By David Batchelor, QuotedData, 17 June 2025:
It would be putting it mildly to describe as ‘unhelpful’ the backdrop of the past few years for sustainable investing – that is, investing focused on companies providing solutions to the 21st century’s environmental challenges.
From late 2021, markets focused foursquare on the risk of inflation, a fixation that lasted throughout the interest rate tightening cycle that followed..
Adding to the headwinds was the investor obsession with the US mega-cap technology stocks, most notably the ‘Magnificent Seven’ that are a world away from the sector.
Although the inflation monster has largely been tamed, and interest rates have been coming down (though they remain well above their 2021 level), more recently political and policy developments have caused their own significant turmoil.
Most obvious has been the return of Donald Trump to the White House..
One trust that has struggled against these headwinds is Impax Environmental Markets (IEM). From its peak to trough (November 2021 to October 2023), IEM’s share price fell some 43% (NAV return of -29%) versus a fall of only 12% for the S&P 500.
And from that point to the time of writing, in a generally much more risk-on environment, IEM’s shares have risen just 10% (NAV return of 12%) versus the S&P 500 40%. In addition, it is now the only trust in the AIC’s environmental sector, with both Jupiter Green and Menhaden Resource Efficiency opting to wind up at the end of 2024.
So, does sustainable investing of the type exemplified by IEM have a future? Looking beyond the headlines suggests that it just might.
Firstly, when it comes to Trump’s anti-environmentalism, the inconvenient truth for the president is that much of the action is driven by individual US states with the power to pursue their own climate policies – there are therefore still plenty of opportunities out there.
Read more here