Effective March 31, 2021, Impax Asset Management LLC, the investment adviser (the Adviser) to the Pax World Funds, will enhance the sustainability profiles of three of its Funds and change their names to better reflect their core focus of investing in the transition to a more sustainable economy. The new Fund names will be the Pax U.S. Sustainable Economy Fund (currently the Pax ESG Beta Quality Fund), Pax International Sustainable Economy Fund (currently the Pax MSCI EAFE ESG Leaders Index Fund) and Pax Global Sustainable Infrastructure Fund (currently the Pax ESG Beta Dividend Fund).
In connection with these changes, shareholders of the U.S. Sustainable Economy Fund and the Global Sustainable Infrastructure Fund will also benefit from new management fee waivers.1 The net expense ratio of the U.S. Sustainable Economy Fund will be reduced from 0.65% to 0.45% of net assets for Institutional Class shares and from 0.90% to 0.70% for Investor Class and Class A shares, and the net expense ratio of the Global Sustainable Infrastructure Fund will be reduced from 0.65% to 0.55% of net assets for Institutional Class shares and from 0.90% to 0.80% for Investor Class shares.2 The total expense ratio for the International Sustainable Economy Fund will remain at 0.48% of net assets for Institutional Class shares and 0.73% for Investor Class shares.
Also effective March 31, 2021, two of the three Funds — the U.S. Sustainable Economy Fund and the International Sustainable Economy Fund — will integrate the Impax Sustainability Lens (the Impax Lens) into portfolio construction. The Impax Lens, which is already used in several of our actively managed Funds, is a tool that facilitates a systematic review of the economic opportunities and risks associated with the transition to a more sustainable economy. The tool highlights sectors, industries and companies with transition tailwinds and headwinds, enabling our investment team to construct portfolios weighted toward companies that the Adviser believes present attractive opportunities and lower risks for shareholders.
In addition, starting March 31, 2021, the Global Sustainable Infrastructure Fund will invest primarily in companies that support “sustainable infrastructure,” which we define as infrastructure that conserves, enables or increases access to vital resources such as clean energy, water, food and agriculture, including resource and waste management as well as other societal resources that advance social well-being, such as healthcare, education, finance, transportation and data and communications. This approach is informed by the systematic review of opportunities and risks that we conduct using the Impax Lens.
As a reflection of the above, the investment objective of the International Sustainable Economy Fund will change; the secondary investment objective of the Global Sustainable Infrastructure Fund will be eliminated; and certain changes to the Funds’ investment strategies will be implemented as described in the prospectus supplement.
Each of the Funds will continue to integrate ESG analysis and ratings, as applicable, into portfolio construction and to be fossil fuel free, with both the U.S. Sustainable Economy Fund and the International Sustainable Economy Fund using an investment approach we call SmartCarbon,™ which replaces energy company holdings with energy efficiency stocks.
All three Funds use systematic, quantitative portfolio construction techniques to derive their investment portfolios from underlying universes. By combining the top down, systematic analysis of sectors and industries facilitated by the Impax Lens and other tools with bottom up, company-specific ESG analysis and ratings, we believe the sustainability profile of each Fund will be enhanced, as will the potential for long-term outperformance versus benchmark indices.
Each Fund continues to retain a particular focus:
- The U.S. Sustainable Economy Fund (currently Pax ESG Beta Quality Fund) will continue to be comprised of quality companies.
- The International Sustainable Economy Fund (currently Pax MSCI EAFE ESG Leaders Index Fund) will continue to be comprised of companies in non-U.S. developed markets (EAFE Index) that are ESG leaders.
- The Global Sustainable Infrastructure Fund (currently Pax ESG Beta Dividend Fund) will continue to be comprised of companies in sectors and industries that, in our view, are more likely to offer higher dividend yields to shareholders.
Effective February 1, 2021, Aperio Group LLC will no longer serve as sub-adviser to the ESG Beta Quality Fund (to be renamed U.S. Sustainable Economy Fund) and the ESG Beta Dividend Fund (to be renamed Global Sustainable Infrastructure Fund). Impax Asset Management LLC will continue to serve as investment adviser to all three Funds.
At Impax and across the Pax World Funds, we remain committed to our unique investment approach — investing in companies that we believe are positioned to benefit from the transition to a more sustainable economy, integrating ESG analysis and ratings into all our portfolios, and engaging with companies to improve their sustainability performance. The changes outlined above deepen this commitment and are meant to extend its benefits to shareholders.
1 These fee waivers will remain in place until at least April 30, 2024.
2 The gross expense ratios of both funds will remain unchanged at 0.65% for the Institutional Class shares and 0.90% for the Investor Class and Class A shares. Only the net expense ratio is borne by shareholders.
The Fund does not take defensive positions in declining markets. The Fund’s performance would likely be adversely affected by a decline in the Index.
Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings.
Emerging market and international investments involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principles, economic or political instability in other nations or increased volatility and lower trading volume.
Investments in Asia/Pacific increase the impact of events and developments associated with the region can adversely affect performance.