Impax takes a counterintuitive view on Trump 2.0

When looking at full-year figures for Impax Asset Management (IPX), you would be justified in asking whether support for stocks synonymous with environmental, social and governance (ESG) mandates has already peaked.

Impax invests in companies engaged in the “transition to a more sustainable global economy”. For a time, that worked out rather nicely in terms of assets under management (AUM). Consider that AUM increased by 84 per cent in the year to September 2021. This time, the group registered a net outflow of £5.8bn, with client redemptions primarily made through the “wholesale channel and largely by retail clients served by third-party distribution partners”.

The group’s three largest strategies (global opportunities, leaders and water) returned 17.8 per cent, 19.4 per cent and 18.9 per cent respectively, but performance was held in check by the over-concentration of the mega-cap technology stocks in the MSCI All Country World index. Nonetheless, positive investment returns, ergo a £5.3bn gain, combined with £312mn from the firm’s acquisition of Absalon Corporate Credit, meant that overall AUM (£37.2bn) only saw a marginal decline. Midway through the year, the group struck a deal to acquire fixed-income specialist SKY Harbor Capital Management, which should add around £1.3bn to AUM.

Curiously, Impax chief executive, Ian Simm, said that despite Donald Trump's “negative stance on climate policies”, his first tenure in the White House proved to be positive for innovative US companies engaged in the renewable space. That statement may well have been made in hope, rather than expectation, but it demonstrates that political change in the US could alter perceptions towards ESG strategies.

Shares were heading in the right direction on results day despite adjusted operating profit decreasing by 9.3 per cent to £52.7mn on a 160-basis point decline in the underlying margin. Impax has made the right decision by trying to build scale, but perhaps ESG mandates simply aren’t attracting the same degree of enthusiasm anymore. Hold.

Last IC view: Buy, 468p, 29 May 2024