The world’s population is forecast to reach 8.5 billion by 2030, up from 7.8 billion in 2020 and almost twice 1980 levels. Most of this growth will be in developing countries. The renewal and replacement of existing infrastructure assets is therefore a growing theme for governments, companies and investors.
The environmental, social and governance (ESG) label is now imbedded in virtually every fund manager’s mandate, as it is within the companies they invest into as demanded by their investors, but IMPAX Asset Management stands out from the crowd having managed sustainable investments for 20 years. They perceive a range of opportunities emerging as demand for sustainable infrastructure grows.
These fall into two broad categories - Resource infrastructure, those assets, networks and systems that underpin the supply of life’s essential ingredients – energy, food and water – as well as the repurposing of our waste; and Social and Economic infrastructure which covers education and healthcare and the movement of goods and people as well as information technology and finance. The current war in Ukraine only emphasises the pressing issue of food and energy security.
The “electrification of everything” is one area that IMPAX are investing. The Energy Transition Commission has forecast that global electricity use will soar from 27,000TWh in 2019 to between 90,000 and 130,000TWh by 2030 if we are to decarbonise the economy. They estimate that global investment must treble to US $820 billion by then to upgrade.
One beneficiary that is held in their fund is Hubble, listed in the US and whose products form part of the backbone of our electrical infrastructure. In 1896 they patented the pull lamp chain and now concentrate on embedding cloud-enabled monitoring systems across electricity networks to more efficiently match demand for supply. That’s technological progress just there!
This year’s growth sell off has been indiscriminate, but as I have often said the cream will rise to the top. In the first half of the year the underlying stocks held in the IMPAX Environmental Markets investment trust fell -17% but shares in the trust itself fell -27% to a 10% discount to Net Asset Value (NAV) having stood at a 15% premium at the end of last year. However in the last month the trust has risen +14.6% from its low and is up +98% over the last 5 years against the MSCI ACWI index return of +58.14%.
The portfolio's companies are now trading back at their long term average of 18 times forecast earnings, down from their multiple of 23 in December.
IMPAX is held within the Irongate Bespoke Global Equity portfolio in the form of the Investment Trust and in the Irongate Global Equity portfolio in the form of the St. James’s Place Sustainable and Responsible Equity Unit Trust.
Figures supplied by FE analytics to 03/07/22. Reports taken from IMPAX and Citywire.
The value of an investment can go down as well as up.
You may get back less than you invested.
Past performance is not a reliable guide to future performance.
The opinions expressed are those of Irongate, this material is not a recommendation, or intended to be relied upon as a forecast.