Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Impax Environmental Markets. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Having been one of the forerunners of the sustainable investment theme, Impax Environmental Markets (IEM) now finds itself in the epicentre of what we believe is strengthened secular growth post-COVID-19. The trust seeks to invest in companies which will profit from the transition to a more sustainable economy. An investment theme that seems likely to run for many years yet.

As we discuss in Portfolio, IEM offers a specialist exposure to mid and small-cap companies around the world within four broad overarching sectors: new energy, water, waste/resource recovery, and sustainable food and agriculture. Interest from generalist investors this year in these areas has resulted in multiples expanding for the portfolio as a whole. On the one hand this might mean enhanced risks for IEM, or on the other hand it might reflect more aggressive ambitions by governments around the world to achieve ‘net-zero’.

This increased interest from investors, combined with strong earnings growth means 2020 has been a hallmark year for IEM. As we discuss in Performance, the trust has outperformed the benchmark by c. 11.5% (to 18/11/2020), and the trust has been a strong issuer of shares with the premium to NAV standing at 9.5% currently.

IEM’s portfolio has a definite growth bias. However, the managers are valuation-driven in their stock-picking approach, which has enabled them to reposition the portfolio since COVID-19 to improve the portfolio’s quality and growth characteristics. IEM’s net gearing remains at c. 2.5% reflecting the managers’ optimism, balanced by caution on the portfolio’s valuations relative to the wider equity market.

Analyst's View

IEM’s strong performance and elongated premium achieved this year gives cause for cheer in some senses – certainly for investors who have held the shares over this and longer time frames. 2020 feels like IEM’s moment. Yet at the same time, valuations – both in the underlying holdings and the 9.5% premium that the shares trade - at are potentially signs for caution (as we discuss in Discount).

There are plenty of unknowns out there. As we write, a COVID-19 vaccine rollout seems likely over the coming months, ostensibly a potential boost to all sectors. However, in the event that markets retrench, then IEM will not be unaffected. This could be compounded in share price terms by a normalisation of the premium the shares trade at, which would be painful for investors.

On the other hand, governments around the world are getting more aggressive in their ambitions to achieve ‘net-zero’ in terms of carbon emissions. With fiscal stimulus required (and being promised) on a huge scale, attempts to direct spend towards decarbonizing economies likely provides a strong and lasting tailwind to precisely the sorts of companies that IEM invests in.

The fundamental drivers which have underpinned performance year to date show no signs of slowing down. IEM offers exposures that are unlikely to be found in other funds. Our enthusiasm that IEM should be a consideration for long-term investors looking for specialist expertise is balanced by the significant premium of the shares: any lessening could be a potential opportunity.

Bull BEAR
Niche investment strategy which has come of age and performed strongly in 2020
Portfolio trading on a higher premium to wider markets than historically
Strong historic underlying earnings growth gives credence to the investment thesis
Structural gearing likely to exacerbate portfolio volatility
Specialist, well-resourced manager
Trading on a large premium to NAV
Continue to Portfolio

Fund History

30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
08 Mar 2022 Fund Analysis
IEM’s very high premium has eroded, offering a potentially attractive entry point for long term investors…
24 Nov 2021 Holding back the tears
While the final text of COP26 fell short of what many had hoped for, the writing is on the wall for fossil fuels and, from an investment perspective, the age of sustainability has only just begun…
27 Oct 2021 Gone with the wind
One of our analysts looks at the implications of the shocking rise in energy prices and the opportunities it highlights for investment trusts...
26 Oct 2021 Fund Analysis
Momentum behind IEM’s performance appears strong, but this is reflected in the premium rating...
10 Jun 2021 Green is good!
2021 will see billions dedicated to sustainable initiatives, which brings with it a host of possible investment opportunities...
01 Apr 2021 Fund Analysis
IEM’s valuation-led approach to growth investing has delivered strong returns through cycles...
24 Feb 2021 Dire Straits or Money for Nothing?
As discounts reach historically narrow levels across the board – our analysts debate whether a premium is a price worth paying…
04 Feb 2021 Eurovision 2021
We highlight potential opportunities within the European investment trust space…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
02 Dec 2020 Fund Analysis
2020 has been IEM’s year, and the future looks bright too…
15 Oct 2020 Nice guys finish first
ESG has moved from hippy pipe-dream to corporate mainstream, but what is it really and where do we see opportunities?
26 Aug 2020 Trump v. Biden
Two of our analysts debate who will win the US election and what that means for markets…
20 Aug 2020 Weathering the storm: Impax Environmental Markets
Reporting results for the six months ending June 2020, IEM has continued to attract new investors even during the Coronavirus crisis and could soon face capacity constraints…
22 Jul 2020 A game of four quarters
Seven trusts, two quarters. Are our team still happy with their trust picks for 2020?
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech seems to beat every other sector hands down – in both up and down markets – but nothing lasts forever. Where else should investors be looking for secular growth themes?
01 Jul 2020 Fund Analysis
Strong demand for IEM’s unique offering, means it continues to issue shares and grow...
25 Mar 2020 Of mice and men
Our ‘best laid plans’ have somewhat ‘gang aglay’ since the KTI team put forward its best ideas for 2020 in early January…
02 Jan 2020 Crystal Balls
Drunk on our success in choosing funds to perform well in 2019, the team at Kepler Trust Intelligence is back at the table with a glint in its eye…
26 Nov 2019 The new frontiers in environmental markets
Impax Environmental Markets has a long track record of addressing environmental challenges - giving it a first mover advantage when it comes to new sustainable issues...
19 Sep 2019 Fund Analysis
IEM invests in companies which are helping the transition from depletive models to sustainable ones…
19 Sep 2019 Rebels no more...
Climate change and sustainability is now mainstream - so we are adding ESG analysis into all of our fund research…
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
03 Apr 2019 ESG: Impact
26 Mar 2019 Fund Analysis
With global populations rising, IEM invests in companies that help humanity achieve more with less...
19 Mar 2019 Electric Dreams: The future of energy
At our first public event, three fund managers gave their insights on the future of energy and the investment opportunities in this space...
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long-term capital growth...
24 Dec 2018 Why did the chicken cross the road?
Because he was so bored of reading newspapers devoted entirely to Brexit he was hoping he’d be hit by a truck.
04 Dec 2018 Fund Analysis
Long term thinking...
04 Apr 2018 Electric dreams
We examine the growing shift toward electrical power across a broad range of industries, and the implications for investment trusts with exposure to them...
04 Apr 2018 Fund Analysis
A highly-differentiated global equity trust that benefits from the increasing focus on resource efficiency and tighter environmental regulations around the world...
05 Oct 2017 Winners and losers from tomorrow’s world
We highlight a subsection of managers and strategies which aim to identify and profit from innovative disruption in the global economy...
05 Oct 2017 Fund Analysis
A small-mid cap global equities trust positioned for the transition toward a low energy, cleaner and more efficient global economy..
17 May 2016 Why oil may never recover..
Those who believe today’s resurgent oil price is an opportunity should bear in mind that Britain was powered, this month, without burning a single chunk of coal for the first time since 1882.
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