Friday, 5 April 2019

Impax Env. Markets Trust - Results

I added this investment trust to my ISA portfolio last October in response to my growing concerns relating to climate change following the IPCC report (COP 24) and the possible implications for the economy and investments landscape.

Impax (IEM) is an investment trust with a market cap. of around £550 million and its objective is to help investors benefit from growth in markets for cleaner and more efficient energy, water and waste services. 

The trust was launched in 2002 and is run by Jon Forster and Bruce Jenkin-Jones who have a long term record of experience and expertise in this market. They see a strong momentum in these areas and wish to appeal both to those who require growth from their investments as well as those who are more concerned about the environmental impact of climate change.

IEM is focussed on global growth and the portfolio has around 60 holdings - predominantly smaller and medium sized - mainly in USA (41%), Europe (34%) and Asia/Japan (18%). 

The main sector focus is Energy Efficiency (33%), Water (20%), Food/Agriculture (14%), Pollution Control (10%) and Renewables (9%).

Results

The trust has this week released results for the full year to end December 2018. (link via company website)

Whilst returns for NAV fell by 10%, the discount narrowed considerably over the year due to strong demand from retail investors. The share price total return was -0.4%.

Dividend

Net revenue for the year increased to £5.7m (2017 £5.1m) which equates to 3.2p per share. The company pays out most of the income and they have declared a 20% increase in the final dividend from 2.5p last year to 3.0p which is payable end May. This gives a yield of just over 1.0% based on the current share price of 292p.

Performance

The trust has turned in a decent performance over the past 5 years with a total return of 97%. This compares favourably with some of my other holdings - Finsbury Growth & Income 79% and Mid Wynd 98%. Vanguard Lifestrategy 100 has returned 67% over the past 5 years.
 
5 Yr Comparison v VLS 100 (red line)
(click to enlarge)

My purchase price last October was 265p and currently around 292p so going in the right direction after a sharp sell-off at the end of last year. The return since the start of 2019 is 16%.

Commenting on Climate change

"2018 started with a severe drought in Cape Town and ended with Californian wildfires, highlighting the need for innovation and investment in environmental markets. Evidence linking extreme weather events and climate change appears to grow stronger every year. Morgan Stanley recently estimated that global damage caused by climate-related disasters for the last three years alone stood at around $650 billion. In October, the latest Intergovernmental Panel on Climate Change (IPCC) report suggested that if annual global emissions were maintained at current levels, then damage costs by 2040 could reach $54 trillion. It is hard to digest the size of such figures, nevertheless the implications are clear".

"Opportunities for businesses to deliver emission reductions, for example via energy efficiency and renewable energy solutions, and to adapt to changing climate, for example via grid resilience and water infrastructure, are growing.

The global drivers for companies providing environmental solutions remains very compelling, especially in China and the rest of Asia. The behaviour and preferences of consumers, and policy developments, are supportive and evidence of this is already visible in companies' order books. And we are seeing an increasing number of disruptive events, such as electric vehicles and the war on plastic, that point to an accelerating growth trend".

Conclusion

In the past week we have a report from Blackrock assessing the climate-related risks to the US economy with a focus on municipal bonds, mortgage-backed securities and electricity utilities. Clearly this is an important issue and the 'big boys' of the investing world are starting to take it very seriously.

IEM was the first 'green' fund to join my portfolio last year at the point when I decided to make some changes to align my investments with my beliefs and lifestyle. Since this time I have made several more changes to divest away from fossil fuels such as big oil/gas - Shell and BP for example - which have been responsible for greenhouse gas emissions and climate change. I really do not want to invest my money in and profit from these companies.

As more people become aware of the implications of climate change, and the enormous threats posed to our way of life if not addressed, I hope the businesses such as the ones supported by Impax Environmental will benefit and grow stronger.

In the words of economist Prof. Nicholas Stern in a report for the World Economic Forum (worth a read)

"The global economy will probably double in the next 20 years and that helps us understand how fast we have to move and what we have to do. Because at the same time as that global economy doubles, we're going to have to cut our overall emissions absolutely by 30 - 40% or more. That means that we have to be doing things differently within the next 20 years, which means that we have to be investing in a very different way, starting from now".

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

4 comments:

  1. I for one am full of admiration for your green approach to investing, DIY. It's the way forward. I hold several of the same holdings as you.
    Just a great shame that so few others are following suit. Let's hope they take up the baton. They're certainly missing out at the moment - the likes of TRIG not only provide a good dividend but seem to be growing considerably.

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    1. Thanks bernie. Climate change is quickly moving mainstream and I am sure many more people will soon start to appreciate the scale of the challenges and threats which face us. I am optimistic that we will not be so foolish as to permit our planet to become dangerously uninhabitable.

      Of course there are many vested interests which attempt to block any changes but they are gradually being exposed and challenged by the likes of the school children striking for climate etc.

      As they say, the future is green ...or may not be at all!

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  2. ps IEM's been on my watchlist for a while. My only reservation is that it tends to get hit hard whenever's there's a downturn. Maybe it's a case of buy and forget.

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    1. Yes, this can be volatile as it's portfolio is mainly smaller companies in a niche sector. Hopefully as the market cap grows and these areas of investing become popular, the volatility will reduce. Until then, as you say, tuck away in the bottom drawer...

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