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:
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.
Autodesk is a technology company that provides design software to the architecture, engineering and construction industries. The company has adopted a cloud-first strategy, which, combined with generative design software, enables time, labor and materials savings, allows different engineers to work simultaneously on the same model, removes the need for users to deploy costly on-premises IT hardware, and drives customer growth. Autodesk’s software for the construction industry supports the adoption of building information modeling (BIM) and uses 3D modeling to more efficiently plan, design and construct intelligent buildings and infrastructure, reducing resource waste and eliminating time overruns. While there is exposure to the more cyclical construction market, Autodesk benefits from secular growth in IT spending within the least digitized sector of the economy and from several governments starting to mandate the use of BIM for public projects. The company has leading market positions across end-markets, very low customer attrition, and is well-positioned to benefit from industry digitization and the increasing use of cloud computing and simulation. With almost all of its customers now on subscription contracts, recurring revenues predominate and are expected to drive margin improvements going forward.
Koninklijke DSM NV
Royal 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.
Georg Fischer AG
Headquartered in Switzerland, Georg Fischer was founded in 1802. The company is a diversified global industrial corporation that provides solutions for secure water and gas transport, automobile safety and fuel efficiency, as well as precision manufacturing. Its strong market positions and increased diversification have helped it generate double-digit returns on equity since the financial crisis with very little gearing. Its water infrastructure business manufacturers piping systems, with exposure to important long-term themes, and is now the majority of its business, with solid margins and resiliency to economic cycles. The lightweight vehicle components unit is a top automotive supplier in Europe for passenger and commercial vehicles. The company’s focus on cost-cutting and efficiency has been impressive — leading to high returns on invested capital. Georg Fischer has a well set out acquisition strategy with a renewed focus on integration as well as higher margin and innovative products. The company is diversified across end markets — transportation, utilities, electronics, construction, aerospace and med tech, among others.
* Pax Global Environmental Markets Fund holdings as of 6/30/19.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.