The Pax Global Environmental Markets Fund (PGINX) invests in companies around the world that are developing innovative solutions in the areas of new energy (renewable energy and energy efficiency), water (water infrastructure and technologies, pollution control), waste (waste management and technologies, environmental support services) and sustainable food and agriculture. We believe the leading companies in these markets are fast becoming major drivers of global economic growth. Here are some examples:

Equinix (Real Estate, Industrial Energy Efficiency, U.S.)

Equinix is one of the leading data center Real Estate Investment Trusts (REITs) globally, with more than 200 data centers and more than 9,800 customers that connect via Equinix’s locations. Energy efficiency is a core focus for the company, which uses technologies such as free air cooling systems, ultrasonic humidification, evaporative cooling, reusable waste heat, and low-power servers. Equinix can help customers reduce the carbon footprint of their supply chains through energy efficiency, and, importantly, 92 percent of power used globally by Equinix comes from renewable sources. All new centers are built to LEED silver building standards. Functionally, a data center REIT provides for network interconnection, for example to allow internet players such as Microsoft and AOL to exchange information. Lack of neutrality between these players created the need for independent players. This provides a unique market niche which becomes even more important with the fast growth of these so-called hyperscalers (Google, Microsoft, Amazon). These big technology companies have their own data centers, but because of their fast growth, they rely in part on so-called colocation providers such as Equinix. In addition, some of these large customers are also seeking to go carbon-neutral (or even carbon-negative, per Microsoft’s recent pledge), making Equinix an aligned partner. With global reach, scale and steady and reliable growth for 17 years, Equinix has a strong balance sheet, pricing power and built-in business model resilience. Unusually, Equinix also owns the land for about 50 percent of its data centers and continues to buy more land assets, which provides insulation from rent pricing. Up to 90 percent of revenues come from subscription-based services, providing high recurrent revenues. India, Mexico and Africa represent future growth areas. A recent catalyst was the upgrade of Equinix’s debt to investment grade.

SAP (IT, Industrial Energy Efficiency, Germany)

SAP is a leading provider of enterprise resource planning (ERP), human capital management (HCM) and other management software, with a diversified portfolio of customers across almost every sector and region. The company’s cloud and database products empower businesses to become data-driven, in the context of broader overall digitization, which contributes to resource, materials and energy efficiency. Examples include improved efficiencies through real-time data and processes managing supply chains, inventory management, the tracking of raw materials and effectively optimizing production capacity. Customers include those in banking or financial services, manufacturing, media, utilities, science, retail and transportation sectors. The global trend of digitization has the potential to profoundly improve efficiency across these and other industries. SAP’s leading products are best placed to capture the transition to the cloud. The positive side effect of this pathway is a decrease in the volatility of the revenues as the licenses move to a subscription-based model. The technological trends that can speed up this transition include IoT, Big Data, Blockchain and AI. Digitization has the potential to profoundly improve efficiency across a range of industries. SAP’s asset-light business model is expected to face less disruption in the current unprecedented environment.

Ansys

Ansys is active in CAE (computer aided engineering) and CAM (computer aided manufacturing) software solutions for design analysis and optimization. This type of software accelerates product time to market, reduces production costs, improves engineering processes, and optimizes product quality and safety for a variety of manufactured products. The underlying markets show growth, with broad diversification among end markets. Structural growth over the medium term is likely in areas such as semiconductor design, manufacturing internet of things (IoT), and construction, but also broadly in sectors of technology, industrial, energy, agriculture and academia. Quicker time to market and operational efficiency for customers saves valuable time and money when developing and testing physical product prototypes. With Ansys software solutions, design and testing can be done virtually, via simulation, thus accelerating development and analysis. Generically speaking, but also during the new coronavirus crisis, a virtual simulation and workflow approach improves product quality and, of course, reduces testing time and product launch time.

Idex

Global demand for water and wastewater solutions is rising due to population growth, climate change and weather volatility, increasing water stress and bringing changes in water management and water standards. The gap between water supply and demand continues to increase, not just in the agriculture, beverage or energy sectors but also for water utilities and essential industrial uses. Idex has a wide portfolio of products largely focusing on water distribution and flow monitoring. This includes leak detection, water audits, valves and flow meters. Providing solutions to monitor water loss gives greater security to water infrastructure assets, minimizing real economic and natural resource losses. The company has a high-quality management team driving organic and inorganic growth with excellent capital discipline and a focus on earnings growth and return on invested capital. Over the cycle, the business has generated solid margins and returns-on-equity, facilitating strong free-cash flow and helping to expand market dominance through acquisitions.

Mettler Toledo

Mettler is a leader in food scales and food safety applications. End uses for Mettler products are in food retailing applications and industrial and laboratory uses. The company’s analytical and measurement technologies, such as precision weighing machines and product inspection technologies, are sold broadly in North America, Europe and Asia Pacific. Long term trends for continued growth in product inspection, food safety and related analytics, among others, are supportive for Mettler. Many of these investment and sector themes will likely be more of a focus going forward in light of the current pandemic. A strong management team has delivered consistent margin growth and has practiced prudent use of capital, while focusing strongly on product leadership and dominance in respective product categories.

Koninklijke DSM N.V.

Koninklijke DSM N.V. (Royal DSM, commonly known as DSM), is a large Dutch company focusing on science-based solutions in nutrition, health and materials. Products include food, beverages, animal feed ingredients and materials such as those that improve industrial efficiency. With employees and offices around the world, DSM seeks to address three defining core areas: nutrition and health, climate and energy, and resources and circularity. A majority 70 percent of its business is now in natural food ingredients to meet human and animal nutrition needs, among the higher margin business lines. Under strong management team guidance, this company has moved rapidly from its more cyclical chemical industry roots to an impressive nutrition and performance materials group with a very sharp focus on sustainability. DSM is also targeting leading positions in growing markets, including emerging markets such as China. Return on invested capital has improved; the balance sheet is solid; margins have been strong; and cash flow has been strong. These characteristics make DSM a more defensive holding in the portfolio. The solid operational and financial performance provides the company with the ability to invest in research and development and stay at the forefront of innovation — DSM is involved in more than 80 partnerships with academic and other institutions.

Pax Global Environmental Markets Fund Top 10 Holdings

(As of 04/30/2020)

This information is not a recommendation to buy or sell any security.

PAX009205

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