Shares in Impax Environmental Markets (IEM), the investment trust which buys stocks involved in the cleaner and more efficient delivery of energy, water and waste services, gained 1% to 454p after the firm reported a 31% net asset value total return in the year to December as total assets surpassed £1 billion for the first time.

Net asset value per ordinary share rose to 411.2p from 321.8p the previous year, helped by the second-half recovery in markets and in particular the positive momentum in ESG stocks, reflecting ‘a further strengthening of the investment hypothesis underpinning environmental markets’ according to chairman John Scott.


2020 was characterized by a sea-change in policies around the world towards de-carbonisation and environmental spending in general. Japan and Korea matched the EU’s commitment to become net-zero by 2050, while China – the world’s largest CO2 emitter – said it would target net-zero by 2060.

Meanwhile, president Biden revoked his predecessor’s decision and accepted the Paris Accord on climate change as well as presenting a $2 Trillion clean energy spending plan. The UK government set out its 10-point 'green plan', and the EU committed €550 billion of funds to target climate action over the next seven years.

When the pandemic first emerged, there were reasonable fears the virus would distract policymakers, business leaders and investors from other sustainability challenges, including climate change.

Instead, it ‘helped push environmental concerns to the centre of the stage and what we are witnessing is a long-awaited reset of society's acceptance of its responsibility for stewardship of the planet’ says Scott.


The 31% total return and 29% share price return easily outpaced the 12.7% rise in the MSCI All Country World Index but badly lagged the FTSE Environmental Technologies 100 Index, which rose 90.3% thanks to its heavy weighting in electric vehicle stocks and especially Tesla, which rocketed 400% last year.

Impax Environmental stands by its decision to avoid the main EV stocks such as Tesla and China’s Nio ‘for a combination of valuation and ESG concerns’, although it does have exposure to the theme through component suppliers such as LEM, Littlefuse and Umicore, which it believes offer ‘durable competitive advantage and cheaper valuations’.

For the time being, the fund has also avoided hydrogen stocks although it says it will ‘monitor the sector and look for viable business models at appropriate valuations’.


To meet the strong demand for its shares, and in order to manage the premium to net asset value, the firm issued new stock throughout 2020. However, parent company Impax Asset Management (IAM) has requested that going forward the firm issue no more than 10% of its existing share capital ‘in order to manage overall flows into the strategy’.

The firm has responded by saying it will ‘endeavour to manage demand within these constraints’, but it warns there is a possibility the premium to NAV will rise beyond its control if demand outstrips the 10% limit set by IAM.


Disclaimer: The author owns shares in IEM

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Issue Date: 07 Apr 2021