Investors Size Up Sustainability
Impax Asset Management, a specialty investment firm, is focused on global equity strategies across alternative energy, energy efficiency, water, waste, food and agriculture related markets.
The firm’s investments aim to benefit from the long-term trends of changing demographics, urbanization, rising consumption, and the resultant increases in resource scarcity.
Ian Simm, the company’s founder and CEO, launched the company in 1998 with the premise that there were a large number of rapidly growing companies operating in the areas of environmental, infrastructure, environmental technology and renewable energy.
“From the outset, we’ve been interested in resource efficiency and environmental markets, and we’ve been attracting institutional clients to manage parts of their portfolios to invest in those areas, and that specifically means investing into global equities in the water sector, the food and agriculture sector, energy efficiency, renewable energy and waste management, in particular,” said Simm.
Four of five investors consider sustainability issues to be relevant, according to research by PwC. About 80% of responding investors say that they considered these concepts in one or more investment contexts during the past year.
“Our survey asked whether sustainability issues are considered by investors, not necessarily whether they are the dominate consideration in investment decision-making,” Kayla Gillan, leader of PwC’s Investor Resource Institute, told Markets Media. “In that context, respondents to our survey indicated that the quest to reduce risk is the primary driver, followed closely by the goal of enhancing performance and minimizing exposure to unethical companies.”
With more than $4.0 billion in assets under management for institutional and high net worth investors globally, Impax is approximately 85 percent long only strategies and 15 percent private equity strategies.
“In the long-only space, we have five individual strategies: global small cap (Specialists Strategy), global all cap (Leaders Strategy), as well as three specialist strategies in water, food and agriculture, and Asia/Pacific region,” said Simm. “Our private-equity business is dedicated to the power generation sector, so we fund the construction of new power stations, particularly in the renewable energy space.”
Impax’s client base includes approximately 75 institutional investors around the world. These clients are comprised primarily of pension funds, insurance companies, sovereign wealth funds and the remainder are family offices, charities, endowments, foundations, and high net worth individuals.
Approximately 10 percent of its assets are from North America, with about 5 percent from the Asia-Pacific region and the balance from Europe. “Most of our clients have historically been European, however we have gained strong momentum and a rapid pick up of client interest, particularly in the United States,” said Simm.
Within institutional portfolios, Impax acts as a diversifier for global equity, in particular core/satellite or opportunistic type frameworks. “We also fit quite well into the natural resources allocations that many institutions have, such as an institution that would have quite a sizable fossil-fuel extraction related, natural resources portfolio,” Simm said.
Impax’s listed equity funds seek out mis-priced companies that are set to benefit from long-term trends of changing demographics, urbanization, rising consumption, and the resultant increases in resource scarcity.
“We’ve got a unique offering because our clients are convinced of our thesis that these areas are not only growing rapidly, but they’re also quite prone to producing inefficiently priced equities, which presents a great opportunity for our team of specialists to buy cheap stocks and identify private investments at favorable valuations,” Simm said.
Take waste management for example. “Waste is simply a jumble of materials, and in a world of generally higher commodity prices and medium- to long-term resource scarcity concerns, those companies that can extract high-value materials streams are well placed to make quite a bit of money,” said Simm.
One such company is LKQ Corp., a U.S.-based provider of alternative collision replacement parts, recycled engines and transmission and remanufactured engines. “LKQ was set up around the turn of the millennium by executives of Waste Management International,” Simm said. “This group had the insight that once insurance companies had picked up ownership of damaged automobiles and vehicles, they quite often didn’t know how to realize value for them.”
LKQ set up to buy, at relatively cheap costs to them, these damaged to partly usable vehicles and stripped out the parts that could be used, then recycled them back to manufacturers. “They did that at significant scale with proper inventory management and IT systems,” Simm said. “In a few years they were able to create a leading go-to brand for the workshops, who wanted high-quality OEM parts at an attractive price.”
Featured image via Maxim Kazmin/Dollar Photo Club
Firms' solution automates the extraction and formatting of alternative investment data.
The platform provides a central limit order book for standardised interest rate derivatives.
The not-for-profit initiative will make it easier to ensure funds are comparable and clear about costs.
Most buy-side firms miss alpha-generation opportunities by not using granular ESG data.
The acquisition reinforces Schroders’ private assets and real estate capabilities.