Once seen as a niche area, investing in environmental market solutions such as resource efficiency and renewable energy has become a more mainstream thematic opportunity – with Impax Asset Management one of the larger players in the sector.
Founder and chief executive Ian Simm has now spent 18 years as the head of the firm, and maintains the trend is a long-term one with more growth ahead.
Mr Simm outlines how, after graduating with a degree in physics, he became interested in environmental markets following the Brundtland Report, published by the UN World Commission on Environment and Development in 1987, which was effectively the first blueprint for sustainable development.
“I was fascinated by that and for the next eight years did a variety of things: I put an expedition together to west Africa to do some applied physics on the edge of the Sahara desert; I worked as an environmental consultant; then I did a masters degree in economics, which allowed me to compare ways of solving environmental problems using public- and private-sector money,” he says.
“I came to the conclusion there was an amazing opportunity for the private sector to mobilise capital to help address environmental problems and lay the foundations for sustainable development.”
Following further roles, including a stint at McKinsey in its sustainable development practice in the Netherlands, Mr Simm returned to London to work in corporate finance with an early-stage company that was to be the predecessor to Impax, helping companies in the renewable energy and waste sectors to raise capital.
“Inevitably, it was a lumpy business,” he says. But in 1998, the firm secured a contract from the World Bank’s International Finance Corporation to help design and run a solar energy fund, “and that was the foundation client of Impax Asset Management”.
“If you jump forward to today, over the last 18 years we’ve been able to demonstrate it is possible to make money for institutional investors and private individuals by investing in private and publicly traded companies that are solving environmental problems,” he says of a business that now has £3.6bn in assets.
Mr Simm says the investment matter appeals to both retail and institutional investors as it can offer “superior rates of top-line revenue growth as well as earnings growth, and there’s plenty of evidence that assets are mispriced or misunderstood because there is a lot of changing regulation and technology, as well as lots of M&A activity”.
But he acknowledges that, while it is growing in popularity, there is “some evidence that it’s not for faint-hearted investors”.
“It is possible to slip up on the proverbial banana skins – electric vehicles, for example. Tesla is a volatile stock, trading on some scary multiples of current revenues. Batteries for electric vehicles and even some renewable energy companies – solar panels and biofuels – have been volatile. There is a compelling logic to buying a fund, a portfolio, which is run by specialist investment managers who know about these trends.”