United StatesThis is the fifth year that Impax has published a report quantifying and disclosing the environmental benefit derived from our portfolio companies’ activities.
In the report we share our data on four environmental outputs per US$10 million for one year of investment: renewable electricity generated, in megawatt hours (MWh); water treated, saved or provided, in megalitres; materials recovered/waste treated, in tonnes; and tonnes of coal displaced in Asian cities.
Our portfolio managers invest to maximise risk-adjusted financial returns – not to maximise the impact metrics that we track. Nonetheless, most of the impact metrics that we track have improved year-on-year, underscoring our conviction that we can deliver competitive financial returns by addressing the world’s pressing sustainability challenges.
Improving impact results
We are pleased to report that, across Impax’s three main listed equity strategies and our Renewable Energy Infrastructure strategy, all but one of these metrics improved in comparison to last year, reflecting the increased efficiency with which our portfolio companies are providing solutions to environmental pollution and resource scarcity.
We also report on a fifth metric, net carbon dioxide avoided, in million tonnes of carbon dioxide equivalent (CO2), which reflects the positive outcome that investee companies are having on the global climate. This metric is more complex to measure, as it involves calculating not only a company’s direct and indirect emissions (from its operations and energy use), but also the emissions avoided by the use of its products or services compared with conventional alternatives.
Impact in context
As interest has grown in measuring impact, techniques and methodologies have proliferated. Alongside excitement over how impact metrics can help individual investors connect with their savings, there is growing confusion over greenwashing and questions on what these numbers really mean. At Impax we continue to report metrics which naturally emerge from our investment philosophy, whilst also identifying external frameworks which we consider to be the most insightful in terms of putting our portfolio companies’ impact into a meaningful context. This year we have chosen three:
- CO2 avoided in context of the Paris Agreement
- The UN Sustainable Development Goals (SDGs)
- Investment product context using the Impact Management Project framework (IMP)
It is not easy
Delivering meaningful impact reporting is a complex process that requires specialist expertise to understand and scrutinise the data involved. When we started this process, few of the companies in which we invest had the systems in place to capture and report the data we sought. Today, while data quality varies, it is improving, and we are confident it will continue to do so. In particular, we expect to engage more actively in coming years on water and waste data to encourage companies to begin to match carbon reporting in its scale and rigour. Our methodology has evolved to adapt to the improvements in the data available and will continue to do so. Looking ahead to the next five years, Impax commits to invest the time and resources to demonstrate the positive impact of our investments as we work to maximise returns for our clients.
We hope you enjoy this year’s report