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Impax Asset Management on investing in resource efficiency markets



Impax Asset Management, which specialises in both private equity and listed equities in resource efficiency and environmental markets, recently won Best Environmental Fund at the Investment Week ESG Awards for its flagship Irish-listed fund, Impax Environmental Markets (IEM).

The accolade proved that investing sustainably in tackling the depletion of vital resources such as energy and water can offer long-term investors good risk-adjusted returns while improving social and environmental conditions.

Impax has developed since the firm’s inception in 1999 to be among the leading asset managers in the environmental and resource efficiency space. The firm is witnessing an increasingly high demand for investment in this area, and has demonstrated growth across all its major listed equity products in the past year.

For the year to the end of October 2013, the £106m fund has returned 26% – slightly lower than the average return set by other environmental funds in the Blue & Green Investor library. But the fund’s factsheet shows returns of 76.4% over the last five years compared with 30.4% for the FTSE ET50. Meanwhile, since inception in December 2004, the fund has returned 105.2%, compared to the ET50’s return of 80.8% and 100.0% for the global equity MSCI ACWI index. 

“The principle benefit of investing in these markets is long-term growth”, says Impax chief executive Ian Simm, speaking to Blue & Green Tomorrow 

There is also a demand for clean water, clean low-carbon heat and power, food and specialist materials which is growing rapidly due to environmental constraints, regulations around this and rising wealth around the globe. This strategy does appeal to those investors who’ve got ethical concerns, but it’s not core and central to what we’re doing as a firm.” 

Simm says Impax is set aside from competitors due to its many years’ of staff experience and leadership in the industry. 

“We’re one of the largest investment managers in this space; we’ve been around for 15 years and we have 28 investment specialists who have spent their careers in these markets”, he adds.

Top contributors to IEM’s performance have been water infrastructure and energy efficiency, along with pollution control solutions. But what are the challenges and opportunities facing investment in these markets over the coming years?

Simm says, “At a company level, we need to be asking a series of questions as to what may impair growth. Are there changes in conditions? Are there new technologies? Will governments move the goal posts? 

But it’s a large and growing universe of stocks to invest in and if you have around 65 holdings in your portfolio, you can diversify those investments pretty well so that you’re minimising your risk for investors. Finally, there are always challenges as to whether companies can raise capital to fund developments.”

With the global population expected to rise to around 10 billion by the turn of the century and greater pressures placed on resources, Impax’s investment strategy is only going to be more attractive to investors. This is investment in and of the future.

Further reading:

Sustainable and ethical investors honoured at Investment Week Awards

Investing ethically across global environmental markets

FTSE launches new environmental index

World Water Day: long-term opportunities in investing in water

The Guide to Sustainable Funds 2013