03/07/2012

1

Mega trends for a Sustainable World

Picking winners from today’s growth themes

Mark Campanale, Advisor, Pictet Funds

June 2012

mark@campanale.co.uk

BP oil spill in the gulf of Mexico

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03/07/2012

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Drought in UK 2010-2012

2

Fire in Russia

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03/07/2012

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Floods in Thailand

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Changing climate; global population growth; rising food

demand; the challenge of access to water; rapidly

ageing western world populations.

All of these are examples of “megatrends.”

These are trends which are profound developments that are

likely to fundamentally shape the progress of human

civilisation over decades. As entrepreneurs react to these

challenges, new businesses will be created and

technologies developed.

Understanding the Mega trend opportunity

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The key trends in the clean tech

Investment theme

Sources: University of Bern (Siegenthaler et al., Science 2005; EPICA community members, Nature 2004),

(1) IPCC estimate, average of possible scenarios, (2) Deuterium: proxy used to estimate temperature in

Antarctica

Today, there is a global

consensus that man-

made climate change is

real

Energy security and

independence are vital

for global economy

Clean energy benefits

from strong support

through government

and public opinion

Energy efficiency

provides a huge field for

improvements

an energy shift Correlation between CO2 concentration and temperature

500

450

400

350

300

250

200

150

100

50

0 -100,000 -200,000 -300,000 -400,000 -500,000 -600,000

Years

CO2

parts per

million

0

Forecast 2050 (1): 480

ppm

CO2 concentration

Temperature

Today: 382 ppm

Rising Greenhouse Gases Need to be Stabilised

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Water Demand

Sources: U.S. Census Bureau, German Ministry of Environment

1890 1940 1950 1960 1970 1980 1990 1995 2000 2010 2025

1000

900

800

700

600

500

400

300

200

100

0

Global Water Consumption

Rela

tive G

row

th r

ate

Global Population

Global Water Consumption is Rising

Projections

Agriculture – solving global imbalances

Source: U.N., World Population Prospects, FAO, Pictet, The Mosaic company - ML Agri conference, 2008

• Direct human consumption of

grains and vegetables is

similar irrespective of income;

protein and vegetable oil

consumption grows with

increase in wealth.

• McKinsey: “…about 1.1 billion

people will join middle class

income groups in China and

India alone between 2005 and

2025.”

• Investments in the agro value

chain are an integral part of

solving the global food

challenge

0

1

2

3

4

5

6

7

8

9

10

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Po

pu

latio

n in

bn

.

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

Ha

of a

rab

le la

nd

pe

r ca

pita

World population (lhs) Arable land in ha/capita (rhs)

Around 80m extra people have to be fed each year

World Population Per Hectare of available land

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Natural Resource Demand is Rising

Source: UN Population Division, FAO, USDA, EIA, WRI, UN Joint Database, Goldman Sachs Research Estimates

World development indices 1950 to 2030E (rebased to 100) 1

95

0 =

10

0

900

800

700

600

500

400

300

200

100

0

1950 1960 1970 1980 1990 2000 2010E 2020E 2030E

Population

Energy demand

Urban population

Grain consumption

Real GDP per capita

Carbon emissions

Projections

What are the key thematic opportunities?

• Renewable energy

• Water

• Sustainable timber

• Agriculture

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Thematic Investment opportunities

8. New Technology

3. Acceleration

4. Hyper complexity

12.

Globalisation

6.

Commercialisation

7. Affluence

14. Health

9. Polarisation

10. Dematerialisation

11. Individualisation

5. Networks

13. Democratisation

2. Environment 15. Ageing

1. Knowledge

Sources: CIFS Copenhagen, Pictet

Water

Clean Energy

Timber

Digital

Communication

Agriculture

Generics

Biotech

Security

Premium Brands

Cleantech:: Enabling Sustainable Prosperity

ENERGY: Includes

Energy Generation,

Storage,

Infrastructure and

Efficiency

TRANSPORTATION:

Includes vehicles

design, fuels and

logistics

AIR &

ENVIRONMENT:

Includes

remediation,

emission control,

trading and offsets

RECYCLING &

WASTE: Includes

various recycling

services and waste

treatment services.

WATER: Includes

filtration, purification,

water conservation and

wastewater treatment

MANUFACTURING/

INDUSTRIAL:

Includes monitoring/

control appliance and

smart production industries.

MATERIALS:

Includes

environmental

friendly nanotech,

biotech, chemical

materials

AGRICULTURE:

Includes land

management, natural

pesticides, natural

fertilizers, irrigation,

Source: KBC Kleinwort

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Investment theme: Why water ?

