Global Environmental Markets Fund
The Pax Global Environmental Markets Fund (PGRNX) invests in companies around the world that are developing innovative solutions in the areas of energy (energy efficiency and renewable energy), water (water infrastructure and technologies, pollution control), waste (waste management and technologies, environmental support services) and sustainable food and agriculture. We believe the leading companies in these markets are fast becoming major drivers of global economic growth. The following are examples of these companies:
- Wolseley plc (2.0%*)
- TE Connectivity, Ltd. (1.5%*)
- Waste Management, Inc. (2.4%*)
- Kubota Corp. (2.3%*)
Wolseley plc is a UK company in the environmental markets Water sub-sector, and is a leading specialist distributor of water infrastructure and water network solutions as well as energy efficient heating products.
- This company is a well-managed business with strong market share and attractive exposure to global economic growth. Many of Wolseley’s brand names hold leading positions in their local markets.
- Revenue and margin growth have been expanding, and Wolseley’s e-commerce business has helped contribute as well.
- End market exposure is diversified: plumbing and heating and building material for residential, non-residential, new construction, and infrastructure.
- Wolsey will benefit from product demand by both a natural replacement cycle, as well as newly built real estate, which both demand more efficient water heaters and boilers. With growing need for the latest technologies helping to transition to lower carbon emitting products and higher water efficiency heaters and boilers, their national US reach provides medium to long term growth opportunities.
- Sustainable construction and building development will increasingly play an important role in supporting long-term environmental sustainability given population growth, aging housing stock, and increased level of comfort in homes.
TE Connectivity, Ltd.
TE Connectivity is a leading provider of connectivity and sensing components across many end markets including transportation, industrials, information technology and consumer electronics.
- The company’s products form part of the trend of increased electronic content across businesses which is part of the foundation of the transition toward connected ‘internet of everything’ technology. Originally this US company was part of AMP Incorporated (Aircraft Marine Products), then Tyco Products Ltd.
- TE Connectivity solutions contribute to enhancing productivity, increasing efficiency, and thus addressing pollution. Power and data is delivered more efficiently and lower energy consumption is achieved through such aspects as superior data analytics, improved fuel efficiency, or more predictive maintenance schedules.
- Following various portfolio divestments, TE Connectivity has been transformed into a pure play provider of connectors and sensors across several industries. The company now produces products focused on the megatrends of ‘safe, green and connected’, all of which are positioned to enjoy sustained growth in the coming years.
- Important trends which the company should benefit from include the coming shift to electric vehicles and autonomous driving in the automotive segment: the content of relevant technology and componentry for an electric vehicle is three times that of a conventional vehicle.
Waste Management, Inc.
Waste Management is the leading private player in the US refuse and recycling market, with a 22% share of the industry.
- Serving over 21 million customers, Waste Management can act as an industry consolidator in a still highly fragmented industry.
- End markets include residential, but also the manufacturing and industrial sectors.
- The portfolio managers regard this as a lower volatility defensive stock with stable cash generation over an economic cycle, yet it can benefit from positive housing sentiment.
- Waste Management was named to Fortune’s “Change the World” list in 2015-companies that have made a sizeable impact on major social or environmental problems.
- Waste Management is transitioning its truck fleet to natural gas to reduce emissions. Innovative projects include methane emissions capture, next generation landfills with accelerated decomposition technology, and re-processing and recycling of older landfills.
Kubota is a Japanese company that has dominant market shares in its small scale farm equipment and PVC water pipe businesses.
- Although the individual number of farmers is declining in the domestic market, the consolidation of farms and rising demand for more powerful planting and harvesting machines is leading to stable revenue.
- Kubota is a leading player in rice-related farm equipment in Asia with a 40% market share in Japan and a 80% share in Thailand.
- Demand for high quality and sub-compact equipment should grow in Asia, driven by the growing mechanisation of agriculture and need to plant and farm more efficiently.
- Kubota is also one of the two dominant players in the Japanese PVC water pipe sector. While a mature market, modest growth is anticipated driven by reconstruction activity and the re-enforced Japan infrastructure works program. The Tokyo Olympics in 2020 should also boost demand.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.