This was Ian Simm and Bruce Jenkyn-Jones’s thought process when they founded Impax Asset Management in 1998. It now has £35bn under management, including a £1.4bn investment trust, Impax Environmental (LSE: IEM), launched in 2002. IEM trades at net asset value (NAV) and has returned 74% in the past five years, well ahead of the global indices, so the Impax thesis clearly works.
Investing in solutions to environmental problems
The investment trust seeks to invest in companies offering solutions to environmental problems, including clean energy and energy efficiency, water treatment and pollution control, waste technology and natural resource management and sustainable food. This is much broader than a mono-focus on net-zero and climate change.
“We are beginning to see a sustainable solution,” says Jenkyn-Jones. “Solar energy was 40 times more expensive than today when we started. Ground-source heat pumps have appeared and are commercial, as have solutions for water management and food production.” He could add that the growth of renewable energy and the adoption of electric vehicles (EVs) have far exceeded the most optimistic forecasts.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“More solutions will appear,” he says, “but there are still significant problems that are getting worse, such as climate change, plastics pollution and bio-diversity. Environmental costs such as carbon output and waste are not properly internalised so it still pays to pollute. The solutions are there and growing rapidly but we do need more political action from governments.”
Evidence shows if emerging countries such as China and India ignore the issue they will be among the worst affected, but “current geopolitical challenges don’t help”.
Jenkyn-Jones also believes it’s necessary to work with the fossil-fuel industry instead of boycotting it, to improve energy efficiency. Ahmed Zaki Yamani, once Saudi Arabia’s oil minister, used to say that “the Stone Age did not end because the world ran out of stone and the oil age will not end because we run out of oil”. Impax believes it will be replaced by cheaper, better, cleaner, more sustainable sources of energy.
Impax Environmental: the investment trust to back
Impax's investment trust portfolio has holdings in around 60 companies, nearly all of which are profitable and all but one of which is quoted. Around 52% of the portfolio is invested in North America, 33% in Europe and 14% in Asia-Pacific. Over half the portfolio is described as mid-cap, though this is defined as companies with a market value of between $5bn-$20bn, and most of the rest is small cap. Some 50% of revenues have to be in products or services that provide solutions to environmental problems.
Jenkyn-Jones has a great story for every holding. Trimble is a software, hardware and services company that uses GPS and soil data to optimise the use of land and machinery for agriculture, construction and transport. Advanced Drainage designs and manufactures systems to control water flow and reduce the risk of floods. Darling Ingredients reduces food waste by collecting and reprocessing by-products of the agri-food industry. And Lem makes transducers, sensors and monitors to ensure the efficient usage of electricity in EVs.
Impax has spawned many copycat strategies from rival fund managers but has a near 20-year head start on its peers. This, the investment trust's record and the accumulated expertise makes it the fund to back.
“Looking back in history,” Jenkyn-Jones adds, “we generally do find solutions to environmental problems.” Canny investors can profit thereby.
-
December 2023 NS&I Premium Bond winners - check now to see what you’ve wonIf you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
-
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
