Impax’s Asia-Pacific strategy has delivered 7% annualised earnings growth over the past five years1. Both China and India are making progress in tackling carbon dioxide emissions and local air pollution, key drivers of this growth.

Demand from India and China for cleaner and more efficient factory equipment, public transport infrastructure and electric vehicle components is an opportunity for exporters in the region. Taiwanese, Korean and Japanese companies have historically been early innovators in environmental markets and represent an opportunity to build regional partnerships insulated from potential global trade disputes.

How China is winning the war on air pollution 

The Chinese government has repeatedly demonstrated that the ‘war on pollution’ goes far beyond rhetoric. For example, a pledge to cut carbon dioxide emissions per unit of GDP by 46% from 2005 levels by 2020 has been met three years ahead of schedule2. In addition, local air quality has markedly improved in Beijing and 27 surrounding cities, with levels of toxic small particulates (“PM2.5”), dropping 33.1% over a one year period in the final quarter of 20173.

This progress has been achieved partly through the government taking drastic action to reduce coal use in 2017, which included switching off coal-fired power stations and heavy industry. Alongside this, the transition to natural gas for heating, building public transport infrastructure, and encouraging electric vehicle uptake represent longer term solutions and investment opportunities.

With many factories in China’s Northeast shut down in 2017, industry output in other provinces increased, intensifying local pollution rather than reducing it. As well as ensuring that cutting emissions in the Northeast is executed in a sustainable manner, the next challenge for the Chinese government is to extend the growth of solutions to air pollution across other parts of the country.

China’s growing role in world affairs and its economic clout draws a lot of attention. However, the importance of India’s role in the transition to a more sustainable economy is difficult to overstate. Its population is set to exceed China’s by 20254, with energy demand predicted to double by 20405. Whatever policy decisions and consumer actions are made in India will have greater impact on worldwide emissions in the long term.

Opportunities in the Indian energy transition 

Currently, India’s power generation is dominated by coal, which produces around 75% of the country’s electricity. It is therefore unsurprising that 14 out of the 20 world’s most polluted cities are in India6. As in China, an on-going transition to using natural gas for heating and power generation is a positive step towards a cleaner energy mix. The transition in India may take longer as the country faces significant, and very different challenges. For example, China has an extremely centralised power structure, and the government has demonstrated that it is prepared to make dramatic policy changes quickly. In comparison, India is made up of a number of States and Unions, each with their own agenda and concerns; compromises must be forged and the subsidy of coal is popular in many areas due to the number of jobs provided by the coal industry7.

The Indian government is aiming to increase the portion of natural gas in the country’s energy mix from 6.5% to 15% by 20308. The huge deficits in energy infrastructure and the volume of gas that will need to be supplied to meet demand indicate a compelling investment opportunity if this target is to be met.

Furthermore, it is estimated that 240 million people in India have no reliable access to electricity, and so rely on polluting biomass stoves for indoor cooking and heating9. A successful transition to distributed electricity systems based on renewable energy could deliver heat and light in rural areas.


1Past performance is no guarantee as to performance in the future. The value of investments can fall as well as rise and you may get back less than you have invested. As at 31 December 2017. Source: Factset. Data relates to a representative account of the strategy. Implied earnings growth for a given year has been calculated from the change in estimated price-only performance in USD, divided by the change in price-to-earnings multiple over the same period. Estimated price-only performance has been computed from the USD total return, adjusting for the dividend yield, where price-only returns in USD have not been available.
2China meets 2020 carbon target ahead of schedule: Xinhua –
3PM2.5 in Beijing down 54%, but nationwide air quality improvements slow as coal use increases –
4India to outnumber China in population by 2025: US Census Bureau –
5India Energy Outlook –
6India home to 14 of world’s 20 most polluted cities –
7Number of employees at Coal India Limited from 2002/2003 to 2016/2017 –
8Indian state oil firms betting on natural gas as next big thing –
9Living in the Dark: 240 Million Indians Have No Electricity –

David Li

Senior Portfolio Manager

David co-manages both the Asian Environmental Markets Strategy and Asian Opportunities Strategy with Oscar Yang. He has broad expertise of environmental markets sub-sectors and researches stocks globally with a focus on the Asia-Pacific region.


David joined Impax in 2007, initially on secondment from Ajia Partners, before becoming a full-time employee in 2011. He began his career in the investment industry in 1997. He was the Head of Small and Mid-Cap Research for Asia ex-Japan at Deutsche Bank Securities, and Head of Regional Media Research at ING Securities.

David graduated from the University of New South Wales in Australia with majors in Accounting and Finance. David also has experience in auditing and is a qualified CPA and CFA.

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