Is ESG integrated into your investment process? How? Which funds or does this apply to the entire firm?
Impax is a specialist asset manager, investing in the opportunities arising from the transition to a more sustainable global economy
We believe capital markets will be shaped profoundly by global sustainability challenges, particularly climate change, environmental pollution, natural resource constraints, demographic and human capital issues such as diversity, inclusion and gender equity.
These trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt.
Fundamental analysis which incorporates long-term risks, including environmental, social and governance (ESG) factors, enhances investment decisions. We incorporate sustainability within the investment process at three stages:
- Identification of areas of the market likely to benefit, rather than at risk, from the transition to a more sustainable global economy. This is done using proprietary tools which are used as the first step in the investment process
- Fundamental analysis of equities and issuers with integrated risk management, incorporating environmental, social & corporate governance issues
- Post investment engagement as an active owner and steward of our client’s investment by continuing dialogue with the senior managers
Every strategy at Impax is designed to intentionally allocate clients’ capital towards the winners and reduce or eliminate exposure to potential losers as the economy transitions to a more sustainable model.
Our investment strategies include:
Sustainability Lens Strategies
- Global Opportunities
- US Large Cap
- US Small Cap
- Core Bond
- High Yield Bond
Environmental Markets Strategies
- Sustainable Food
New Energy Strategy
- New Energy Funds
Gender Lens Strategies
- Global Women’s Leadership
- Global Women’s Select
- ESG Beta Quality
- ESG Beta Dividend
- MSCI EAFE ESG Leaders Index
- Sustainable Allocation
Who conducts ESG analysis within the team? Is it done by PM, financial analysts or a central ESG team?
Impax’s Head of Sustainability & ESG and Managing Director, Lisa Beauvilain is responsible for the development and oversight of Impax’s Sustainability and ESG analysis, including environmental policy and legislation research in the Listed Equity team. She is the Chair of Impax’s ESG and Lens Committees and Co-Heads Impax’s impact investment work.
Impax does not have a star manager culture, trusting to its process and shared manager/analyst research methodology. All managers are responsible for research and ESG analysis. As such all strategies are co-managed.
The Co-Portfolio Managers share responsibility for decisions in the portfolio. They discuss topics that arise and work on a consensus basis. On individual stock discussions, input from the lead analyst is key. Disagreements are infrequent, and in such cases there is a process and effort to build consensus, often these discussions would take place at the Portfolio Review Meeting. A more in-depth process would involve jointly looking at, and analysing, the model, conducting stress tests, and working toward a conclusion through a collegial and consensus building manner.
Please summarise the key ESG metrics that are core to your strategy?
Impax assesses physical and transition risks facing investee companies as part of its ESG analysis. Where material the investment team assesses how the company manages these risks and its assessment feeds into the overall ESG score given to the company. Impax uses various metrics depending on the company’s risk exposure, these include GHG emissions and emissions avoided by the company’s products and services.
How is this research carried out? Positive/negative screening? Qualitative?
Impax’s most valuable research is generated internally, with external research being used to challenge assumptions and conclusions made by the investment team. Much of Impax’s research, especially top-down, global macroeconomic views and analysis is shared across investment teams and used firm-wide. This includes views on changes in credit markets, government and consumer spending, policy announcements, industrial production and commodity prices, sector and industry dynamics, technological disruptions and similar themes. Impax strives to maintain its competitive advantage by continuing to invest in its personnel and research resources, and by staying ahead of dynamic technology and regulatory changes.
As a responsible investor, Impax is committed to avoiding activities and companies that do not adhere to international norms and conventions. As such, Impax avoids or limits investment in activities that are harmful.
The investment team use positive screening to bring individual stocks into Impax’s thematic equity investment universe. For a stock to qualify for inclusion it must first pass a revenue screen where, depending on the strategy concerned, at least 20% or 50% of its underlying revenue must be generated by sales of environmental products or services in the energy efficiency, renewable energy, water, waste and sustainable food and agriculture markets.
How do you measure your success regarding ESG? Performance against benchmarks (which ones)? Reports?
Impax measures environmental impact.
As concerns about climate change and the investment risks become more widespread amongst investors, Impax is frequently asked about the environmental impact of its funds. Impax believes simple carbon footprint models and carbon-tilted indices are unsophisticated and not representative of true environmental benefit from the companies held within the thematic strategies.
Impax has therefore developed a proprietary methodology to measure the net environmental impact (net carbon avoidance) which is applied to the Specialists, Leaders and Asia-Pacific strategies. Impax provides this non-financial reporting to investors on an annual basis, focusing on the following metrics:
- Net CO2 emissions (tonnes of CO2 emitted vs tonnes of CO2 avoided)
- Renewable energy (MWh generated)
- Water (megalitres provided, saved or treated)
- Materials (tonnes recovered, waste treated)
- Coal displaced in Asian cities (tonnes)
The relevance of each metric was also assessed for each company based on their business activities.
Engagement is also an important tool in managing risk and building relationships with investee companies.
Our engagement report sets out our activities over the past year and highlights the areas of focus for 2020, which can be found here – https://impaxam.com/investment-philosophy/engagement/
Is your business a signatory to PRI? Why, why not?
Yes. Impax became a UN PRI signatory in 2007.
Impax’s 2020 PRI Assessment Report is available on the website:
Are you disclosing climate change policies in line with the Task Force on Climate-Related Financial Disclosures (TFCD)? Please briefly outline your policies.
Yes, Impax has the capacity and intent to provide reporting in-line with the TCFD, as one of the first signatories to the TCFD in summer of 2017.
The Firm is in the process of developing the optimal way of analysing and reporting on physical climate risks, as part of the TCFD reporting pillars. Impax has added resources to develop this area.
Impax has mapped its environmental companies and strategies’ revenues to seven environmental UN SDGs and reported on these for the past three years in the Firm’s annual Impact Report:
Has your business signed up or committed to any other campaigns relating to ESG?
Impax works on ESG engagement collaborations with clients, partners, and industry organisations to promote sustainable investing and ESG considerations across the globe. Impax is proud to be a part of:
|Member Organisations||Investor initiatives / collaborations|
|Asian Corporate Governance Association (ACGA)||Access to Medicine Index|
|Carbon Disclosure Project (CDP)||Access to Nutrition Index|
|CERES||Deforestation initiative (PRI)|
|Confederation of British Industry (CBI)||Climate Financial Risk Forum (CFRF)|
|Council of Institutional Investors (CII)||Energy Transitions Commission (ETC)|
|Global Impact Investing Network (GIIN)||FAIRR|
|Institutional Investors Group on Climate Change (IIGCC)||Finance to Accelerate the Sustainable Transition-Infrastructure (FAST-Infra)|
|Interfaith Centre on Corporate Responsibility (ICCR)||Impact in Listed Equities working group (GIIN)|
|Investment Company Institute||Just Transition|
|Investor Environmental Health Network (IEHN)||Northeast Investors Diversity Initiative|
|Investor Network on Climate Risk (INCR)||Plastic Solutions Investor Alliance (As You Sow)|
|NH Businesses for Social Responsibility||PRI EU Taxonomy Practitioners Group|
|PRI||PRI Global Policy Reference Group|
|Shareholder Rights Group||Silicon Valley Toxics Coalition (SVTC)|
|Thirty Percent Coalition||Sustainable Stock Exchanges Initiative (PRI)|