Three growth areas for social impact funds

Three growth areas for social impact funds

Managers of the £511m Impax Environmental Markets investment trust have revealed the three areas they are focusing on for future returns.

In the annual report of the trust, the managers said investments that combat plastic pollution and extreme weather, as well as companies working in the area of electric vehicles are where they are focused.

Bruce Jenkyn-Jones, joint manager of the trust said in recent months, with the BBC documentary series ‘Blue Planet II’ acting as a catalyst, the problem of plastic waste has dominated the news and political agenda.  

"We are seeing bans and restrictions on plastic take effect, such as the introduction of a five pence levy on single-use plastic bags in 2015, and the law passed in France that will see plastic utensils banned by 2020.

"Additionally, the UK government has recently announced that all plastic, glass, and metal drinks containers sold in England will soon be covered by a bottle deposit scheme.

"Meanwhile, China has implemented strict new laws governing the waste it will accept (having formerly imported and disposed of plastic waste from other countries), and bans and levies are being mooted in certain US states, Canada, and across Europe.”

He added that companies which supply collection services or reverse vending machines are particularly interesting to him now.

The second sector he nominated is electric vehicles.

He said: “Many economies are incentivising the purchase of electric vehicles (EVs). While the EV market has made progress over the past ten years, it is our view that the sector is now at a turning point.

"EV and hybrid sales in China increased by 53 per cent over 2016¹, and we believe that this growth will accelerate in the years to come.

"A combination of new market entrants in the form of technology companies speeding up research and development cycles, governments around the world tightening air pollution regulations, and shifting sentiment towards EVs from consumers (in part due to the VW ‘Dieselgate’ scandal), is driving this growth.”

He said his focus is on buying companies that supply equipment and parts to electric car manufacturers, rather than the companies that produce the cars.

Mr Jenkyn-Jones said the extreme weather conditions of 2017 may also present an opportunity for investors.

He said climate change is likely to increase the prevalence of extreme weather events in the UK.

The fund manager said: “Immediate responses to extreme weather include the use of backup and portable power generation.

"Companies that clean up and repair large-scale damage, such as fallen trees and hazardous materials, also see an increase in activity.

"Longer-term planning typically requires huge investment in water infrastructure. For example, water treatment facilities may need upgrading to address contamination during tidal surges and flood conditions.

"In addition, the pipes, pumps, and sensors that constitute the systems that remove, collect and transport water are getting ‘smarter’. The integration of digital technology allows these systems to monitor and control water management processes, offering a compelling investment opportunity.”