As the global economy shifts to become more sustainable, the set of related investment opportunities is broadening, widening and deepening.

The growth of the Environmental Markets investment universe is clear evidence of the increasing influence of drivers such as resource scarcity, environmental and social regulation, and consumer preferences for more transparent, authentic and healthy products.

This growth can be seen across three metrics:

  • The absolute number of qualifying stocks; 
  • Their market capitalisation; and
  • Their geographic spread.

Rapid growth in the number of companies 

In 1999, Impax launched the Environmental Technology 50 index (the ET50), defined as the top 50 listed companies deriving at least 50% of their revenues from at least one of three themes: clean energy; waste and water management; and pollution control. At that time, there were around 250 companies globally which qualified for the universe from which the index was selected.

By 2007 the trend of larger cap companies, organically growing or acquiring smaller specialists to capture the environmental opportunity, was becoming evident. In response, Impax created a broader universe based on a 20% revenue exposure to the themes, bringing the universe to approximately 450 companies.

Following further expansion of the themes into food related sectors, in 2012, the sustainable food and agriculture opportunity was incorporated.

Today Impax’s thematic equity universe comprises almost 2,000 companies.

Market capitalisation 

The growth in absolute numbers of eligible stocks has been mirrored by a growth in their market capitalisation, as pure-play companies have successfully expanded, and as large incumbents in mainstream sectors have developed or acquired environmental technology businesses.

In the early years, the investment universe was dominated by unprofitable early stage companies, and over 50% of the ET50 was under £500m market cap. Today the average market cap of companies in our thematic universe is $3.8bn.

Geographic spread 

A clear theme over the last decade has been the rapid growth in the investment universe in Asia. Between 2009 and 2018, the number of companies in Impax’s Asia-Pacific universe has almost doubled, rising from 342 to 630, as the need to tackle local pollution has become a priority for human health resulting in opportunities for companies offering solutions.

A more diverse investment opportunity 

This larger investment universe, with a wider range of companies in terms of market cap, purity and geography, provides greater opportunities for active investment management. At Impax we continue to be excited by the ongoing expansion in the Environmental Markets universe, and the compelling investment opportunity which it represents.

We believe that the transition to a more sustainable economy will continue to disrupt an ever-larger proportion of the global economy and that portfolios which focus on well-positioned companies, while avoiding those unable or unwilling to adapt, potentially could outperform.

To hear more of how Impax strategies can help you access opportunities to invest in the sustainable economy, please speak to your usual Impax contact.

Source: Impax Asset Management

Bruce Jenkyn-Jones

Chief Investment Officer (CIO), Listed Equities, Executive Director

Bruce serves as Impax’s Chief Investment Officer, Listed Equities. He is responsible for supervising and overseeing investment process, policy and performance, regulatory oversight, and leads product design within Listed Equities and development as well as the application of Impax’s investment thesis across the Listed Equities product range.

Bruce is Chairman of the Listed Equities Investment Committee, and serves as Co-Portfolio Manager of Impax’s Specialists and Climate strategies.

Bruce joined Impax in 1999 where he worked initially on venture capital investments before developing the listed equities business.  Before joining Impax, Bruce worked as a utilities analyst at Bankers Trust and as an environmental consultant for Environmental Resources Management (ERM).

Bruce has an MBA from IESE (Barcelona), an MSc in Environmental Technology from Imperial College and a degree in Chemistry from Oxford.

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