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Generation Investment Management
Sustainability Trends Report
2 0 1 7
© Generation Investment Management LLP
Important information
This presentation has been prepared by Generation Investment Management LLP ("Generation") for discussion purposes only and reflects the views of Generation as of October 2017. It is not to be reproduced or copied or made available to others without the consent of Generation. The information presented herein is intended to reflect Generation's present thoughts regarding trends and opportunities towards a more sustainable economy and should not be construed as investment research, advice or the making of any recommendation. References to any companies must not be construed as a recommendation to buy securities of such companies.
The information presented herein is based on Generation’s analysis of publicly available data and intended to present a global perspective of the different areas that Generation believes represent a sustainable economy. The jurisdictions and time periods presented herein may vary, as the data shown is what Generation used in its own assessment and believes to be the most complete view to support each identified area of sustainability and associated trends. 2016 and other historic estimates made throughout the report were extrapolated from cited research and based on previous trends and known current data. While the data is from sources Generation believes to be reliable, Generation makes no representation as to the completeness or accuracy of the data.
© GENERATION INVESTMENT MANAGEMENT LLP 2017
© Generation Investment Management LLP
Commercial indicators capturing significant trends and
opportunities towards a more sustainable economy.
Foreword
We are pleased to introduce Generation Investment Management’s first Sustainability Trends Report, which documents the progress towards a more sustainable global economy.
Generation was founded in 2004 on the principle that long-term investing is best practice for investors and society alike. We believe it is critical for businesses and markets to understand the nature and magnitude of our sustainability challenges, as well as the related opportunities. To support that endeavour, we have created this compendium of commercial opportunities in sectors which we believe are central to the move towards a low carbon, prosperous, equitable, healthy and safe society.
The trends in this report capture only the early stages of the ”Sustainability Revolution”. The risks posed by our many
environmental and social challenges, from climate change to inequality, remain significant. Our journey to a fully sustainable economy will require considerable changes in attitudes and behaviors from all stakeholders, and supportive policies at local, national and international levels. We do not pretend business alone can provide all the answers.
However, it is clear to us that many businesses are embarking on the journey, and are bringing new, more sustainable technologies to market and to ever greater scale. Such businesses are delivering growth, profits and employment, while shifting society and the planet to a more sustainable footing.
Progress is underway. Yet the magnitude of opportunity remains vast.
Al Gore David BloodChairman Senior Partner
3
© Generation Investment Management LLP
We are in the early stages of a Sustainability Revolution.
The opportunities are vast.
Introduction
Since our founding, Generation’s investment process has been based on long-term research in which we combine assessment of conventional business and economic factors with analysis of relevant sustainability trends. Over the past 13 years, it has been encouraging to witness the emergence of sustainable goods and services, produced more efficiently and from sustainable inputs.
In this report, we present a broad set of metrics to convey this systems-wide transition. All of the data herein comes from publicly available sources. Because many of these trends represent new developments, data can be limited in quality and historical duration. We expect this to improve as these trends become more central to economic growth, and we will update accordingly.
In this 2017 report, we have investigated five areas where there are clear signs of advance:
Mobility
Energy
Built Environment
Food Systems
Wellbeing
We will add more areas of coverage in the future, as further trends appear. We hope you enjoy the report and we welcome your feedback.
4
Mobility
Food Systems
Energy
Wellbeing
Built Environment
An enduring and equitable economy is
characterised by sustainable...
MOBILITY
© Generation Investment Management LLP
We believe a sustainable system of personal
mobility is centred around:
Reduced road congestion from fewer privately owned vehicles
On demandservices leading
to betteruse of idle assets
Electrification & decreased
emissions
Improved roadsafety catalysed
by autonomy
Enhancedsynergy amongst
more efficient modes of transport
Transport solutionswith positive
societalexternalities
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
As of January 2017, the number of electric vehicles (EVs) on the road worldwide surpassed 2 million
8Source: International Energy Agency, Global EV Outlook 2016; The International Council on Clean Transportation
20152014201320122011 2016
1m
0
2m
Electric car stock (battery and plug-in hybrid electric vehicles)
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
The global battery-powered bus stock doubled in 2016, and further marketgrowth was evidenced globally in the two- and three-wheeler markets
9Source: IEA 2017
20150
400,000
200,000
2016
EV bus stock worldwide
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
Progress has been catalysed by ambitious government targets around vehicle emissions:6 countries have seen EVs surpass 1% of total market share
10Source: The International Council on Clean Transportation
China
Europe
Japan
US
20252020201520100
200
100
Target g of CO2 per km
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
Progress has also been facilitated by the declining price of electric-car batteries
11Source: Bloomberg New Energy Finance
20152014201320122010 2016E
800
0
1,200
1,000
600
400
200
2011
Average EV battery costs ($ per Kwh)
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
Consumer demand for EVs is being matched by innovation and greater supply from battery producers
12Source: CleanTechnica 2016
SK Group
Air Lithium
Beijing Pride Power
Wanxiang
Samsung
LG Chem
Mitsubuishi/GS Yuasa
BYD
AESC
Panasonic
0 500 1000 1500 2000 2500 3000
First half 2015 (MWh)
First half 2016 (MWh)
EV battery production by top 10 producers
© Generation Investment Management LLP
The market for electric vehicles is gaining momentum
Advanced infrastructure developments, such as charging sites, draw users in
13Source: IEA, 2017 Note: EVSE—Electric-vehicle supply equipment
Global EVSE charging outlets
2,500
1,500
500
0
2,000
1,000
2010 2011 2012 2013 2014 2015 2016
(thousands)
© Generation Investment Management LLP
Early signs suggest private car ownership may beon track to decline, leading to reduced congestion
Is “peak car” – defined by a plateau in sales – imminent in developed markets?
