IMPAX ENVIRONMENTAL MARKETS: Green fund that knows how to stay in the black
Investment house Impax Asset Management has been investing in environmentally-friendly companies for more than 20 years.
Listed on London’s Alternative Investment Market, it has some £16billion under management across a range of funds, all with a ‘sustainability’ theme. But its flagship vehicle is stock market listed Impax Environmental Markets, a £634million global fund.
The investment trust has built up a solid investment record. Over the past five years, it has generated returns for shareholders of 107 per cent. Over the past year, it has managed to achieve a small overall return of 7 per cent.
To put these numbers into perspective, returns from the FTSE All-Share Index over the same time periods have been 14 per cent and losses of 12 per cent.
The trust will only invest in companies that generate at least 50 per cent of their revenues from environmental initiatives
The trust is normally managed out of London by Bruce Jenkyn-Jones, although lockdown has meant he has recently been keeping a watchful eye on it from his home in Herefordshire. He has been at the trust’s helm since its launch in 2002 and he believes the fund is more relevant than ever.
He says: ‘When we set up the fund, the idea was to invest in companies that were providing solutions to environmental problems. That objective remains as true today as it did 18 years ago – indeed it’s more relevant than ever. People realise there are great threats to the globe and we need more sustainability.’
The trust will only invest in companies that generate at least 50 per cent of their revenues from environmental initiatives – be they based around energy efficiency, pollution control, sustainable food, water infrastructure and waste management.
It’s a hurdle that excludes most big listed companies from the trust’s portfolio and means the trust is focused on small or micro businesses. If a company’s earnings from environmental projects fall below 50 per cent, the trust will sell up although Jenkyn-Jones says this ‘does not happen very often’.
The trust currently has 65 stakes in businesses, all but one listed. Yet with its global mandate, Jenkyn-Jones says there are about 1,200 companies to choose from, so the pool of investable businesses available is sufficient. The trust has little exposure to healthcare or financial companies.
The trust currently has 65 stakes in businesses, all but one listed
Its top two positions are in US computer software company PTC – that helps companies become more efficient through the embracing of digitalisation – and Rayonier (also US-based) that is focused on sustainable forestry management. The biggest UK holding is in packaging company DS Smith that is improving the efficiency of its recycling operations.
Unlike some fund managers, Jenkyn-Jones is not keen on taking big company bets. ‘It’s a reflection of the smaller companies that we tend to invest in,’ he says. ‘They come with investment risk.’ So, no individual holding is ever allowed to exceed five per cent, although it is rare for a stake to represent more than 3.5 per cent of the trust’s assets.
The manager also likes to hold stakes long-term – as evidenced by the fact that a fifth of today’s holdings were in the portfolio from day one in 2002. For the record, Impax does not talk about the companies it holds.
The trust’s annual charges are reasonable at a tad over one per cent. It is among the top 30 ethical funds recommended by Interactive Investor with the wealth manager impressed by the trust’s long-term track record and Jenkyn-Jones’s commitment to the cause.
Other global funds with an environmental twist that Interactive likes include BMO Responsible Global Equity and Fundsmith Sustainable Equity.