The Impax Sustainable Leaders Fund seeks to achieve sustainable, above market returns over the longer term by investing globally in companies active in the growing resource efficiency and environmental markets. The Fund shall invest in equities of companies with at least 20% of revenue, profits or capital employed in environmental markets. Environmental markets include renewable & alternative energy, energy efficiency, water infrastructure & technologies, pollution control, waste management & technologies, environmental support services, and sustainable food, agriculture & forestry.

Impax believes that the transition towards a more sustainable global economy will lead to out-performance for well-positioned companies. Due to a host of global macroeconomic factors including increasing population, urbanisation, an infrastructure deficit, rising pollution, and finite natural resources it is Impax’s belief that environmental markets – and thus Impax’s chosen themes – will grow at a faster rate than the rest of the global economy.Impax believes that equities markets continue to misjudge the pervasiveness of most environmental themes, ranging from power production to water purification to air pollution. What is more, millennials are continually shaping new horizons for the modern world with resource efficiency, renewables, clean water, and sustainable food at their core. It is this miscalculation of environmental themes, combined with a growing emphasis on sustainable living, that Impax considers to be at the heart of alpha generation across its Thematic Strategies.The steady shift of global populations from rural environments to cities is placing increased pressure on fragile urban infrastructure, and as such substantial capital expenditure is required to keep pace with growing demand. In emerging markets this will be the initiation of new infrastructure projects while in more developed economies it will consist of complex redevelopment of brownfield sites. Impax has been developing a proprietary universe of environmental stocks since early 1999, with ideas sourced both through internal research of sector and geographical developments as well as via a wide and deep network of contacts developed over a long time period. The investment universe represents Impax’s intellectual property, and it is managed internally through a robust process.Inclusion in the ‘Impax ET Universe’ is contingent upon the resource efficiency and environmental markets business typically comprising >20% of group revenue, profitability or invested capital, a hurdle rate that is analysed by the analyst responsible for the stock, and which is confirmed and documented by a member of the Listed Equities Team with a specific universe management role.  (average exposure to environmental markets is substantially higher – with the average exposure of the Fund as at 30 June 2022 being 55%).  As the environmental markets have expanded, there have been new universe entrants (IPOs, spinouts and companies identified by the team’s detailed research), as well as companies leaving the universe due to both merger and acquisition activity, and due to the de-emphasis of environmental activity within businesses’ portfolios. In-house analysis monitors such changes on an ongoing basis, with changes regularly communicated to the Listed Equities Team. During the period 2007-2020, Impax worked with FTSE to develop and manage the FTSE Environmental Markets Index Series, which were seminal in benchmarking environmental markets. In 2021, FTSE launched its own FTSE Russell Green Revenues data model to manage the indices, with members of the Impax team on the Advisory Committee.The investment team apply a primary screen to all potential investee companies to ensure they meet the criteria for inclusion in the universe. This is followed by initial research by a lead analyst into the stock’s financial performance and a review of consensus earnings. If it is decided that full research should be completed, the lead analyst completes the Firm’s proprietary 10-Step analysis, which includes an in-depth ESG analysis followed by a peer review, and subsequent introduction to the Impax A-list of investable stocks. Ultimately, all companies must be approved by the Investment Committee on both a financial and an ESG basis before being added to the “A-list” as part of Impax’s research and approval process.Stewardship through active ESG engagement and proxy voting are important parts of the investment process. Impax engages with investee companies and undertakes long term engagement to improve practice and disclosure across their governance and sustainability activities. We view proxy voting as a key activity in the ongoing dialogue with companies in which we invest. We are committed to ensuring the consistent exercise of voting rights associated with shares held in investment mandates where proxy voting has been delegated to us. Our engagement report sets out our activities over the past year and highlights the areas of focus for 2021.

Impax also reports portfolio impact on a look-back basis as at the end of each calendar year. At Impax, every strategy is designed to intentionally allocate clients’ capital towards those companies we expect to benefit as the global economy transitions to a more sustainable model. Our Impact report demonstrates how this intention has been translated into action.