14Source: Autodata Corporation; Tradingeconomics.com
US total vehicle sales
1996 2000 2004 2008 2012 2016
22m
18m
14m
8m
10m
12m
16m
20m
© Generation Investment Management LLP
Early signs suggest private car ownership may beon track to decline, leading to reduced congestion
Younger cohorts exhibit less interest in acquiring a driving licence
15Source: University of Michigan Transportation Research Institute
100%
80%
60%
0%16
20%
17 18 19 20-24 25-29 30-34 35-39 40-44
40%
19832008
2014
Licenced drivers as percentage of population in the US, by age group
© Generation Investment Management LLP
Early signs suggest private car ownership may beon track to decline, leading to reduced congestion
This trend is especially pronounced in millennials
16Source: The Atlantic
1976 1990 1995 2000 2005 2010 2015 2016E
90%
85%
80%
70%
75%
Percentage of 12th-graders who drive
19851980
Drove at all in the past year
Have a driver’s license
© Generation Investment Management LLP
Increased connectivity has facilitated ‘mobility-as-a-service’ models
People are more connected than ever before…
17Source: Statista; eMarketer
2010 2011 2012 2013 2014 2015
1.5bn
0
0.5bn
1.0bn
2016E2009200820072006
Global smartphone shipments
© Generation Investment Management LLP
Increased connectivity has facilitated‘mobility-as-a-service’ models
…allowing the emergence of disruptive operational models thathave efficiency propositions relative to private car usage
18Source: Uber
2,000m
0
500
1,500m
1,000m
2013 2014 2015 2016
20m
0
5m
15m
10m
Uber: total global trips taken Didi: daily number of daily rides
© Generation Investment Management LLP
Increased connectivity has facilitated‘mobility-as-a-service’ models
Similarly, global car-sharing membership has grown dramatically
19Source: TSRC, Winter 2016 Carsharing Outlook Note: Numbers reflect business-to-consumer (B2C) carsharing only, including one-way operations
Members
6,000,000
0
5,000,000
120,000
0
20,000
100,000
60,000
Vehicles
4,000,000
3,000,000
2,000,000
1,000,000
80,000
40,000
2006 2008 2010 2012 2014 2016E
© Generation Investment Management LLP
Digitisation of the travel experience is enhancingaccess to more efficient modes of transportation
Travel sales – including bus and rail – by mobile devices aregrowing as more people turn to a digital booking experience
20Source: Euromonitor International; Skift Research
0
70
35
Western Europe
North America
Asia Pacific
Australasia
Middle East and Africa
Latin America
Eastern Europe
20162014
Mobile travel sales to residents by region (US$ billion)
© Generation Investment Management LLP
Digitisation of the travel experience is enhancingaccess to more efficient modes of transportation
Innovations in ticketing and other infrastructure havecorresponded to an uptick in use of public transport
21Source: BRTData Note: BRT is a bus-based public transport system designed to improve capacity and reliability
1970 1980 1990 2000 2010
0
20
15
10
5
200
150
100
0
50
New cities employing bus rapid transit (BRT*) Cumulative number of cities
1965 1975 1985 1995 2005 2016E
© Generation Investment Management LLP
Digitisation of the travel experience is enhancingaccess to more efficient modes of transportation
Improvements in access to public transport via digitisation are also seen in emerging markets
22Source: Indian Railway Catering and Tourism Corporation
2014-152013-142012-132011-122010-110
20,000
15,000
10,000
5,000
2015-16E
Indian railway e-ticketing revenue (in Cr Rs)
© Generation Investment Management LLP
Digitisation of the travel experience is enhancingaccess to more efficient modes of transportation
Further enhancements in multimodal booking is helped by thegrowth of location-based services
23Source: Pew Research Center
Share of US smartphone owners using location-based information services
2016E20142010
100%
0
50%
2012
© Generation Investment Management LLP
Digitisation of the travel experience is enhancingaccess to more efficient modes of transportation
And all of this is made feasible by an increased focus on city-levelpolicy innovation and smart infrastructure investment
24Source: IHS Technology Note: *Denotes an effort to use urban information and technology to improve efficiency of services
201520142013 2016
0
40
20
Number of smart cities worldwide, as per IHS Technology’s definition of a “smart city”*
© Generation Investment Management LLP
Improving computational efficiency has led toincreased vehicular connectivity and autonomy
Complete with CPUs, GPUs, cameras, sensors, and networking hardware, cars continue to take advantage of increases in computing efficiency
25Source: Jonathan Koomey; The Economist Note: 2010-2016 estimates based on extrapolation from line of best fit
1e+16
1e+12
1e+8
1e+0
1e+4
ENIAC
Univac-I
1945 1980 19951960 2010 2015
SDS 920
Cray I
IBM PC
Apple Macintosh Compaq Deskpro
386/20e
Dell OptiPlex GXI
SiCortex SC5832
2016E
Computations per kilowatt-hour (log scale)
© Generation Investment Management LLP
Improving computational efficiency has led toincreased vehicular connectivity and autonomy
This is evident through growing semiconductor revenuesfor Advanced Driver Assistance Systems (ADAS)…
26Source: IHS ADAS Semiconductor Intelligence Service; McKinsey & Company
3
2
1
0
2010 2012 20132011 2014 2015 2016E
Global semiconductor and sensor revenues for ADAS applications ($ billion)
© Generation Investment Management LLP
Improving computational efficiency has led toincreased vehicular connectivity and autonomy
…and the growing number of car models whichnow have automated driver assistance technologies
27Source: Securities and Exchange Commission Mobileye 2015 Annual Filing
250
0
2007 2016
125
2008 2009 2010 2011 2012 2013 2014 2015
Global number of contracted models
© Generation Investment Management LLP
Improving computational efficiency has led toincreased vehicular connectivity and autonomy
Companies are announcing fully autonomouscapabilities for the very near future
28Source: Yahoo News; Business Insider; Tech Crunch
Tesla aims for the Model 3 to be the first mass-market autonomous car
Uber released its autonomous cars in Pittsburgh as part of a pilot programme in September 2016
Google’s Waymo released the first
images of its autonomous trucks
in early 2017
© Generation Investment Management LLP
Improving computational efficiency has led toincreased vehicular connectivity and autonomy
Connectivity and autonomy have significant implications on various sustainability considerations, including congestion and fuel consumption
29Source: University of Michigan Center for Sustainable Systems 2016 *Note: Right-sizing is the ability to match the utility of a vehicle to a given need; full benefits only likely when paired with aride-sharing on-demand model **Note: Refers to vehicle performance, such as fast acceleration, which is likely to become de-emphasized when comfort and productivity become travel priorities
Range of estimated change in energy consumption as a result of autonomy, %
CongestionEco-driving PlatooningDe-emphasizedperformance**
Improvedcrash
avoidanceVehicle
right-sizing*
Changedtransportation
services
0%
-10%
-20%
-30%
-40%
-50%
25
25
25
2525 25
© Generation Investment Management LLP
The transportation trends also extend to the two-wheel market
Bicycling continues to become a more popular form of commuting to work across the US
30Sources: US Census Bureau American Community Survey and Decennial Census
PortlandMinneapolisSan FranciscoDCSeattle
2000 2016E2004 2008 2012
0
8%
6%
4%
2%
Share of workers commuting by bike10%
© Generation Investment Management LLP
The transportation trends also extend to the two-wheel market
Sales of electric bikes are also on the rise
31Source: Confederation of the European Bicycle Industry
2006 2007 2008 2010 2011 2012 2013 20142009 2015 2016E
1500
1000
500
0
Sales of ebikes in Europe (x1000 units)
© Generation Investment Management LLP
The transportation trends also extend to the two-wheel market
Bike-share ridership in the US has grown over time
32Source: National Association of City Transportation Officials
2010 2011 2012 2013 2014 20162015
30
20
10
0
Total trips taken (m)
© Generation Investment Management LLP
The transportation trends also extend to the two-wheel market
