Investors may be more environmentally aware now, but still find it difficult to choose a suitable home for some of their money from the various shades of “green” investments.
Impax Environmental Markets investment trust (IEM) was established in 2002 to allow investors to take advantage of the growth potential in the markets for cleaner and more efficient delivery of energy, water and waste.
IEM portfolio manager Bruce Jenkyn-Jones highlighted the rapid development of the market since 2002. He said: “When we first started investing in this field, the investment universe consisted of a mere 200-300 companies with a market capitalisation of circa £40billion. Less than 10 years later, the market is now 1,400 companies and accounts for around 6% of the global economy.
“IEM is used predominantly by institutional investors. The types of company we invest in are usually hi-tech and require very detailed due diligence and most investors do not have the resources to carry out this research. Investors are looking for global equity exposure with the potential to outperform traditional global equity indices.”
The net asset value (NAV) of Mr Jenkyn-Jones’ trust has increased by 63.7% over the five years to the end of February, against an increase of 44.3% in the MSCI World Global Small Cap index.
IEM only invests in companies that get a minimum of 50% of their revenue from environmental technology (ET) business.
Mr Jenkyn-Jones said: “Despite this restriction, the portfolio is very diversified with exposure across sectors like support services and commodities, along with some ‘special situations’ investments.”
Although IEM has little exposure to the UK economy, it does have about 4% in unlisted companies mainly in the UK, but with global reach. One such company is Pelamis Wave Power.
The ET sectors are powered largely by government spending. Despite this, Mr Jenkyn-Jones is upbeat about future prospects.
He said: “In previous recessions the environment became second order. This time round, there has been a real sea change. China allocated 20% of its stimulus package to sectors we invest in and there has been no slowdown in policy initiatives so far.”
Despite historically trading at a premium, investors can buy shares in IEM at a discount to NAV of just under 10%. For more information call 020 7434 1122 or visit www.impax.co.uk
Barry O’Neill is a chartered financial planner with Thomson Shepherd. Contact him on 01224 619215