I. Challenge An unsustainable status

quo… • total use of water increased

9X since 1900 • driven by 3 very thirsty

stakeholders • creating a water availability

challenge

II. Industry …leads to growth in water

services industry… • Creating a USD 500bn

market growing at 6% per year

• Recycling a limited resource and protecting the environment

• mostly owned and operated by public entities

III. Investment …creating opportunities for

equity investors • USD 1tr per year global

investment needed • under improving political

environment(s) • offering attractive risk

adjusted returns

Solar energy reached $137 billion of investment, wind was $75 billion

But the top-line hides what is happening in the past few years – increased capital allocations

2011 was record year for investment

5%

Growth 33%

Growth

Source: Goldman Sachs, 2012, New Energy Finance Note: Adjusts for reinvested equity. Total value includes estimates for undisclosed

deals.

5%

Growth

20%

Growth

$151bn

2007

$180bn

2008

$186bn

2009

$247bn

2010

$260bn

2011

Global Investment in Clean Technology For the first time, 2011 global investment in new renewable power plants

(USD 240 billion) surpassed fossil-fuel power, which stood at USD 219 billion

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Allocations to clean energy

Expected allocation to clean

energy investments by 2012

Expected change to clean energy

allocations by 2012

Source: New Energy Finance, 2009

Based on 106

Institutions

with

$1tr AUM 3%

22%

75%

Less

Unchanged

More 57%

54%

50%

48%

42%

36%

32%

41%

40%

44%

48%

55%

54%

65%

Projects

Public Equity

Carbon

Private Equity

Timber and forestry

Venture

Capital

Agricultural commodities

More Less No change

Institutional Investor Intentions, New Energy Finance Survey

Cleantech Private Equity Funds and Advisors Targeted at clean technologies and growing in number

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Growth in the Listed Environmental Universe

250

662 75

399

50

307

2000 2010

Emerging Asia

Leaders ex-Emerging Asia

Environmental

Opportunities

*Estimated Size

Source: Impax and Bloomberg

* *

Number of

companies

By Number of Companies, by market

Lets pick two “natural assets”

• Sustainable timber

• Agriculture

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Timber Demand: steady growth until 2030

Source: FAO – State of the World’s Forests 2009; FAOWRI/FAO statistics, 2005

Demand drivers

Population growth

(housing, basic needs,

hygiene) directly linked

to demand growth

Higher GDP p.c.

changes consumption

patterns: household

paper, print, packaging,

high-end uses

Bioenergy (fuel wood,

cellulosic ethanol)

increasingly important

Further ’environmental’

options: amenity value,

biodiversity, land

development, mineral

rights

Paper & board

Source: NCREIF Timberland Index, Bloomberg Please note this data refers to private equity timberland investments

0

500

1000

1500

2000

1986

1989

1992

1995

1998

2001

2004

2007

2010

NCREIF Timberland Index

MSCI World (NR)

NCREIF Timberland index vs MSCI World

Timberland: historical performance 1987- 2011

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Global agricultural trade: 60 years of 2x GDP growth

Growth in agricultural

trade has

experienced very low

cyclicality and no

correlation to

commodity prices

Megatrends focus on

companies that

benefit from:

• infrastructure

development

• cross-border

volume growth

Source: FAO Database, Pictet

Value of Global Agricultural Imports and Exports have seen ~ 7.9% CAGR since 1960’s

0

200

400

600

800

1,000

1,200

1970 1975 1980 1985 1990 1995 2000 2005

Imports Exports

USDbn

7.9 %

CAGR

Constructing a thematic portfolio

• Renewable energy

• Water

• Sustainable timber

• Agriculture

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Top-down strategic weights in themes

Source: Pictet

Pictet-Environmental Megatrend Selection

Timber 1/6

Agriculture 1/6

Clean Energy 1/3

Water 1/3

• Strategic thematic

weights

• Monthly rebalancing

triggered by

performance

differences of the

individual themes

• Daily publication of

NAV

Water Energy Land Resources

Themes

Combination of four investment ideas in one investment fund

Investment universe

(*) This market cap as per May 31, 2010, compares with the market cap of the Footsie 100, with EUR 1.75 tr

Source: Pictet Asset Management

Over 900 companies across 4 themes

Investment universe by sub-

theme

Investment universe by

geography

5%

30%

24%

41%

Developed Asia Pacific Emerging Markets

Europe North America

11%4%

10%

3%

13%

14%

11%7%

1%

19%

7%

Agricultural Supply Chain Services Carbon FreeEnergy Efficiency Environmental ServicesFarm Inputs FarmingLow Carbon Energy Packaged WaterTimber Water SupplyWater Technologies

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The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees

that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.

