Impax Asset Management

Sustainable Investing interest and options for US investors continues to grow

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Continuing our review of positively focused sustainable investing fund managers in the US, we now turn to another growing player in Impax Asset Management

Founded in the late 1990s in the UK, and originally known in the States for their work with Pax World sub-advising their Global Environmental Markets Fund, Impax has operated in the United States since 2008 with a range of products offered directly through their own offices in New York City and Portland, Oregon.

Along with the perhaps better known Generation Investment Management led by Al Gore and David Blood, Impax is a pioneer at seeking to identify opportunities created by the scarcity of what appear to be finite natural resources alongside the associated demand for cleaner, more efficient products​, and services.​

Founder and Chief Executive Ian Simm published a paper in September entitled Investing in Resource Optimization, and argued that “all investors should benefit from holding a portfolio of investments in Resource Optimization markets.  These would typically include companies in energy efficiency, renewable energy, water treatment, waste treatment, materials recycling, and sustainable food and agriculture.”

Impax manages roughly US$4.7 Billion dollars (a figure which has remained constant the past two years, after rising significantly a few years prior) in assets for institutional and high net worth investors globally, and is focus on providing strong long-term risk-adjusted returns.

 

Like Parnassus which we profiled a number of times recently, Impax has a strong emphasis on preserving shareholder value but also seeks to capture growth potential in these global markets.  

Their investment team numbers in the dozens of professionals, with an average of 20 years relevant experience, including the highly regarded Bruce Jenkyn-Jones, Head of Listed Equities and co-manager of the Pax fund mentioned above.

Since inception, the Pax World Global Environmental Markets Fund has had somewhat similar performance to the MSCI World, both being up an average of roughly 4-5% per year.  Up until recently they matched index performance after fees, with a fund that only invests in companies which are seeking environmental solutions which are good for the bottom line and for society.

Impax's investment thesis is to seek mispriced companies that may be poised to benefit from long-term trends including changing demographics, the rise of the global cities, increasing global consumption, and the resultant increases in resource scarcity.  Its investments are focused on a small number of deeply researched global equity strategies across alternative energy, energy efficiency, water, waste, food and agriculture related markets.

For example, the Pax World Global Environmental Markets Fund held 51 companies as of November 30, 2015, as per this link, with over half of its portfolio in energy efficiency and water infrastructure technology companies.

Their Resource Optimization paper sees “Compelling Long Term Drivers of Change” surrounding four themes, including:

  • Rapidly growing demand for resources  Driven by an expanding global population and rising standards of living and urbanization, particularly in (populous) developing markets
  • Limitations to cost-effective resource supply   Higher marginal costs of production for many key resources, e.g., oil, rare earth minerals
  • Inadequate Infrastructure  Greater demand for new infrastructure in developing economies alongside repair and replacement in developed economies
  • Environmental constraints  Limits on clean water availability, rising exposure to flooding, contaminated air, soil pollution, and growing impacts from climate change against a backdrop of ever stricter environmental policy around the world

 

Before the global financial crisis, Impax had emerged as a first leader in the environmental opportunities space with solid financial performance and developed expertise. While 2008 proved to be a challenge for all investors, markets rebounded, and something of a Cleantech 2.0 emerged due to changing energy cost curves and clearer emerging signals of the resource constraint issues which Impax has been exploring.

 

Going forward, firms such as Impax with a laser focus on environmental opportunities are exactly the sort of investor we have long written about who should be ideally positioned to capitalize on sustainability as a theme more broadly.  At minimum, their approach is something of a hedge without much potential downside as their results have shown.  And they may well provide outperformance as the systemic effects of challenges in energy, water, food and other environmental sectors continue to unfold.