During yesterday’s rainy summer evening I sat to watch a movie and came across this movie called “Tapped”. Given that I consider myself to be somewhat aware of water issues, in particular from an investment standpoint, I must admit that I was surprised by what was being presented in this documentary (http://www.tappedthemovie.com/). There were a few points that I felt could ultimately have implications for us all, not just as investors but also as citizens and consumers:
1) The filmmakers alert us to the fact that Nestle, Coke and Pepsi are mining ground water from numerous communities/states in the USA. What I found of particular interest was that as long as the water mined remains in the state of origin in its distribution, there seems to be no regulatory platform to regulate the quantity of water mined. Interesting, but does it impact investing? Stay with me.
2) Secondly, in the USA there are no requirements for testing the quality of the water that ends up in your bottle. Meanwhile, our municipalities are required on a regular basis to test and meet certain established requirements. Of this I was unaware, and in the film they go on to show results of independent testing of bottled water quality and without giving too much away, the results are quite shocking (if you watch the movie, you’ll possibly reconsider your next purchase).
3) These same beverage companies that distribute plastic water bottles bear no responsiblity for what happens to their end product. Now it’s likely not shocking for many of us in North America when we think about it… who’s responsible for the chip bag at the end of the day? Well, what’s really compelling in the movie is that these billions of water bottles could actually be recycled. In states that have a bottle exchange program, there is a very high return rate. That’s great that these bottles are returned, but who pays to recycle them? The bottling companies? The beverage companies? Well it appears that it’s the municipalities. Yep, that’s you and I with our tax dollars.
So how is any of this relevant to an investor? Do you own any financial instruments of municipalities? Do you own any of the beverage companies noted above in your portfolio?
Municipalities: What are the financial needs of municipalities to ensure that we all have safe access to drinking water? How can a municipality compete with beverage companies with respect to the “quality” of water issue? And of course, how much extra does it cost municipalities to recycle the garbage of beverage companies? From a sustainable investing standpoint, it appears there will be growing pressure on municipalities and they will definitely require more financial resources to keep their infrustructure up to date to meet the needs of their constituents. Is this being priced into financial instruments?
Beverage Companies: On the other hand, if you’re an owner of a beverage company in your portfolio, how long do we believe it will be before there will be pressure on these companies to accept a recycling tax on their products? With pressure growing at the local community level, will there eventually be changes in the regulations on how these companies get access to water resources? Will they eventually need to test the water for quality before it goes into a bottle? What will be the costs of such? What impact will that have on their margins?
Obviously timeframes of these potential changes need to be considered, but is water not one commodity everyone needs? My guess is that the pressure and awareness on this issue is going to grow substantially in the coming years and with it will come regulatory change… ultimately leading to financial implications as well.
All food for thought. If you want to be “Tapped” in, take the time to see the movie.