculture in rice growing countries across southeast Asia, where agriculture is still far less mechanised than it is the developed world. Kubota’s heritage in Japan, where rice is the staple crop, positions it perfectly to provide high-quality products into Asia, and it has a number one market share of tractors in Thailand, and is the leader across the Asian continent in manufacturing combine harvesters.

Given that the United Nations is forecasting that the global population will approach 10bn by 2050, and it is expecting food demand in that year to be 1.7x greater than it was in 2010, there are going to need to be continued efficiency gains in the way that we generate food if these people are going to be fed. This is especially the case because even as populations are rising, and food output is increasing, there is a simultaneous exodus from the fields, rural populations across the global pulled towards cities and their economic and social potential like moths to a flame. Even since 1990, the decline has been staggering, as shown in the chart below. The further mechanisation of agriculture, and companies like Kubota, will be key to liberating people from drudgery on the land and feeding a growing world.2

Ratio of agricultural workers to total employment

Source: Kubota, based on World Bank research

But if getting more out of the ground is one part of the equation, then moving that produce across the globe with minimum wastage is another vital part. Until recently, food often had to be eaten shortly after it had been procured, or else it would rot. Some food could be dried and salted to make it less perishable, but even salt was too expensive for most people to afford. Even these days, with vastly improved food storage and transportation techniques, the UN estimates that 14% of food is lost between harvest and retail, with that number leaping to 25% in developing markets, where the food supply chain is less sophisticated. In the United States, about 13mn tonnes of food is wasted each year between production and consumption.

It doesn’t have to be that way: introducing Americold Realty Trust

Americold Realty Trust operates the world’s largest integrated network of temperature-controlled warehouses, with 238 facilities encompassing more than 1.4bn cubic feet of space, in geographies from Argentina to the United Kingdom, the United States to Brazil. Americold plays a key role in shepherding food from the farm to the fork, protecting it against degradation, ensuring it stays safe to eat, and minimising wastage. In 2020, 75.5bn pounds of food was preserved and protected by Americold, with 205mn pounds of it shipped and received daily. The food wastage on that volume was a staggeringly low <0.00002%.3

Keeping food chilled and safe can be an energy intensive business, but Americold has worked hard to bring down the environmental impact of its supply chain work, leveraging sophisticated energy management technology to keep operations at their highest levels of energy efficiency and the lowest kilowatt hour usage. The company has seen a 23% decrease in carbon dioxide GHG scope 2 emissions since 2018 at legacy sites.

What about water?

But if food has become more bountiful and easier to transport without decay, then what of water? For many in developed markets, it seems almost ubiquitous – a resource so plentiful that you only have to twist a tap to create an apparently limitless cascade of it. But on a global basis, 3 in 10 people don’t have safely managed access to drinking water (defined as drinking located on premises, free from contamination, available when needed) and the UN estimates that 700 million people worldwide could be displaced by intense water scarcity by 2030. There is huge global appetite for water, from agriculture (which accounts for 72% of water withdrawals), but also by municipalities for households and services (16% of withdrawals), and by industries (12%). Economic development is a thirsty business, and as cities and populations continue to grow, there will be stresses placed on water resources. The UN estimates that 1.4bn people live in areas with high water vulnerability. Environmental change could exacerbate this.

A focus on Xylem

Against this backdrop, there is an urgent need for companies that help their clients be more frugal and more intelligent with water. Xylem is the largest pure-play water business globally, with a corporate mission statement simply to “solve water”. Xylem addresses the full water cycle, from collection and distribution of water, to its safe return to the environment. Its products and services encompass everything from high performance pumps to digital solutions enabling customers to leverage data and analytics to make more intelligent decisions about how they manage their water, or to detect, predict and prevent broken pipes that are losing and wasting water.

In 2020, Xylem helped its customers prevent 1.4bn cubic metres of polluted water from flooding communities or entering local waterways. That’s about 2.5x the size of Sydney Harbour. They also installed water treatment solutions that enabled clients to salvage and reuse 4.3bn cubic metres of water. That’s enough to fill 2 million Olympic-sized swimming pools. And Xylem also reduced water lost due to leaking, faulty infrastructure and unauthorised use by 0.5 billion cubic metres in 2020. By 2025, Xylem wants to reduce water lost in this way by over 3.5bn cubic metres, equivalent to the water use needs of over 55mn people annually.

These are vast numbers, and they give some insight into the positive environment and social impact that companies have when they tackle sustainability issues of this magnitude. And by tackling an issue for which there is an existential and growing need, Xylem is also putting itself firmly in a growing slice of the global economic pie.

Final thoughts

As human populations continue to grow on a finite planet, there will be an increasing premium on those companies that are enabling us to do more with less – for example a Kubota, helping produce more food with less labour on the land – and those that help us use, transport and recycle precious resources, for example a Xylem, fixing the leaks in the global water ecosystem. We aim to invest in companies providing just these sorts of solutions.

Risk warnings

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

Meet Harry Waight

Harry Waight

Meet Harry Waight

Harry joined BMO GAM in 2013, and works as a portfolio manager on the Global Equities team. He focuses on Japan, as well as global stocks contributing to Technological Innovation and Health and Well-Being. Outside of work he is interested in understanding history, as well as mastering Jiu-Jitsu – both of which are proving equally challenging.


1 Johan Norberg, Progress, p16

Americold, ESG Report, 2020

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