Investment Trust: Impax Environmental Markets promises potential

Trends apparent in the developing world concerning demographics, urbanisation, infrastructure development and the increasing availability of credit imply that the size of emerging market economies will inevitably increase as a share of the world economy in future decades.

A recent presentation I attended said China’s economy will have grown by a factor of eight by 2050. If this forecast is right, emerging markets should perform well.

Given how strongly emerging markets have performed this year, it is worth finding other investment opportunities to benefit from the same trends that are driving growth in the emerging world. We have identified Impax Environmental Markets plc as one of the most interesting.

Impax Environmental Markets plc was launched in February 2002 to provide exposure to companies operating in environmental industries. Its universe of companies cover the provision of services related to renewable and clean energy, waste treatment, pollution control and the delivery and treatment of water.

The only way emerging economies can grow strongly is for huge advances to be made in environmental science and services. This is evident when you consider the strain the Chinese economy is putting on the environment at its current size – it cannot grow by a factor of seven without a transformation in environmental practices. Companies playing to this theme will be serving a market that is set to grow faster than the world’s fastest growing economies.

Impax have recognised this trend by recently launching an Asian specialist environmental investment trust. However, currently some of the most attractively valued companies benefiting from the strong growth in demand for environmental related products and services are global companies located in developed economies. As such, the broad mandate of Impax’s flagship investment trust retains particular appeal.

Investing in environmental-related businesses is a specialist area best suited to experts. Impax is dedicated to fund management in the environmental field and has matured, to have an outstanding team with an increasingly strong record compared to the competition.

We see Impax’s funds as excellent long-term investments. However, in recent weeks it has been affected by a general widening of investment trust discounts, and its discount has widened to around 10%. At this level, we believe that the shares are a bargain, given the trust’s exceptional long-term potential.