Sustainable materials is a hot topic and now a big business


Binya Even

Whether it’s plastic bag charges or the National Energy Guarantee, environmental sustainability is becoming a hot topic.  One industry that’s enjoying quiet but steady growth against this backdrop is the Sustainable Materials sector where we see manufacturers changing the way in which their products are made to achieve lower emissions, reduced waste, reduced water consumption – and save money.

Aerospace is a pioneer sector in sustainable materials.  Driven by fuel bills that are literally sky high, today’s aeroplanes have 50% of their weight made from carbon fibre composites, a material that barely existed outside military usage until the 1980s.  Carbon fibre is roughly twice as light as and five times stronger than aluminium, enabling aeroplanes such as the Boeing 787 and Airbus A350 achieve 20% lower fuel consumption than their predecessor models.  Leading manufacturers in the aerospace sustainable materials sector include companies such as Hexcel in the US and Toray in Japan.

The multi-trillion dollar automotive sector is now following aerospace’s lead.  The non-steel share of a car’s body is forecast to almost triple over the period 2015-2040, from 20% to a staggering 58%. As befits such a huge sector, a wide range of companies are involved.  Toray and Hexcel are using their aerospace experience to make automotive material grades.  France’s Plastic Omnium already makes tens of millions of lightweight exterior parts out of plastic, including bumpers and fuel tanks.  Switzerland’s Georg Fischer and Canada’s Linamar are focused on heavier duty structural parts, where steel is replaced with lighter magnesium or aluminium alloys.  Lighter car bodies translates to improved fuel efficiency and, in the case of electric vehicles, extended range.

Outside the transport sector there is increasing focus by companies to reduce waste in the production, usage or disposal of their products.  As an example, Apple, the world’s most valuable company, has switched parts of the iPhone’s packaging from plastic to paper.  This paper packaging is supplied by Finnish forest products giant Stora Enso, whose strategy is to replace as much as plastic as it can with paper – which is both renewable and biodegradable.  Apple is part of an army of consumer goods companies which are waging a “war on plastic” as the Financial Times put it, including Coca Cola, Proctor & Gamble, Unilever, McDonald’s, Nestle, Danone and many others.

In the clothing sector, focus has been centred on sustainable production.  Consumers are increasingly wary of cotton, which the World Wildlife Fund says requires 20,000 litres of water to produce one kilogram of cotton produced (equivalent to a single t-shirt and a pair of jeans), as well as oil-based fabrics such as polyester.  Austrian fabric manufacturer Lenzing reuses close to 100% of the water used in production of its Tencel fabric, leading to a net water consumption approaching zero.  Lenzing spent 20 years developing Tencel and its time appears to have come, with customer demand easily exceeding the company’s production capacity.  Notably Tencel has been deployed in the sustainability collection of the world’s top apparel brands, including H&M and Zara.

Nanuk Asset Management is wholly focussed on investing in listed global companies which benefit from or contribute towards the broad themes of environmental sustainability and resource efficiency.  Advanced and sustainable materials represent one of the 8 core sectors in which Nanuk invests.  Companies are held in Nanuk’s portfolios for their expected risk-adjusted financial performance and their contribution in transitioning to a more sustainable planet for the benefit of future generations.

By Binya Even, Portfolio Manager

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