It has taken a while but the rest of the investment world seems to be catching up with Impax Asset Management. Chief executive Ian Simm says that 10 years after it started investing in environmental technologies, many other fund managers have realised there isvalue in the sector.
He says: “In the late 90s, it was seen very much as a niche. Over the last seven or eight year, with the rollout of legislation that guides in favour of environmental technology, growth has been very rapid and the market has grown by 20 or 30 per cent every year. The market capitalisation is getting on for three quarters of a trillion dollars.”
Simm first got into the world of environmental investing as a consultant working for McKinsey and Company inthe Netherlands but again found himself slightly ahead of his time.
“I went to McKinsey to work in its environment group in the Netherlands andat the time in the early 90s, there turnedout to be not enough work for that type of service. I took a leave of absence and decidedI was going to concentrate on a more specialist renewable energy and environmental business and joined up with thetwo guys who had just started Impax.”
Initially, the firm decided to work in the corporate market but in 1998 Impax decided to move into investment management.Simm has been heading the asset management side of Impax since then.
“In the early to mid 90s, we realised that there was a big opportunity for a specialist finance team to go into the renewable energy and waste sectors and help deals come together because deals are quite complicated with quite a lot of technology and quitea lot of regulatory complexity. We got a few corporate clients to start with and then in 1998 we got our first fund management assignment. Since then, we have built the fund management business and movedaway from the corporate side.”
Initially, the inflow of funds was modest but, after a slow start, Impax now has more than £1bn of assets under management.
“The growth of assets has really come in the last three years. There was six or seven years of fairly slow growth while we built a track record and bedded down and since then it has really taken off.”
Simm says it is very encouraging to see the effort put in by Impax pay off as environ-mental investing becomes mainstream.
“Given that most of the people in the team have been in these markets for 15 or 20 years, it is very exciting to see what we have been doing all this time become mainstreamand very successful and profitable.”
But he also says it is very encouraging to see non-ethical investors begin to see the attractions of this approach to investing.
“It is very encouraging that we have been able to attract significant amounts of money from mainstream investors, pension funds and insurance companies, that are just looking for good sensible risk adjusted return and are not interested in savingthe planet or investing just from anethical point of view.”
In a world of high energy prices and concerns over security of energy supplies, and with a more supportive regulatory environment that encourages environmental development, Simm says businesses offering energy efficiencies can see their earnings grow by 20 or 30 per cent a year.
“You do not need to take an ethical view one way or another on pollution and energy. You just look at the economics and theymake sense.”
Simm says the popularity of environmental investing should continue to grow at pace and, barring the economy sliding into recession, he expects the performance of investments to continue to do very well.
“Unless there is a complete meltdown, this area should outperform very substantially because there are some quite onerous regulatory targets in place for renewables, bio fuels and recycling, which, over thenext two or three years, companies aregoing to have to meet.”
Impax has seen an interesting couple of years in its own development. The company saw its profits for the year ending September 30, 2007 increase almost fourfold on the previous year, from £495,680 to £1.8m.In December last year, BNP Paribas Investment Partners increased its stake in the business from 1 per cent to 29 per cent.
“It has a business model of taking a stake in a business and leaving the managementto grow the business.”
Simm says Impax has a number of plansfor growth. It offers a number of specialist investment funds, including an offshore infrastructure fund and an offshore absolute return fund but retail investors are currently limited to one UK equity fund, the Impax environmental markets fund. This is shortly to be joined by a new fund, the Impax environmental leaders fund, which is dueto launch in March.
The new fund will invest in bigger companies that already generate a large part of their income from, or which are moving into, environmental technologies, products and services. Companies must have a minimum market cap of $500m and derive 20 per cent of their income or have 20 per cent of their assets invested in environ-mental technologies.
“Historically, we offered funds witha small- and mid-sized company bias because this was where the most exciting andhigh-growth prospects were in the sectorbut now we are broadening our scope to include large caps, as they become signi-ficant investors in, and developers of,new environmental technologies.”
Another new development is the partnership with FTSE to run the FTSE ET50 index. Impax had been running an index of the top 50 environmental stocks since1999 but it was only last year that it teamed up with FTSE to launch the index publicly.
“With the growth in popularity of the sector and the arrival of structured product providers hoping to benchmark themselves against the sector, it made sense to commercialise it properly. There are only a handful of providers who have a solid reputation for index creation and FTSEis the leading one, so it made sense toteam up with it.”
Simm says Impax has another capital- raising planned for its private infrastructure fund later this year and with plans fora venture capital vehicle also under way,the business continues to explore new investment opportunities.
“With the stockmarket wobbles, we needto be careful that we do not over-promise but there is plenty of growth available.”
Born: Born: Ilkley, West Yorkshire
Lives: Hammersmith, West London
Education: Cambridge University (MA, Physics); Harvard University (Master’s in Public Administration)
Career: 1989-1991, environmental consultant with the European Commission and Environmental Resources Management. 1993-1996, management consultant, McKinsey & Company. 1996-present, Impax
Likes: Reading Bob the Builder storieswith my son
Dislikes: People who always drive downthe middle lane of the motorway
Drives: As little as possible
Favourite book: 1984
Favourite film: Twelve Angry Men
Favourite album: Herbie Hancock -Maiden Voyage
Career ambition: Stop the developmentof the third runway at Heathrow
Life ambition: It’s a journey…
If I wasn’t doing this I would be…Playingthe piano