• In the third quarter, the Impax International Sustainable Economy Fund underperformed the MSCI EAFE Index (EAFE Index).

Investment Strategy

  • The strategy integrates the Impax Sustainability Lens, a proprietary tool that helps the adviser systematically overweight the portfolio toward sub-industries we identify as high opportunity in the context of the transition to a more sustainable economy while removing exposure to sub-industries classified as low opportunity and high risk. The Fund is also constructed to provide higher exposure to companies with favorable environmental, social and governance (ESG) ratings relative to their sector and industry peers, as determined by MSCI.1 Lastly, the portfolio is fossil fuel free, utilizing SmartCarbonTM a proprietary tool that replaces Energy sector holdings with energy efficiency stocks. The portfolio’s optimization process applies appropriate constraints at the sector, region, country and security levels to create a diversified portfolio of 200-250 stocks.


  • Equity and bond markets experienced significant declines over the period, as central banks, including the US Federal Reserve, the Bank of England and the European Central Bank, moved to contain inflation by further raising interest rates. While rate hikes were not unexpected, the magnitude and the associated commentary took the market by surprise. Further volatility came from the United Kingdom, where the announcement of tax cuts unsupported by full budget disclosure led to sterling weakness and a sharp selloff in bonds. This in turn resulted in intervention by the Bank of England to support certain pension schemes and contain the disruption. Currency moves were once again significant over the quarter, with the dollar continuing to gain against multiple currencies.
  • The MSCI EAFE returned -9.4% as investors factored in higher interest rates and potentially slower economic growth. All sectors posted negative returns, but defensive sectors performed better, due to concerns over lower economic growth. Energy (-5.0%) and Consumer Staples (7.1%) were the top performers while Communications (-13.7%), Utilities (-13.3%) and Real Estate (-13.1%) were the bottom sectors, the last two reflecting concerns over higher interest rates and slower economic growth.

Impax Sustainability Lens

  • The Impax Sustainability Lens, which rates sub-industries on both Sustainability Risk and Opportunity scales, is a central tool to guide the Fund to identify sub-industries that will benefit from the transition to a more sustainable economy over the long-term. The portfolio will overweight Lower Risk Sub-Industries, and underweight High Risk sub-industries. Low Risk Sub-industries underperformed the market and High Risk sub-industries in the quarter, detracting from performance. Not owning High Risk industries like Integrated Oil & Gas and Diversified Metals & Mining were particularly impactful.
  • In a similar vein, the portfolio’s tilts towards High Opportunity sub-industries, and away from Low Opportunity categories were a drag to performance. Low Opportunity sub-industries outperformed High Opportunity sub-industries and the market over the quarter; as a result, lens positioning across the Opportunity dimension was negative. Overweight positions in Life & Health Insurance, Semi-Conductor Equipment and Pharmaceuticals were among the largest detractors from performance for the quarter.

ESG Ratings

  • We believe, that by eliminating stocks with low ESG ratings, as determined by MSCI, we can improve the overall volatility profile of the portfolio and target securities better positioned to benefit from the transition to a more sustainable economy over the long-term than the broad index. However, this quarter, the Fund’s bias towards ESG leaders provided a significant headwind. Stocks with the highest ESG scores underperformed the rest of the investable universe, and the portfolio’s high conviction tilt towards those stocks that score well across Environment, Social and Governance dimensions was one of the largest detractors to portfolio performance.


  • Not owning traditional Energy companies has been a consistent headwind to the Fund in 2022, and this continued in the third quarter. The Fund’s SmartCarbonTM framework, which replaces the traditional energy exposure with companies that are positioned to provide more energy efficiency underperformed modestly. In a quarter in which Energy was the best performer in the index, not owning traditional Energy companies, and substituting them with energy efficiency names detracted from performance.

GICS2 Sector

Sector positioning is an outcome of the portfolio construction process rather than a deliberate exposure. The portfolio’s sector positioning was negative for the third quarter; the lack of exposure to Energy and underweight to Consumer Staples were the primary drivers of the negative contribution from sector positioning for the period.