And this trend proves to be far-reaching as the numberof global bike-sharing schemes continue to increase
33Source: MetroBike
2006 2007 2008 2010 2011 2012 2013 20142001 2002 2003 2004 2005 2009 2016E2015E
900
600
300
0
Bike sharing schemes
Increased global usage of efficient means of public transport and improved access for all
Growth in EV car registrations as a proportion of total cars on the road (plug-in EVs <1% in 2016 according to the IEA), and complementary grid support
Innovation around lithium and cobalt constraints and other sustainable supply-chain considerations
Comprehensive improvements in freight transportation
…among others
Mobility
trends to monitor:
ENERGY
We believe a sustainable system of energy
production is rooted in:
Reliable and cost-competitive wind
power
Substantial storage capacity
for all renewables
Efficient and scalable solar
power
Innovations in off-grid global energy
access
Positive associated
implications for human capital
A united global commitment to
responsible investment
An effective price on carbon for industry and governments
© Generation Investment Management LLP
Despite its maturity relative to other renewables, global wind capacity continues to grow at double-digit rates annually
The wind market is more mature than the solar market: wind’s capacity levels in 2003 were only matched by solar in 2011
37Source: REN21, European Photovoltaic Industry Association, BP Statistical Review of World Energy 2017 Note: Projections based on EPIA medium scenario
Gigawatts
2016
Wind
Solar
400
300
200
100
02003 2007 2009 20132005 2011 2015
500
600
Energy Capacity Levels
© Generation Investment Management LLP
Despite its maturity relative to other renewables, global wind capacity continues to grow at double-digit rates annually
The cost of wind energy continues to decrease due to cheaper components and significant efficiency improvements
38Source: Lazard Levelised Cost of Energy Analysis
200
150
100
50
0
Wind levelised cost of energy (LCOE), mean
2009 2011 2012 20142010 2013 2015
$/MWh
2016
Cost of wind energy
© Generation Investment Management LLP
Despite its maturity relative to other renewables, global wind capacity continues to grow at double-digit rates annually
As a result, wind power continues to see year-on-year capacity growth, including a 12.5% increase between 2015 and 2016
39Source: Ren21 Renewables 2016 Global Status Report; Global Wind Energy Council
500
450
300
100
0
2005 2007 2008 20102006 2009 2015
200
2011 2012 2013 2014
Annual additions
Capacity
2016
Gigawatts Wind power capacity
© Generation Investment Management LLP
Despite its maturity relative to other renewables, global wind capacity continues to grow at double-digit rates annually
Offshore installations have been an increasing contributor, especially in Europe
40Source: WindEurope 2016 European Statistics
14
12
10
2
0
2005 2007 2008 20102006 2009 2015
6
2011 2012 2013 2014
Offshore
Onshore
2016
Gigawatts Annual onshore and offshore wind installations in the EU
8
4
© Generation Investment Management LLP
Installed capacity of solar energy has grown at a 50% CAGR*over the last eight years
The cost of solar continues to decline as production volumes increase: cost is no longer the major barrier to growth
41Source: Lazard *Note: Compound annual growth rate (CAGR) is a measure of growth over multiple time periods
LCOE $/MWh
20102009 20152011 2012 2013 2014 2016
Solar photovoltaic LCOE
0
50
100
150
200
250
300
350
400
450Crystalline Utility-Scale Solar LCOE Mean
Crystalline Utility-Scale Solar LCOE Range
Rooftop C&I Solar LCOE Range
Rooftop C&I Solar LCOE Mean
© Generation Investment Management LLP
Installed capacity of solar energy has grown at a 50% CAGR*over the last eight years
The total installed capacity at the end of 2016 amounted to more than 300 GW globally
42Source: IEA 2016 Snapshot of Global Photovoltaic Markets *Note: Compound annual growth rate (CAGR) is a measure of growth over multiple time periods
200
02000 2002 2004 2006 2008 2010 2012 2014
50
100
150
350
GW Total installed capacity
2016
250
300
© Generation Investment Management LLP
Installed capacity of solar energy has grown at a 50% CAGR*over the last eight years
This is due in part to substantial growth in PV installations in Asia
43Source: IEA 2016 Snapshot of Global Photovoltaic Markets *Note: Compound annual growth rate (CAGR) is a measure of growth over multiple time periods
MEA
Europe
America
Asia Pacific
Rest of World
2000 2002 2004 2006 2008 2010 2012 2014
GW
2016
200
0
50
100
150
350
250
300
PV Installs
© Generation Investment Management LLP
Installed capacity of solar energy has grown at a 50% CAGR*over the last eight years
Today, we are at an inflection point where solar is competitive without subsidies
44Source: Lazard 2016 *Note: Compound annual growth rate (CAGR) is a measure of growth over multiple time periods
Levelised costs ($ /Mwh, global)
Solar PV –Rooftop Residential
$0
Natural Gas Reciprocating Engine
Solar PV - Community
Solar PV – Thin Film Utility Scale
$50 $100 $150 $200 $250 $300
Solar PV – Rooftop C&I
Solar PV – Crystalline Utility Scale
Diesel Reciprocating Engine
Nuclear
Coal
$138 $222
$88 $193
$78 $135
$212 $281
$68 $101
$97 $136
$60 $143
$49 $61
$46 $56REN
EWA
BLE
EN
ERG
YC
ON
VEN
TIO
NA
L
© Generation Investment Management LLP
The cost of storage is generally a bigger bottleneck than the cost of production, but capacity is growing and costs are declining
The energy-storage industry is rapidly innovating, with 2016 exhibiting significant growth
45Source: GTM Research; US Energy Storage Monitor; Energy Storage Association
340
0
US energy storage deployments (MWh)
20162013 2014 2015
Non-residential
Residential
Utility
© Generation Investment Management LLP
The cost of storage is generally a bigger bottleneck than the cost of production, but capacity is growing and costs are declining
The global lithium market continues to grow as lithium-ion battery exports see new heights
46Source: Benchmark Mineral Intelligence
South Korea
Japan
Tonnes
H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 201615,000
20,000
25,000
30,000
35,000
Lithium-ion battery exports
© Generation Investment Management LLP
The cost of storage is generally a bigger bottleneck than the cost of production, but capacity is growing and costs are declining
And lithium-ion mega-factories continue to increase capacity worldwide
47Source: Benchmark Mineral Intelligence
Tesla Motors Nevada
0
80,000
20,000
60,000
40,000
MWh
LG Chem
Michigan
LG Chem
Nanjing
LG Chem
Poland
LG Chem Korea
BYD China
Boston Power China
Boston Power China 1
Samsung SDI Xian
Samsung SDI
Korea
Panasonic Dalian
Lishen CATL CALB SK Innovation
100,000
120,000
Capacities of lithium-ion mega-factories
Annual Capacity 2016 (MWh) Expanded Capacity (MWh)
© Generation Investment Management LLP
Lower costs mean renewable technologies are becoming increasingly affordable in emerging markets
The number of known pico-solar* manufacturers continue to grow with new financing schemes emerging
48Source: BNEF; Dalberg; Lighting Global *Note: pico-solar systems are smaller and cheaper thanconventional solar systems, but can provide energy for low-power gadgets, such as cell phones
80
02008-10 2012 2015
Number of recorded pico-solar manufacturers
2016E
Other known manufacturers
Manufacturers of lightingglobal quality-verified products
© Generation Investment Management LLP
Lower costs mean renewable technologies are becoming increasingly affordable in emerging markets
The off-grid renewables market continues to penetrate a space previously dominated by unsustainable and dangerous energy sources
49Source: Global Off-Grid Lightning Association
5.0
0
2011H1 H2
2012H1 H2
2013H1 H2
2014H1 H2
(m units)
2015H1 H2
2016H1
2010H2 H2E
2.0
3.0
1.0
4.0
Sales of portable solar kits by GOGLA members and lighting global associates
© Generation Investment Management LLP
Lower costs mean renewable technologies are becoming increasingly affordable in emerging markets
Solar lanterns are becoming cheaper due to decreasing energy and storage costs
50Source: Lawrence Berkeley National Laboratory, BNEF
50
02009 – CFL & lead acid
2009 – LED & lead acid
2014 – CFL & lithium
