Impax Environmental Markets | Winterflood Research

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Unique Proposition at Attractive Discount

Background: Impax Environmental Markets* (IEM) aims to generate long-term, sustainable, above-market returns by investing globally in listed companies developing solutions to resource-related challenges or environmental issues. Investments are made in ‘pure-play’ companies that have at least 50% of their underlying revenues generated by sales of products or services in environmental markets. The fund has been managed by Bruce Jenkyn-Jones and Jon Forster of Impax Asset Management since its launch in 2002, with Fotis Chatzimichalakis joining the investment team in 2018 and becoming co-manager 2021. Impax Asset Management, which has c.£40bn AUM, is dedicated to investing in the transition to a more sustainable economy.

Portfolio: The portfolio contained 61 holdings as at 31 August, with the top 10 accounting for 27% of portfolio value. The active share relative to the MSCI AC World Index (MSCI ACWI) was 99.5% as at 30 June, while it was 90.9% relative to the FTSE Environmental Technology 100 Index (FTSE ET100). There is a bias to small and mid-cap companies, with 82% of the portfolio invested in stocks with a market cap of less than $20bn vs 13% for the MSCI ACWI.

Performance: Over the last ten years, IEM has delivered a NAV total return of +175%, underperforming both the MSCI AC World Index (+187%) and the FTSE ET100 Index (+276%). Both absolute and relative returns have deteriorated from Q4 2021 onwards, which we attribute to the initial market style rotation from ‘growth’ to ‘value’ following the release of Covid vaccines, and more recently to the market dominance of AI-related stocks and the underperformance of small and mid-caps in a rising rate environment, as well as reduced investor emphasis on ESG characteristics in general.

*Denotes a corporate broking client of Winterflood Securities

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