Source: Lipper m onthly data, c reated with MPI Stylus

Megatrends: Peer group performance

as of 31.05.2012

Cum ul a ti ve P e r fo r m a nc e

i n EUR, 0 9 /1 0 - 0 5 /1 2

70

75

80

85

90

95

100

105

110

115

120G

row

th o

f 1

00

EU

R

09/10 10/10 11/10 12/10 01/11 02/11 03/11 04/11 05/11 06/11 07/11 08/11 09/11 10/11 11/11 12/11 01/12 02/12 03/12 04/12 05/12

5 th to 2 5 th Percenti l e 2 5 th to Median

Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e

Pic tet-Envi ronmental Megatrend Selection-P EUR MSCI World NR USD

YTD 1M 3M 6M 1Y

Pictet-Environmental Megatrend Selection-P EUR 4.90 -2.47 -3.22 7.25 -5.32

MSCI World NR USD 5.80 -2.20 -1.02 9.66 3.46

Peer group Median 4.81 -3.01 -3.56 7.25 -7.43

Peer group Average 4.13 -3.38 -4.70 5.97 -9.82

The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees

that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.

Source: Lipper m onthly data, c reated with MPI Stylus

Agriculture - peer group performance

as of 29.02.2012

Cum ul a ti ve P e r fo r m a nc e

i n EUR, 0 5 /0 9 - 0 2 /1 2

90

95

100

105

110

115

120

125

130

135

140

145

150

155

160

165

170

Gro

wth

of

10

0EU

R

05/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 02/12

5 th to 2 5 th Percenti l e 2 5 th Percenti l e to Median

Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e

Pic tet-Agr i cul ture-P EUR MSCI World NR USD

YTD 1M 3M 6M 1Y

Pictet-Agriculture-P EUR 7.84 2.32 9.40 4.66 -6.47

MSCI World NR USD 6.89 2.64 10.78 16.54 1.50

Peer group Median 9.08 1.88 10.69 6.37 -4.45

Peer group Average 9.17 2.21 11.21 6.40 -5.01

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Water - review of performance

Performance chart

50.00

70.00

90.00

110.00

130.00

150.00

170.00

190.00

210.00

230.00

Jan

00

Jan

01

Jan

02

Jan

03

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

Jan

12

Value

Ind

ex

ed

pe

rfo

rma

nc

e

Pictet - Water - P EUR MSCI World

Pictet Water converted to GBP

The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees

that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.

Source: Lipper m onthly data, c reated with MPI Stylus

MSCI World

YTD 3M 6M 1Y Ann. 3Y Ann. 5Y Pictet-Water-P EUR converted to GBP 8.87 3.96 9.27 2.85 MSCI World 5.56 2.06 6.90 -2.04 12.14 2.40

Ann. SI 6.54 1.33

12.66 SI

117.31

17.63

Cumulative Performance since inception

4.38

as of 30.04.2012

The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees

that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.

Source: Lipper m onthly data, c reated with MPI Stylus

Clean Energy - Peer group performance

as of 30.04.2012

Cum ul a ti ve P e r fo r m a nc e

0 5 /0 7 - 0 4 /1 2

30

40

50

60

70

80

90

100

110

120

130

140

Gro

wth

of

$1

00

05/07 09/07 12/07 03/08 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 04/12

5 th to 2 5 th Percenti l e 2 5 th Percenti l e to Median

Median to 7 5 th Percenti l e 7 5 th to 9 5 th Percenti l e

Pic tet-Clean Energy-P USD MSCI World NR USD

YTD 1M 3M 6M 1Y Ann. 3Y

Pictet-Clean Energy-P USD 6.23 -1.82 0.09 1.61 -24.11 1.72

MSCI World NR USD 10.30 -1.14 5.03 7.54 -4.63 15.61

Peer group Median 6.04 -2.03 0.32 -0.23 -27.81 -3.23

Peer group Average 5.91 -2.99 0.01 -1.39 -29.52 -2.41

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The perform ance disc losed in this docum ent is net of com m issions charged to the Fund. The data does not take into account the subsc ription and redem ption fees

that can be charged by our interm ediaries within the lim its set forth in the prospec tus of the Fund.

Source: Lipper m onthly data, c reated with MPI Stylus

Timber - review of performance

as of 31/03/2012

C u m u l a t i ve P e r fo r m a n c e

0 9 /0 8 - 0 3 /1 2

50

60

70

80

90

100

110

120

130

140

Gro

wth

of

$1

00

09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 03/12

Pic tet-Timber-P USD M SCI Wor l d NR USD

YTD 1M 3M 6M 1Y Ann. 3Y

Pictet-Timber-P USD 12.63 -0.50 12.63 24.60 -13.26 25.21

MSCI World NR USD 11.56 1.29 11.56 20.03 0.56 20.24

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