2014 – LED & lithium
($)
2017 – LED & lithium
Balance of system
Light
Battery
PV Panel
Solar lantern costs
© Generation Investment Management LLP
Renewable energy also represents significant employment potential
Solar now employs more people in US electricity generation than oil, coal and gas combined
51Source: US Department of Energy
Solar Wind Geothermal Low Impact Hydro
Nuclear Fossil0
400,000
100,000
Bioenergy/CHP
Traditional Hydro
Advanced Gas
Other
300,000
200,000
20162015
Number of employees
© Generation Investment Management LLP
Renewable energy also represents significant employment potential
There has been strong growth in employment figures, which are increasing across all segments of the US solar industry
52Source: US DOE
300%
200%
100%
0%
100%ManufacturingOther
InstallationProject Developers
OverallSales & Distribution
2010 2011 2013 2014 2015 20162012
US solar employment growth (%)
© Generation Investment Management LLP
Renewable energy also represents significant employment potential
An upsurge in employment in renewable energy is also holding true on a global scale
53Source: International Renewable Energy Agency, 2017
2012 2013 2014 2015 20160
10Global renewable-energy employment, 2012-2016Million jobs
8
6
4
2
Large Hydropower
Other technologies
Solar Heating / Cooling
Wind Energy
Bioenergy
Solar Photovoltaic
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
New investment in renewable energy is seen across asset classes…
54Source: UNEP, BNEF
0
CorporateR&D
Govt R&D
VC/PE
Publicmarkets
Smalldistributed capacity
Assetfinance
$bn
$350bn
2004 2005 2006 2012 2014 20162007 2008 2009 2010 2011 2013 2015
$300bn
$250bn
$200bn
$150bn
$100bn
$50bn
Investment in renewable energy
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
…and across regions
55Source: BNEF
$bn
$350bn
02004 2005 2006 2012 2014 20162007 2008 2009 2010 2011 2013 2015
$300bn
$250bn
$200bn
$150bn
$100bn
$50bn
Investment in Renewable Energy
EMEA
AMER
APAC
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
The movement towards divestment of fossil fuels is growing quickly…
56Source: Arabella Advisors, The Global Fossil Fuel Divestment and Clean Energy Investment Movement, December 2016
700
600
Institutions
400
500
300
200
100
0
50K
40K
1KIndividuals
20K
30K
10K
60K
Thousands
‘5T
‘4T
‘0TAssets
‘2T
‘3T
‘1T
‘6T
$ Trillions
September 2015 December 2016
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
…while divesting institutions are more diverse
57Source: Arabella Advisors
For profit asset manager
Health care institution
Pension funds
Educational institution
Non governmental organisation
Faith based organisation
Philanthropic foundation
Local government
14%
12%
6%
3% 2%
Proportion of commitment to total divestment amount by type of institution, US
23%
17%
23%
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
The green-bond market has also taken off
58Source: Climate Bond Initiative, Moody’s
80
2007
US$bn
2008 2009 2010 2011 2012 2013 2014 2015 2016
40
60
20
Green-bond issuance by year
© Generation Investment Management LLP
Capital continues to flow to clean energy and broader sustainability-oriented projects
Global companies committed to solving social and environmentalproblems are certifying as “B Corporations”
59Source: B Corps
Number of Certified B Corporations
Founders 2010 2011 2012 2013 2014 2015 2016
2,500
2,000
1,500
500
1,000
200920080
© Generation Investment Management LLP
Traction towards decarbonisation is evidenced in pervasive support for carbon pricing
While the range of national carbon prices is broad, the share of global greenhouse gas emissions covered by pricing initiatives continues to expand
60Source: World Bank Group, Ecofys, VividEconomics
Regional national and subnational carbon pricing initiatives: share of global GHG emissions covered
0%
20
04
20
05
20
06
20
12
20
14
20
16
20
07
20
08
20
09
20
10
20
11
20
13
20
15
15%
10%
5%
20
03
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
Share of global GHG emissions
© Generation Investment Management LLP
Traction towards decarbonisation is evidenced in pervasive support for carbon pricing
This trend is also true across the corporate world, where commitment to an internal price on carbon has increased more than threefold since 2014
61Source: CDP, UN PRI, Global Counsel
Number of corporates reporting use of an internal carbon price
2014 2015 20160
1,400
1,000
600
400
200
1,200
800
Existing carbon price
Undergoing implementation
© Generation Investment Management LLP
Traction towards decarbonisation is evidenced in pervasive support for carbon pricing
Regulatory tailwinds are further demonstrated by growth in the global stock of climate legislation, which stands at over 1,200 laws across 164 countries
62Source: Climate Change Laws of the World
Total executive
Total legislative
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
800
0
200
400
600
1,400
1,000
1,200
Legislative and Executive Acts up to 2016Total laws and executive policies
1994&Before
The contribution of renewables to total energy consumption, which sat at just over 5% in 2016 (source: IEA)
Adherence to global renewable policy commitments, including Paris COP21, and a movement towards a global price on carbon
Cybersecurity solutions to enable resilient energy networks
Reduction in habitat-destruction risk of certain renewable infrastructure
…among others
Energy
trends to monitor:
BUILT ENVIRONMENT
© Generation Investment Management LLP
We believe a sustainable built environment
is characterised by:
A physical world that is enabled and optimised
through digitisation
Materials and infrastructure that consume
minimal amounts of energy
Affordable industrial appliances that offer a superior return on
investment to the consumer
Significant capital commitments to efficiency efforts
by both the public and private sector
A functioning circular economy enabling better use of materials
CO2
A sharing economy which paves the way for improved
fixed asset utilisation
© Generation Investment Management LLP
The physical world is becoming evermore connected to the digital world
The global sensor market has beengrowing over the past few years
66Source: BCC Research, Global Markets and Technologies for sensors
$02011 2012 2013 2016E2014
$150b
$100b
$50b
2015
Global revenue for sensor market
© Generation Investment Management LLP
The physical world is becoming evermore connected to the digital world
This market growth is visible across all types of sensors, includingthose measuring particulate matter, CO2 and other emissions
67Source: BCC Research, Global Markets and Technologies for sensors
Image and motion sensors
Bio and chemical sensors
Position sensorsTemperature and pressure sensors
2011
2016
$0
$30b
$20b
$10b
Global revenue for different types of sensors
© Generation Investment Management LLP
The physical world is becoming evermore connected to the digital world
Smart-meter installations were estimated tohave hit 70m in the US by the end of 2016
68Source: Edison Foundation
Number of meters
0Dec
2007
90m
70m
50m
30m
10m
20m
40m
60m
80m
Dec 2009
Sep 2011
May 2012
Dec 2012
Jul 2013
Jul 2014
Jul 2015
Dec 2015
Dec 2016E
© Generation Investment Management LLP
The physical world is becoming evermore connected to the digital world
More US electricity consumers are using smart meters
69Source: BNEF, EIA
0%2011 2012 2013 2016E2014
40%
2015E201020092008
30%
20%
10%
% of US electricity customers
© Generation Investment Management LLP
An increasingly populated built environment demands efficient materials
More than 28,000 buildings in the UShave earned EPA’s Energy Star since 1999
70Source: Environmental Protection Agency
020162014
10,000
20,000
30,000
2012201020082006200420022000
Number of buildings
© Generation Investment Management LLP
An increasingly populated built environment demands efficient materials
There are more than 1,755 LEED* certified industrial facilities globally, comprising just under 500m square feet
71Source: US Green Building Council *Note: LEED – Leadership in Energy and Environmental Design
2006
80
02016E
60
40
20
2007 2008 2009 2010 2011 2012 2013 2014 2015
Silver
Certified
Gold
Platinum
Certification achievement trend
© Generation Investment Management LLP
