The UBS research paper says the Earth's population is set to surpass 9 billion people by mid century and that the increasing demand for basic necessities of energy, food and water will drive up prices and necessitate efficiency gains.

"In general, we believe companies that offer products and services to improve efficiency will generate strong revenue growth and above-average expected returns," the report said, but it cautions that investors will also have to pay attention to individual firms' fundamentals and technological and policy developments. "Nevertheless, we believe that companies offering efficiency gains in supplying the basic necessities of food, energy, and water present a strong basis for investing."

In addition to population growth, urbanization and climate change policies will also push countries to look for greater efficiency and more sustainable means of providing for their citizens.

UBS suggests firms that work in such fields as building insulation and heating, cooling and lighting and those that can increase efficiency in electrical transmission and generation are potential investment areas. Agribusinesses in such areas as crop protection and fertilizers, irrigation, fertilizers and plantations and crop processing also offer potential.

Finally, consumer applications and utilities also show promise in the field of water, pipes, treatment services, metering and testing equipment, UBS says.

"Water is perhaps the world's most valuable and most wasted resource, largely because it costs virtually nothing. Such wasteful practices will become increasingly unsustainable throughout the world as the population grows, per capita incomes increase, people move from rural areas to the city, and the effects of climate change become more pronounced," the UBS report said. "Water markets and pricing are developing in many locations, particularly in areas where water is scarce and infrastructure is in critical need of renewal."

The UBS paper notes that enhanced efficiency will mean using fewer resources, a move that is both less costly and more sustainable.

"The incentives to change - in the form of higher prices and government policies -are growing, and the political will to achieve additional gains is also increasing. Under these circumstances, we believe that 'mind' will triumph over 'matter,' and that investments in human ingenuity to efficiently employ scarce resources make sound financial sense," the paper concluded.

By Sean McKibbon, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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