Pax Global Environmental Markets Fund
The Pax Global Environmental Markets Fund (PGINX) invests in companies around the world that are developing innovative solutions in the areas of energy (renewable energy and energy efficiency), 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. Here are some examples:
Ansys is a software company active in computer-aided engineering. It develops, markets, and supports software solutions for design analysis and optimization. In particular, the company is a leader in virtual simulation. Ansys’s wide range of products help to accelerate product time-to-market, reduce production costs and improve engineering processes. The result is better product quality, materials and resource savings, and improved safety. These software solutions are used across a wide range of sectors such as automotive, aerospace, consumer goods, energy, healthcare and materials and chemical processing. Factories use approximately half of the world’s energy and manufacturing accounts for about 20% of emissions, Ansys should benefit from the increasing penetration and use of innovative and advanced technology to drive optimization in design and therefore cost savings. The company products’ nimble integration and applications across multiple industries mean diversified end markets across many sectors.
Global demand for water and waste water solutions is rising due to population growth, climate change and weather volatility, increasing water stress and bringing changes in water management and water standards. The gap between water supply and demand continues to increase, not just in the agriculture, beverage, or energy sectors, but also for water utilities and essential industrial uses. Idex has a wide portfolio of products largely focusing on water distribution and flow monitoring. This includes leak detection, water audits, valves and flow meters. Providing solutions to monitor water loss gives greater security to water infrastructure assets, minimizing real economic and natural resource losses. The company has a high quality management team driving organic and inorganic growth with excellent capital discipline and a focus on earnings growth and return on invested capital . The business generates high margins and returns-on-equity, facilitating strong free-cash flow and helping to expand market dominance through acquisitions.
Koninklijke DSM N.V.
Koninklijke DSM N.V. (Royal DSM, commonly known as DSM), is a large Dutch company focusing on science-based solutions in nutrition, health and materials. Products include food, beverages, animal feed ingredients and materials such as those that improve industrial efficiency. With employees and offices around the world, DSM seeks to address three defining core areas: nutrition and health, climate and energy, and resources and circularity. A majority 70 percent of its business is now in natural food ingredients to meet human and animal nutrition needs, among the higher margin business lines. Under strong management team guidance, this company has moved rapidly from its more cyclical chemical industry roots to an impressive nutrition and performance materials group with a very sharp focus on sustainability. DSM is also targeting leading positions in growing markets, including emerging markets such as China. Return on invested capital is improving; the balance sheet is solid; margins are continuing to grow; and cash flow is strong. These characteristics make DSM a more defensive holding in the portfolio. The solid operational and financial performance provides the company with the ability to invest heavily in R&D and stay at the forefront of innovation — DSM is involved in more than 80 partnerships with academic and other institutions.
Waste Management, Inc.
Waste Management is the leading private player in the U.S. refuse and recycling market, with a 22 percent share of the industry. With more than 21 million customers, Waste Management can act as an industry consolidator in a still highly fragmented industry. This essential services provider benefits from having local scale, which enables operational benefits for sales and efficiency, opportunities for industry consolidation and pricing power. The company’s 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. The company is transitioning its truck fleet to natural gas to reduce emissions and deploying technology to increase route and operational efficiency. Innovative projects include methane emissions capture, next generation landfills with accelerated decomposition technology, re-processing and recycling of older landfills and next-generation recycling plants with sensor or automation-based processes.
* Pax Global Environmental Markets Fund holdings as of 9/30/19.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.