An increasingly populated built environment demands efficient materials
Efficiency enhancements across sectors havesignificantly reduced energy demands globally
72Source: IEA Energy Efficiency Indicators Database
70%2000 2016E2005 2010
130%
120%
110%
100%
90%
80%
Industry and services
Passenger transport
Residential
Effect of efficiency improvements on energy consumptionEnergy consumption
© Generation Investment Management LLP
An increasingly populated built environment demands efficient materials
Substantial growth has also been seen in theconstruction of zero-net-energy (ZNE) buildings
73Source: New Buildings Institute, 2016
02000 20162005 2010
400
300
200
100
Number of ZNE and ultra-low-energy buildings, US
ZNE-verified
ZNE-emerging
Ultra-low-energy
© Generation Investment Management LLP
An increasingly populated built environment demands efficient materials
Green buildings result in quantifiable savings such as energy savings and maintenance labour
74Source: US Green Building Council *Note: Savings estimates from green buildings are a calculation of reduced operational expenditures (e.g., electricity savings)
Savings from green construction
2006
$1,200m
$0
2016E2008 2010 2012 2014
$1,000m
$800m
$600m
$400m
$200m
© Generation Investment Management LLP
Capital commitments are increasingly being made towards energy efficiency enhancements
The market size for total building efficiency andsub-components continues to grow globally
75Source: Navigant Research
0
2011 2012 2016E2013 2014 2015
20,000
40,000
60,000
80,000
100,000
120,000
Building design
Building envelope
HVAC
Lighting
Demand response and enabling IT
Appliances and electronic equipment
District energy and CCHP
Water heating
Revenue from different sources of improved building efficiency ($m)
© Generation Investment Management LLP
Capital commitments are increasingly being made towards energy efficiency enhancements
Global demand for home energy management systems, which allow households to manage energy usage, has also taken off
76Source: Navigant Research
$0
$2.5b
$2.0b
$1.0b
$1.5b
$0.5b
2011 2012 20162013 2014 2015
Global revenue from home-energy-management systems
© Generation Investment Management LLP
Capital commitments are increasingly being made towards energy efficiency enhancements
Estimates of US investment in energy efficiency have seen significant increase over time
77Source: ACEEE, NAESCO, LBNL, CEE, IAEE, Bloomberg New Energy Finance
$0
$14b
$12b
$10b
$8b
$6b
$4b
$2b
2000 2003 2016E2006 2009 20112001 2002 2004 2005 2007 2008 2010 2012 2013 2014 2015
Other
Public buildings
Commercial and industrial
Residential
US estimated investment in energy efficiency
© Generation Investment Management LLP
Capital commitments are increasingly being made towards energy efficiency enhancements
This is likely to continue globally as more and more energy consumption is covered by mandatory energy-efficiency policies
78Source: OECD/IEA Energy Efficiency Market Report 2016
World China BrazilUSA EU India0%
60%
40%
20%
10%
30%
50%Residential buildings
Non-residential buildings
Industry
Transport
Share of energy consumption covered by mandatory energy-efficiency policies
© Generation Investment Management LLP
Greater value is being extracted from resourcesas the global economy becomes more circular
The annual tonnage of post-consumer plastic packagingwaste collected for the recycling sector has scaled rapidly
79Source: Recoup, British Plastics Federation
02000 2016E2004 20102002 2006 2008 2012 20142001 2003 2005 2007 2015201320112009
500k
Quantity collected in tonnes, UK
400k
200k
300k
100k
© Generation Investment Management LLP
Greater value is being extracted from resourcesas the global economy becomes more circular
The volume of recycled plastics use in end-markets has seen substantial growth since 2010 across product categories
80Source: NAPCOR, APR, Waste360
02016E2004 20102002 2006 2008 2012 20142003 2005 2007 2009 2011 2013 2015
1.5b
RPET used by product category, US
1b
0.5b
Fibre
Sheet and film
Strapping
Engineered resin
Food and beverage bottles
Non-food bottles
Other
Pounds
© Generation Investment Management LLP
Greater value is being extracted from resourcesas the global economy becomes more circular
Material consumption appears to be on adownward trend across many developed markets
81Source: Eurostat, SERI and WU Global material flows database
102000 20162004 20102002 2006 2008 2012 2014
20
Tonnes per capita Material consumption in EU-28
18
14
16
12
© Generation Investment Management LLP
Specific industrial efficiencies are derived from a variety of sources
3D printing will continue to reshape the built environment, playing a key role in the reduction of CO2 emissions
82Source: European Patent Office
CO2
£
£
1,800
1,400
1,000
02010 20152012
400
2011 2013 2014 2016E
1,600
1,200
200
600
800
Number of 3D printing patents filed
© Generation Investment Management LLP
Specific industrial efficiencies are derived from a variety of sources
Adoption in use and improvement in technologywill be made feasible through declining prices
83Source: IBISWorld
CO2
£
£
14,000
10,000
12,000
6,000
8,000
2007 20112009 2013 2015 2016E
$ per machine 3D printing machines - benchmark price
© Generation Investment Management LLP
Specific industrial efficiencies are derived from a variety of sources
Similar cost-down curves areappearing across the LED market
84Source: US DoE
CO2
£
£
180
160
140
120
100
80
60
40
20
02008 2016E2009 2010 2011 2012 2013 2014 2015
LED A-Type cost$ per kilolumen
© Generation Investment Management LLP
Specific industrial efficiencies are derived from a variety of sources
Which has manifested in impressive LED penetration of the global lighting market
85Source: Goldman Sachs; Statista
CO2
£
£
40%
0%20122011 2014 20152013
30%
20%
10%
2016E2010
Penetration rate
© Generation Investment Management LLP
The improved use of assets is facilitatedby a shift towards a sharing economy
Airbnb continues to scale, offering value to both hostsand guests through the use of otherwise empty spaces
86Source: CBRE Hotels’ Americas Research
Supply
Demand
Revenue
5%
4%
3%
2%
1%
0%2015 2016
Airbnb volume as a percent of the traditional hotel industry, US
2014
© Generation Investment Management LLP
The improved use of assets is facilitatedby a shift towards a sharing economy
This shift towards the maximisation of asset values is alsoseen in the growth of co-working spaces globally
87Source: Knoll
2007-08 2009-10 2011-12 2013-14
8,000
6,000
4,000
2,000
0
Number of co-working spaces worldwide
2015-16
© Generation Investment Management LLP
The improved use of assets is facilitatedby a shift towards a sharing economy
Consumers and companies appear increasinglyamenable to this model of space utilisation
88Source: Knoll
2011-120
2012-13 2013-14 2014-15
600,000
400,000
200,000
Number of co-working members worldwide
2015-16
© Generation Investment Management LLP
The improved use of assets is facilitatedby a shift towards a sharing economy
Capital continues to flow to these models which promote efficiencyand reduce the need for resource-intensive infrastructure
89Source: CB Insights
02013 2014 2015 2016
0.8b
0.4b
Financings in co-working space start-ups
50
40
30
20
10
0
Funding amount ($) Number of deals
1.0b
0.6b
0.2b
The move to a zero-waste economy and a reduction in pollution (including noise pollution) across markets
Global increase in the use of efficient and renewable materials in buildings
Resilient cybersecurity solutions addressing needs of an increasingly connected society
Universal access to sustainable housing and infrastructure
…among others
Built environment
trends to monitor:
90
FOOD SYSTEMS
© Generation Investment Management LLP
We believe sustainable food systems
are centred around:
Improved information
access around best-practice sourcing and
farming
A clear focus on nutritional
value and health
Last mile and infrastructure
efficiencies facilitated by a move online
Focus by the restaurant industry on food-waste reduction
Optimisations in sourcing
and agriculture
The displacement
of animal protein by superior
alternatives
Conscientious consumer
choices aligned with sustainability
Enhanced earth
observation tools and
