Impax Environment Markets: annual results for the ACE 40 trust

interactive investor comments on numbers from the investment trust.

Impax Environmental Markets (LSE:IEM) portfolio’s NAV returned 21.3% over the year to end December 2021, outperforming its benchmark MACI ACWI by 1.7 percentage points, however, the portfolio underperformed 2020’s stellar NAV return by 9.7 percentage points. Its share price also had another year of strong performance over the year to end December 2021 and rose 30.1% compared to 28.9% in the previous year.

The company's net revenue return for the year was £9.4 million, compared with £5.3 million in 2020. This resulted in an increase in dividend per share to 2.8p from 2020’s 2.3p. Revenue earnings for the year were 3.29 pence per share. The board has retained 0.4 pence per share of these earnings to replenish the revenue reserves, having drawn on them to pay the 2020 dividends.

Chief executive, John Scott, said: “2022 has started on a challenging note, with high levels of uncertainty relating to the impact of the Covid-19 pandemic, inflation which is likely to stay higher for longer, and quantitative easing coming to an end.”

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Tracy Zhao, Senior Fund Analyst, interactive investor, says: “Despite the company’s strong return in 2020 and 2021, we saw the performance weaken in H2 2021 and slip further at the start of 2022, eroding its trading premium from a peak of 15% to today’s 1.65%. For the first three months in 2022, the company suffered a loss of 14.38%, underperforming its benchmark of 11.61%. This is likely to be related to the growth style of the portfolio, which has been impacted during the market rotation to value stocks.

“At the end of February, the company has allocated 19% of the portfolio to resource efficiency and waste management, 16% to water infrastructure and technologies and 16% to energy management and efficiency. Over 50% of investment is in North America, and 32% in Europe. Due to the long duration of the investment and large holdings in the US, the company could feel the pinch of rising US interest rates.

“On a more positive note, the EU has already announcing that it will cut, and ultimately eliminate, all fossil fuel imports from Russia to invest more in wind and solar power, improve insulation, and raise levels of energy efficiency - thereby injecting more investor confidence into the company. 

“Impax Environment Markets has been included on the ACE 40 since Oct 2019 as an adventurous option. Lead by Bruce Jenkyn-Jones, this is the UK’s largest environmental investment trust, targeting long-term capital growth by investing in companies offering solutions to environmental challenges, with a particular focus on alternative energy and energy efficiency, water treatment, pollution control, as well as waste technology and resource management (which includes sustainable food, agriculture and forestry). Despite of the short-term setback; the company has delivered a return of 116.29% over the past five years. Its investment in the highest-quality businesses across environmental markets would benefit from the energy transition and resource management, and provide return over long term.”