Impax Environmental Markets has published results covering the 12 months ended 31 December 2021. Over the year the trust generated an NAV return of 21.3% and a return to shareholders of 30.1%, both well-ahead of the MSCI AC World Index and the Environmental Technology 100 Index – up 19.6% and 13.1%, respectively. This reflects a much better performance against the environmental index than in 2020, when that index soared by over 90%, while the trust returned 31% – see last year’s story for more info.
The much higher return to shareholders over 2021 reflected a shift from trading at a 2.7% premium to a 10.2% premium. That proved unsustainable and the shares are now back trading at 1.7% premium. In the meantime, the trust actually bought back some shares at a modest discount and reissued these at a premium. 32m shares were issued in 2021 and a further 6.2m shares issued in the first quarter of 2022. The dividend was increased to 2.8p from 2.3p.
During the period, Fotis Chatzimichalakis became a co-portfolio manager of the trust, alongside Jon Forster and Bruce Jenkyn-Jones. Fotis has spent six years at Impax in equity research and impact analysis, and had contributed to the trust’s performance through his individual stock picks.
Extract from the managers’ report
Contributors
The themes highlighted in the Interim Report remain relevant for the year as a whole.
Energy Efficiency holdings delivered excellent performance. Performance was led by Generac (Power Network Efficiency, US), the dominant supplier of back-up power systems to US households struggling with an increasingly volatile climate and associated power outages, and NIBE (Buildings Energy Efficiency, Sweden), a leading player in global heat pump markets, which, as discussed above, have a material role to play in the decarbonisation of heating. Ongoing digitisation of industrial markets drove strong performance in IEM’s software holdings, including Altair (Industrial Energy Efficiency, US) and new holding Descartes (Transport Energy Efficiency, US), and also in our digital infrastructure names, including Switch and Monolithic Power (both Industrial Energy Efficiency, US).
Food, Agriculture and Forestry holdings also delivered positive performance, notably in our natural ingredient names, which are benefitting from a secular shift away from synthetic or fossil fuel-derived alternatives, including Koninklijke DSM (Netherlands) and Borregaard (Finland). Sustainable Forestry holding Rayonier (US) also delivered a stand-out performance, benefitting from strength in construction markets and following integration of astute acquisitions.
Finally, IEM’s Water Infrastructure holdings, including Aalberts (Netherlands), Advanced Drainage (US) and Watts (US) performed well, benefitting in part from strength in construction markets, but, in addition, showing encouraging execution in current inflationary and supply chain-constrained markets.
Detractors
As at the interim stage, Renewable Energy remained the main headwind during the year. Weakness reflected, in part, profit taking after exceptional performance in 2020, compounded by moves by Exchange Traded Funds to diversify holdings, which added additional selling pressure. The mixed outcome of COP26, failed passage of the US Build Back Better Bill (which contained significant additional support for renewables) also negatively impacted sentiment and, finally, supply chain disruption posed challenges, especially for Vestas (Wind Power Generation Equipment, Denmark). We currently find valuations more attractive in renewables and have been adding selectively to existing holdings.
IEM : Good 2021 for Impax as it claws back some of last year’s underperformance