analytics for environmental
monitoring
© Generation Investment Management LLP
Plant-based protein sources are emergingas a viable alternative in protein-heavy diets
While consumption of animal-based protein continues to rise globally…
93Source: USDA, US National Chicken Council, FAOSTAT
1984 1992 2000 2008 2016E
40
20
0
China consumption per capita of poultry and livestock (in pounds)
Total red meat and poultry consumedper capita in the US (in pounds)
1984 1992 2000 2008 2016
200
100
0
© Generation Investment Management LLP
Plant-based protein sources are emergingas a viable alternative in protein-heavy diets
Alternative proteins and meat substitutes aregaining market share in many markets
94Source: Euromonitor Blog
2012 2014 2016E
25
20
15
10
5
0
-5 2011 20152013
Meat substitutes
Processed poultry
Processed red meat
Western Europe: Retail volume growth 2011-2016 (% y-o-y)
© Generation Investment Management LLP
Plant-based protein sources are emergingas a viable alternative in protein-heavy diets
Non-dairy milk product innovations are also on the rise
95Source: Mintel
Soy-based drinks
2011 2012 2013 2014 2015 2016E
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Drinks based on rice/nut/grain/seed
Dairy milk
Milk launches by type, North America/Europe/Australasia (%)
© Generation Investment Management LLP
Plant-based protein sources are emergingas a viable alternative in protein-heavy diets
The US non-dairy milk market is estimated to represent well over 10%of the total milk market, and sales continue to outpace regular milk
96Source: Atlas, Euromonitor, Quarts, Mintel
2006 2008 2010 2012 2014 2016
20%
10%
0%
-10%
-20%
Milk alternatives
Milk
Non-dairy milk sales growth is outpacing regular milk
© Generation Investment Management LLP
Certification schemes inform consumers and galvanise sustainability-oriented consumer purchases
The number of USDA certified organic operations is nearly triple what it was in 2002
97Source: USDA Note: Foreign operations may also be certified to the USDA organic standards
20,000
0
10,000
15,000
5,000
20142005200420032002 20152006 2007 2008 2009 2010 2011 2012 2013 2016E
USDA certified organic operations
© Generation Investment Management LLP
Certification schemes inform consumers and galvanise sustainability-oriented consumer purchases
Suppliers are meeting consumer demandfor more sustainable fishing practices
98Source: Marine Stewardship Council
20,000
0
10,000
15,000
5,000
20142008 20152009 2010 2011 2012 2013 2016E
Number of products globally with the MSC label
© Generation Investment Management LLP
Certification schemes inform consumers and galvanise sustainability-oriented consumer purchases
Free-range eggs are also gaining rapid market share
99Source: DEFRA
UK egg throughput by production method
4,000
0
2,000
3,000
1,000
2014 20152006 2007 2008 2009 2010 2011 2012 2013 2016
Enriched [intensive]
Free-range
Barn
© Generation Investment Management LLP
Certification schemes inform consumers and galvanise sustainability-oriented consumer purchases
“Free-from” products are also rapidly gaining shelf space worldwide
100Source: Mintel *Gluten-free covers only bakery, cereals, snacks, pasta & noodles
12%
0%2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E
10%
8%
6%
4%
2%
% of new food products introduced to the market labelled as gluten-free*, global
© Generation Investment Management LLP
Trends in consumer purchasing are driven by environmental and social considerations
Sales of “ethical” food and drink have risen overtime in the UK as a proportion of all sales of household food
101Source: Triodos Bank and Ethical Consumer; SustainWeb
0
4,000
9,000
8,000
6,000
2000
7,000
5,000
3000
1000
1994 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20152012 2013 2014
Others
Vegetarian meat alternatives
Fairtrade
Rainforest Alliance
Organic
2016
Spend £million
© Generation Investment Management LLP
Trends in consumer purchasing are driven by environmental and social considerations
Veganism is becoming more popular as a concept and dietary practice
102Source: Google Trends
100
2005 2007 2009 2011 2013 2015 2016
Web searches related to veganism worldwide
80
60
40
20
0
© Generation Investment Management LLP
Trends in consumer purchasing are driven by environmental and social considerations
There is an increasing emphasis on “buying local”as exemplified by a rising trend in farmers’ markets
103Source: USDA, Economic Research Service using USDA, Agricultural Marketing Service, Farmers’ Market Surveys
4,000
10,000
0
1994
8,000
6,000
2000
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Number of farmers’ markets, US
© Generation Investment Management LLP
Trends in consumer purchasing are driven by environmental and social considerations
Consumers continue to say that they are willing to pay for sustainable features
104Source: Euromonitor International Global Consumer Trends Survey 2016
Try to have a positive effect on the environment
Worried about climate change
I can make a difference to the world
Willing to pay more for “natural” features
Buying eco-conscious products makes me feel good
Willing to pay more for organic
Willing to pay more for eco-friendly features
Willing to pay more for non-GMO
Willing to pay more for sustainable production
Willing to pay more for recyclable products
0% 10% 20% 30% 40% 50% 60% 70%
Environmental concerns and willingness to pay for green features
Climate concerns and level of empowerment
Willingness to pay for “good-for-me” features
Willingness to pay for “good-for-the-environment” features
© Generation Investment Management LLP
Consumers are forging their own nutritional diets,with increased focus on microorganisms and health
While sugar intake far exceeds recommended amounts,trends suggest a gradual shift away from its consumption in the US
105Source: USDA ERS FADS; NPD Group, RBC Capital Markets, UK Business Insiders, NPD Group
19
87
19
88
19
89
20
15
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
55
50
45
US per-capita consumption ofsoft drinks (gallons)
0
40
35
30
25
20
15
10
5
2016
60
50
40
30
20
0
US per-capita annual consumptionof high-fructose syrup (pounds)
2001 2006 2011
10
© Generation Investment Management LLP
Consumers are forging their own nutritional diets,with increased focus on microorganisms and health
There is an increasing focus on understanding the role of themicrobiome in human development, immunity and nutrition
106Source: PubMed
5,000
3,000
1,000
0
4,000
2,000
Published incidences of "microbiome" or "microbiota" or "microbial communities"
2000 2004 20082002 2006 2010 2012 2014 2016
6,000
7,000
8,000
9,000
© Generation Investment Management LLP
30,000
50,000
75,000
70,000
60,000
40,000
65,000
55,000
45,000
35,000
0
20
40
30
10
35
25
15
5
Median Income ($)
Income Obesity Rate(%)
Obesity Rates (%)
Consumers are also forging their own nutritional diets,with increased focus on microorganisms and health
However, health inequities linked to socioeconomicstatus remain pervasive and still need to be redressed
107Source: Planetizen
© Generation Investment Management LLP
Traditional bricks-and-mortar shops are making way for online options offering logistical and operational efficiencies
The online grocery market continues to gain scale, reducing the need for individual store trips
108Source: Euromonitor International, Kantar Worldpanel, IGB
US online food and drink sales $b (exc. sales tax)
8
6
4
2
02010 2012 2014 2016E
UK online grocery spend £b
12
10
8
6
4
2
02010 2012 2014 2015 20162011 2013
Non-food
Grocery
© Generation Investment Management LLP
Traditional bricks-and-mortar shops are making way for online options offering logistical and operational efficiencies
Meal-kit offerings and online retailers such asAmazon will continue to drive online growth
109Source: Hitwise as published on Marketingcharts.com
Number of visits to sites offering food-subscription boxes (m), US
20
0
15
10
5
Jun 2014 Jun 2015 Jun 2016Dec 2014 Dec 2015 Dec 2016
© Generation Investment Management LLP
Traditional bricks-and-mortar shops are making way for online options offering logistical and operational efficiencies
These new models of cooking at home are rooted in a drive towards enhanced efficiencies and a desire to reduce the levels of waste associated with food consumption