(as of 9/30/22)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception3
Pax International Sustainable Economy Fund - Investor Class-9.51-11.63-30.42-27.98-2.57-1.303.282.28
Pax International Sustainable Economy Fund - Institutional Class-9.47-11.64-30.33-27.87-2.34-1.063.532.54
MSCI EAFE (Net) Index-9.35-9.36-27.09-25.13-1.83-0.843.672.53
MSCI EAFE ESG Leaders (Net) Index-9.90-10.32-29.33-27.04-1.92-0.723.993.00
Lipper International Large-Cap Core Funds Index-9.17-9.88-25.83-23.58-1.78-1.603.192.07

Performance data quoted represent past performance, which does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For most recent month-end performance information, call 800.767.1729 or visit

Figures include reinvested dividends, capital gains distributions and changes in principal value.

As of 5/1/2022 prospectus, total annual Pax International Sustainable Economy Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Institutional Class and Investor Class are 0.47% and 0.72%, respectively.ˆ

3The inception date for the Pax International Sustainable Economy Fund Institutional Class is January 27, 2011, and the Investor Class inception date is March 31, 2014.

Portfolio Characteristics

(as of 9/30/22)
Market Cap (weighted avg.)$57,473M$65,867M
Forward Price/Earnings12.0710.87
Number of Securities231798

1MSCI ESG Ratings uses a rules-based methodology designed to measure a company’s resilience to long-term, industry material environmental, social and governance (ESG) risks. Leveraging Artificial Intelligence (AI), machine learning and natural language processing augmented with our 200+ strong team of analysts, MSCI researches and rate companies on a ‘AAA‘ to ‘CCC’ scale according to their exposure to industry-material ESG risks and their ability to manage those risks relative to peers.

2The Global Industry Classification Standard (GICS) is a standardized classification system for equities developed jointly by Morgan Stanley Capital International (MSCI) and Standard & Poor’s. The GICS methodology is used by the MSCI indexes, which include domestic and international stocks, as well as by a large portion of the professional investment management community.
Past performance is no guarantee of future results.

Top 10 Holdings

(as of 9/30/22)
Roche Holding, Ltd. 3.4%, AstraZeneca PLC 3.0%, ASML Holding NV 2.7%, Novo Nordisk A/S Class B 2.4%, AIA Group, Ltd. 2.3%, HSBC Holdings Plc 2.2%, SAP SE 2.2%, Australia and New Zealand Banking Group Limited 1.8%, Merck KGaA 1.7% and Allianz SE 1.6%. Holdings are subject to change.


ƒWeighted Average is an average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average.
Forward Price-Earnings Ratio or P/E FY1 ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings over the next 12 months.
Return on Equity: The amount of net income returned as a percentage of shareholders’ equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
A historical Beta is used for Funds with greater than two years of performance history under the same mandate. Five year Beta is used. Beta reflects the sensitivity of a Fund’s return to fluctuations in its benchmark; A beta for a benchmark is 1.00: A beta greater than 1.00 indicates above-average volatility and risk.

The statements and opinions expressed are those of the author as of the date of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security. Past performance does not guarantee future results.

IMPX1268 (1/23)

Scott LaBreche

Portfolio Manager

Scott LaBreche is Portfolio Manager & VP, Portfolio Analytics, at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

Scott is a Portfolio Manager of the Global Women’s Leadership Strategy, which includes the Pax Ellevate Global Women’s Leadership Fund. He is also a Portfolio Manager of the Pax International Sustainable Economy Fund, the Pax Global Sustainable Infrastructure Fund and the Pax U.S. Sustainable Economy Fund.

He is responsible for portfolio management of systematic strategies, portfolio analytics and risk oversight, and quantitative ESG research.

Before joining Impax in 2007, Scott was a Securities Fund Analyst at Lincoln Financial Group. He has been in the investment management industry since 1999.

Scott holds a Bachelor of Science in business administration and a Master of Business Administration with advanced certificate in finance from Southern New Hampshire University.

Recent Insights

Christine Cappabianca

Portfolio Manager

Christine co-manages Impax’s Systematic strategies and the actively managed Sustainable Infrastructure strategy.

Christine’s research brings a focus on identifying and emphasizing the optimal sources of return within sustainable/thematic universes and removing any unintentional portfolio biases.

Before joining Impax in 2021, Christine spent 14 years with Mellon, where she held several positions, most recently as senior quantitative research analyst and portfolio manager for the firm’s Internet of Things, Blockchain Innovation, U.S. Manufacturing and Smart Cures Innovation thematic strategies. She also served as the ESG data expert on Mellon’s ESG Council. In these roles she focused on informing active portfolios with the power of data and sustainability metrics.

Christine earned a Bachelor of Arts in economics at Harvard University and a Master of Science in investment management at Boston University. She holds the SASB FSA Credential.

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