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We have selected a company that correlates with our focus on current developments and the overarching topic of water. The Erste AM Sustainability Team analyses the strengths and weaknesses of the respective company across various ESG areas.
The responsible use of water is not only a question of sparing withdrawal and consumption, but also of the quality at which water can be refed into the cycle. Even small traces of contamination can render large quantities of freshwater unusable. In return investments in sustainable water infrastructure often show a multiple of the total sums invested in the overall economic.
Numerous technologies for a more sustainable use of water
Achieving these yields is a goal of Xylem. The company is one of the biggest water technology companies in the world and covers the entire water cycle. The technologies of the company include the treatment of fresh pure and drinking water, agricultural irrigation solutions, and industrial purification plants.
On the basis of this wide product range, which facilitates considerable increases in efficiency, Xylem can offer its customers comprehensive solutions for water consumption. For example, in the area of agriculture, which accounts for 70% of the global drinking water use. Xylem offers solutions for the entire production cycle of agricultural businesses, from efficient irrigation solutions to wastewater solutions for the heavily contaminated wastewater of cattle farmers. The latter example illustrates the upside of this integrated approach particularly well: instead of treating the wastewater only according to the statutory requirements, the company offers systems to use them for the production of biogas. This does not only create new revenue streams on the basis of the development of renewable sources of energy for farmers, but it also reduces the high climatic impact of cattle breeding.
| Key figures Xylem Inc. Source: Bloomberg |
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|---|---|
| ISIN | US98419M1009 |
| KGV | 41,27 |
| Kurs (22.11.2017) | $ 79,48 |
| Ticker | XYL US |
Wastewater as a source of energy
This motive also extends into the industrial solutions provided by the company. In addition to traditional pumps and control systems, Xylem offers recuperators that utilizes the thermal energy in wastewater and put it to use rather than pouring it down the drain. If the water is refed directly into rivers or lakes, this approach comes with the added advantage of the damage to flora and fauna being avoided.
The hydraulic power turbines of Xylem underline the contribution of the company to climate protection. As an US company, Xylem has publicly opposed President Trump’s climate policies and has declared itself in favour of complying with the goals of the Paris Climate Agreement. This effort is omnipresent in Xylem’s extensive sustainability programmes across its entire production.
Desalination as solution?
Contrary to its ambitions of sustainability the company also engages in desalination, i.e. a technology that has been subject to much criticism in the past due to its high energy consumption and the damages caused by the higher salt content in the sea around the facilities. However, energy efficiency has approached its theoretical physical limits very strongly in the past years. The problem of excessive volumes of salt has been contained more and more as well. This has also been confirmed by a report from WWF Germany – an institution that has in the past been among the most outspoken critics of desalination.
Overall, Xylem embodies the notion of an investment whose economic success is directly based on solving the challenges created by long-term social and ecological mega trends and is therefore one of the most important water shares in ERSTE WWF STOCK ENVIRONMENT*.
[Dominik Benedikt]
*Risk notes according to 2011 Austrian Investment Fund Act
ERSTE WWF STOCK ENVIRONMENT may exhibit increased volatility due to the composition of its portfolio: i.e. the unit value can be subject to significant fluctuations both upwards and downwards within short periods of time.