110Source: Business for Social Responsibility survey, USDA, Blue Apron, Sun Basket
While the USDA suggests grocery stores in the US throw out 10.5% of their food, Blue
Apron’s facility discarded 5.5%
In 2016, Sun Basket launched one of the first 100%
recyclable and compostable packaging solutions for the
meal-kit industry
Cooks threw out 7.6% of the food in Blue Apron kits,
relative to an estimated 23.9% to make the same
meal otherwise
© Generation Investment Management LLP
Technological innovations in the restaurant industry are making it more sustainable to eat away from home
As consumers increase their eating habits away from the home, there is need for innovation and improvement in the restaurant industry
111Source: USDA
01950
80%
60%
40%
20%
1960 1970 1980 1990 2000 2010 2016
Spending on food away from home is higher than spending on food at home, US
Food at home
Food away from home
© Generation Investment Management LLP
Technological innovations in the restaurant industry are making it more sustainable to eat away from home
Investment in restaurant innovation enables restaurants to optimise operations and reduce food waste
112Source: CB Insights
2014 2015 201620130
$400
$200
$800
$600
0
20
10
40
30
Disclosed funding (m) Number of private deals
Restaurant tech quarterly global financing history
© Generation Investment Management LLP
Technological innovations in the restaurant industry are making it more sustainable to eat away from home
Restaurants say that they are committed to investmentin reducing food waste across their supply chains
113Source: Food Waste Alliance 2016, National Restaurant Association
50%
40%
30%
20%
10%
0%Regeneration of food waste
Disposal of food waste
Fooddonations
Recycling of food waste
Turning food wasteinto animal feed
Restaurants identifying investment area, US (%)
© Generation Investment Management LLP
Technological innovations in the restaurant industry are making it more sustainable to eat away from home
And perceived barriers to repurposing of food waste in US restaurants have also seen significant reduction over time
114Source: Food Waste Alliance 2016, National Restaurant Association
0% 20% 40% 60% 80% 100%
Insufficientrefrigeration/storage
Liabilityconcerns
Transportationconstraints
Insufficientrecycling options
Managementconstraints
20142016
© Generation Investment Management LLP
Precision services, facilitated through the use ofdrones, have become a critical part of agriculture
The percentage of market area usingprecision-agricultural services is getting larger…
115Source: Adapted from Erickson and Widmar 2015; Farmdoc Daily
70%
50%
30%
0%
20%
60%
40%
10%
2000 2005 20072002 2011 2016E2001 2003 2004 2006 2008 2009 2013 2015
Grill or zone soil sampling
Satellite imagery
UAVs
Yield monitor w/GPS
GPS guidance system auto
Average % of market area
© Generation Investment Management LLP
Precision services, facilitated through the use ofdrones, have become a critical part of agriculture
Users are increasingly diversifyingthe precision services employed
116Source: Adapted from Erickson and Widmar 2015; Farmdoc Daily
PSS & VR
YM & VR
YM & PSS
Variable rate (VR)
Precision soil sampling (PSS)
Yield monitor (YM)
YM, PSS & VR
% of users
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152016E
0%
20%
60%
40%
© Generation Investment Management LLP
Precision services, facilitated through the use ofdrones, have become a critical part of agriculture
The scaling opportunity set in AgTech is evidenced throughthe emergence of AgTech-focused investment funds
117Source: AgFunder
2008-10 2011-13 2014-16
+1 +7 +8
Cultivian Fund
Avrio Ventures LP II
Greensoil Agro & Food I
Middleland Capital
Closed Loop Cap Evergreen
Fall Line Farms Fund I
Cultivian Sandbox Fund II
Omnivore Partners Fund I
$92m
$12m
-
-
$127m
$115m
$40m
$34m
$125m Anterra Capital I
$125m Seed to Growth Ventures
Avrio Ventures Fund III$110m
$47m CapAgro Innovation Fund
$42m PowerPlant Ventures
$25m New Crop Capital
$20m Lewis & Clark Ventures
$19m Greensoil Agro & Food II
© Generation Investment Management LLP
Earth observation is also becoming a core partof how we understand the world
The adoption rate of satellite use has increasedto over 50% amongst US agriculture dealers
118Source: CropLife “Precision Agricultural Services Dealership Survey Results”
50%
30%
0%
20%
60%
40%
10%
2003 20112006 20152005 2008 2009 2013 2016E
Rates of satellite adoption among US agricultural dealers
© Generation Investment Management LLP
Earth observation is also becoming a core partof how we understand the world
The launch of microsatellites has proliferated over time
119Source: SpaceWorks Enterprises Inc
0
100
300
200
Full market potential
20132010 20152011 2012 2014 2016
Number of nano- or micro-satellites under 50kg
SpaceWorks forecast
Historical launches
© Generation Investment Management LLP
Earth observation is also becoming a core partof how we understand the world
The market for commercial data related to earth observation has alsoincreased significantly in the US, including outside of a defence focus
120Source: Euroconsult, National Ocean and Atmospheric Administration
0
200
1,800
1,200
Non-US defence
20132006 20152011 2012 2014 2016E
Sales of commercial data relating to earth observation
US defence
2007 2008 2009 2010
Non defence
400
600
800
1,000
1,400
1,600
2,000
Evidence of a fully informed customer making decisions based on fact over marketing
Key agricultural demarcations of improvement including reduction in topsoil depletion, etc.
Improvements around food waste, both at home and at restaurants
Proof that health inequities associated with food consumption are being reduced
…among others
Food systems
trends to monitor:
121
WELLBEING
© Generation Investment Management LLP
We believe a sustainable consideration of wellbeing
is inclusive of:
Increasingfocus on
physical health
Growing globalaccess to basic
needs andopportunities
Collectiveawareness of the
importance ofholistic wellbeing
Workplace wellnessembraced as a
driver of retentionand performance
Ubiquitoushealthcare services
enabled bydigitalisation
© Generation Investment Management LLP
People are increasinglyfocused on physical fitness
The number of people in the US who are exercising on a regular basis has seen a marginal uptick
124Source: Gallup-Healthways Well-Being Index
% of Americans who report they exercised for30 minutes or more, three or more days in the last week
2008 2012 201640%
60%
50%
© Generation Investment Management LLP
People are increasinglyfocused on physical fitness
This is reflected in infrastructuregrowth around physical health
125Source: Leisure Database Company/ Berenberg
Number of health clubs (thousands) in the UK
2011 2012 2013 2014 2015 20160
6
5
4
3
2
1
Low-cost
Traditional
© Generation Investment Management LLP
People are increasinglyfocused on physical fitness
Further evidence of this trend is manifest in increased consumer spending on athleisure apparel
126Source: Euromonitor
3%
0%2011 2012 2013 2014 2015
Apparel and footwear by product category, global
2016
7%
6%
5%
4%
2%
1%
Year-on-year growth
Childrenswear
Womenswear
Apparel Accessories
Menswear
Footwear
Hosiery
Sportswear
© Generation Investment Management LLP
Awareness of the importanceof holistic wellbeing is growing
More people are interested in mental health and wellbeing
127Source: Google Trends
Interest over time on Google for “mindfulness”
2005 2009 2011 2013 2015 20162007
75
50
0
100
© Generation Investment Management LLP
Awareness of the importanceof holistic wellbeing is growing
The number of yoga practitioners in the US is increasing rapidly as people are drawn to both its physical and mental benefits
128Source: IPSOS Public Affairs 2016, USA
Yoga practitioners
2008 2012 2016
15m
20m
35m
30m
25m
40m
© Generation Investment Management LLP
Awareness of the importanceof holistic wellbeing is growing
Wellness benefits of engaging with the naturalenvironment are better understood
129Source: 2016 Monitor of Engagement with the Natural Environment, UK*Visits to outside spaces in and around cities, countryside and coastlines, such as parks, cycle-ways, forests, etc.
% of UK population who claim to visit the natural environmentat least once a week, and % motivated to do so by health and exercise
70%
60%
50%
50%
40%
30%
20%
2010 20162011 2012 2013 2014 2015
% motivated byhealth & exercise
Frequentvisitors
© Generation Investment Management LLP
Awareness of the importanceof holistic wellbeing is growing
Travel and free time are increasingly being usedas an opportunity to focus on one’s wellbeing
130Source: Global Wellness Institute *Wellness tourism is defined as travel for the purpose of promoting health and wellbeing through physical, psychological or spiritual activities
120
80
40
0
Spa economy, global, $bn
160k
0
120k
80k
40k
2007 2013 2015 2016E
Number of spas
800
600
400
200
0
2013 2014E 2015 ‘16E2010
Wellness tourism, global, $bn*
Number of trips
© Generation Investment Management LLP
Awareness of the importanceof holistic wellbeing is growing
The importance of strong social networksis more appreciated than in the past
131Source: McKinsey 2016 China Consumer Report
75%
50%
25%
0%
% of Chinese consumers who agree that being successful means having
a happy family
2009 2012 2015 2009 2012 2015
75%
50%
25%
0%
% of Chinese consumers who agree that being successful
means being rich
© Generation Investment Management LLP
Employers increasingly recognise theimportance of workplace wellness
More attention and resources are beingallocated towards wellbeing benefits for employees
132Source: Society for Human Resources Management, 2017 survey of US employers
Employers who changed their benefits offering in the past 12 months, 2017
Wellness
Health-related
Career development
Employee services
Flexible working
Retirement
Leave
Family-friendly
Housing/relocation
Business travel
0%
Gross increase
5% 10% 15% 20% 25% 30%
© Generation Investment Management LLP
Employers increasingly recognise theimportance of workplace wellness
40% of organisations cite flexible work arrangementsas one of their most effective recruiting strategies
133Source: Society for Human Resources Management, 2017 survey of US employers
% of surveyed firms providing employee benefit
Casualdress
Telecommuting
Flextime
Mealtimeflexibility
Shiftflexibility
Alternatinglocation
Unlimitedpaid leave
100%
0
80%
60%
40%
20%
2013
2016
© Generation Investment Management LLP
Employers increasingly recognise theimportance of workplace wellness
Improvements in flexibility through remote working also has a positive impact on work-life balance
134Source: Gallup – State of the American Workplace; REPL Group
80%
60%
0
40%
20%
Work-lifebalance
Family
Timesavings
Commutestress
Reasons supporting a flexible workforce
1995 2005 2016E
40%
35%
30%
25%
20%
15%
10%
5%
% of workers who have ever telecommuted
© Generation Investment Management LLP
Employers increasingly recognise theimportance of workplace wellness
Employer consideration of wellness provisions isalso reflected in office design and infrastructure
135Source: Society for Human Resources Management, 2017 survey of US employers
% of employers who offered standing desk as a benefit, US
2013 2014 20162015
20%
40%
30%
10%
0%
© Generation Investment Management LLP
Ubiquitous healthcare services, enabled throughtechnology, help alleviate resource constraints
The desire to monitor health and wellness, and apply metrics toprogress, is evidenced in the growing market for consumer wearables
136Source: CB Insights
Wearables units shipments (in millions, global)
0
20m
40m
60m
80m
100m
120m
2014 2015 2016
Fitbit Xiaomi Apple Garmin Samsung Other
© Generation Investment Management LLP
Ubiquitous healthcare services, enabled throughtechnology, help alleviate resource constraints
The digitisation of health provision further enables remoteaccess, which is increasingly receiving consumer buy-in
137Source: Accenture 2017 Survey on Virtual Health
Track health stats
Get a follow-up appointment
Get follow-up care services at home
Get reminders to take health-promoting actions
Discuss health concern with professionals
Get daily support to manage health issues
Get reminders to take medication
Get an exam for a non-urgent condition
Get an annual physical
Get an exam by specialist for urgent concern
Receive mental health therapy
0% 100%75%50%25%
% who would probably or definitely do virtually:
© Generation Investment Management LLP
Ubiquitous healthcare services, enabled throughtechnology, help alleviate resource constraints
Capital continues to flow into this new model of healthcare provision
138Source: CB Insights
2010 2011 2012 2013 2014 20150
US
Non-US
2016E
800
400
Digital health deals by geography
© Generation Investment Management LLP
Ubiquitous healthcare services, enabled throughtechnology, help alleviate resource constraints
While mental health in particular is seeing increased investment activity
139Source: CB Insights
Mental health and wellness techannual global financing history
0
300
100
0
100
50
2013 2014 2015 2016
200
75
25
DealsDisclosed funding ($m)
© Generation Investment Management LLP
Ubiquitous healthcare services, enabled throughtechnology, help alleviate resource constraints
But innovation and capital allocation will need to acceleratein order to keep up with increasing demands on the global system
140Source: World Health Organisation
3 out of 4 peoplesuffering from
major depressiondo not receive
adequate treatment
Depression alone affects 350 million
people and isthe single largest
contributor toyears lived with
disability globally
350m
Depression is estimated to cost over US $1.6tn in
lost economic output by 2030
$1.6tn
© Generation Investment Management LLP
Yet improvements in global societal wellbeing are apparent in increased rates of access to basic needs and opportunities
Global educational attainment has seen markedimprovement, particularly over the past decade
141Source: Simon Marginson; UNESCO Note: Data for 1971-79 not available for Sub-Saharan Africa
0%
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
E
20
16
E
20%
40%
World
Latin America and Caribbean
Sub-Saharan Africa
Gross tertiary enrolment ratio (%)
60%
© Generation Investment Management LLP
Yet improvements in global societal wellbeing are apparent in increased rates of access to basic needs and opportunities
Access has improved because of innovations in educationprovision, including through the emergence of e-learning tools
142Source: Boost eLearning, a Google for Work and Google for Education partner Note: Includes teachers, students and administrators
02010 2011 2012 2013 2014 2015 2016E
80
60
40
20
Number of users of Google apps for education (m), global
© Generation Investment Management LLP
Yet improvements in global societal wellbeing are apparent in increased rates of access to basic needs and opportunities
In part because of big-data analysis, less developed countries are becoming more financialised
143Source: World Bank Group Global Payment Systems Survey
Deposit transaction accounts in World BankUniversal Financial Access (UFA) focus countries (m)
0
10,000
8,000
6,000
4,000
2,000
12,000
2010 2011 2012 2013 2014 2015 2016E
© Generation Investment Management LLP
Yet improvements in global societal wellbeing are apparent in increased rates of access to basic needs and opportunities
E-money accounts are further enabling access
144Source: World Bank Group Global Payment Systems Survey
0
200
100
300
400
500
E-money accounts
New e-money accounts
New e-money accounts created in UFA focus countries (m)
2010 2011 2012 2013 2014 2015 2016E
© Generation Investment Management LLP
Yet improvements in global societal wellbeing are apparent in increased rates of access to basic needs and opportunities
Much of this progress is made possible by tools leveraginggrowing internet penetration in developing markets
145Source: ITU World Telecommunication/ICT Indicators database
Trends in mobile-cellular telephone subscriptions and individual internet usage
75%
50%
25%
0%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mobile-cellular telephonesubscriptions (Africa)
Individuals usingthe internet (Africa)
Mobile-cellular telephonesubscriptions (world average)
Individuals usingthe internet (world average)
Social cohesion, the reconstruction of social capital across all levels of society, and the role of technology therein
Erosion of stigma and misconceptions attached to mental health
The genomics market and implications around healthcare provision and access
Equality of opportunity and of wellbeing trends across different demographic groups
…among others
Wellbeing
trends to monitor:
146
A sustainable economy includes
increased innovation in:
Mobility
Energy
Food Systems
Built Environment
Wellbeing
CO2
© Generation Investment Management LLP
Image sources
148
Proterra electric buswww.insideevs.com/proterra-catalyst-xr-bus-gets-new-330-kwh-battery-pack
Citymapper’s transit appwww.macrumors.com/2015/03/27/citymapper-and-transit-app
Volvo’s autonomous car designwww.futurism.com/volvo-unveils-autonomous-car-design-set-to-hit-the-roads-by-2017
Viaduct-embedded wind turbine conceptwww.popsci.com/technology/article/2011-02/wind-turbines-embedded-italian-viaduct-would-preserve-architecture-and-generate-power
8 372520
Grocery store free-from aislewww.dairyfreebabyandme.blogspot.co.uk/2015/01/shopping-with-food-allergies-in-uk.html
Desktop Metal’s Studio System 3D printerwww.computerworld.com/article/3192127/computer-hardware/startup-claims-3d-printers-create-metal-parts-faster-more-cheaply.html
Impossible Burger as advertised at Momofukuwww.ny.eater.com/2016/9/2/12691348/nyc-david-chang-impossible-burger-review
Sun Basket’s 100% recyclable meal kit boxwww.sunbasket.com
OLPC XO $100 laptop in use in Ulaanbaatarwww.techenet.com/2014/01/gadgets-de-tecnologia-para-o-aprendizado-do-seu-filho
Descartes Labs’ 2015 Cropland Data Layer mapwww.medium.com/planet-stories/this-company-is-using-timely-satellite-imagery-and-deep-learning-to-predict-a-67-billion-u-s-7346bd0f3643
Toast’s point-of-sale systemwww.oneclickroot.com/android-apps/new-android-point-of-sale-system-toast-raises-30-million-wants-to-bring-android-tablets-to-your-favorite-restaurant
Tesla’s solar roofwww.cadintentions.com/cool-tech-tesla-solar-roof-tiles-are-available-to-order
M-Kopa’s solar systemwww.m-kopa.com/category/updates
60
979382
70
111108
105
141115
Carbon Pricing Leadership Coalition, World Bankwww.blogs.worldbank.org/climatechange/reaffirming-our-commitment-carbon-pricing-and-climate-action
Kingspan’s “Passive House”www.kingspaninsulation.co.uk/Knowledge-Base/Passivhaus.aspx
Visual depiction of the microbiomewww.naturalhealth365.com/microbiome-gut-inflammation-1857.html
4841
Please address all comments and questions tosustainabilitytrends@generationim.com
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