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. The following are examples of these companies:
- Siemens AG (3.5%*)
- Ecolab Inc. (3.3%*)
- China Everbright International Limited (1.6%*)
- Koninklijke DSM NV (1.0%*)
Siemens is a diversified large German conglomerate active in electrical engineering and electronics, with a core focus on the industrial megatrends of electrification, automation of production processes and digitization of the factory environment. From renewable energy equipment to the more efficient transmission of power, smart grid solutions, building energy efficiency, lower carbon transportation and more efficient digital factories, Siemens’ products address an array of environmental challenges brought about by increased global population, urbanization and rising living standards. This means that approximately half of Siemens’ revenues come from products or services that contribute toward environmental solutions. The Digital Factory segment has seen strong growth, and Siemens commands a unique position in industrial software. With the recent streamlining of its portfolio, management has positioned the company for what will be a fast-changing environment for many trends, and opportunities, in the electronics sphere — including industrial digitization.
Ecolab is a market leader in water optimization, efficiency and hygiene solutions across many end markets, including hospitals, schools, governments, restaurants and industrial businesses. This award-winning U.S. company has the biggest market share among competitors in food safety and ranks second in water efficiency products. The global need for improved water efficiency, water testing and water treatment has never been greater. Ecolab sells chemicals, products and systems to help preserve, re-use and optimize water usage. A strong management team has led the growth of the company from a U.S.-centric business to a leading global player across a broad array of end markets in a fragmented industry. The company has a strong focus on innovation, and the business model is built on deep understanding of customer needs and providing solutions that drive customer savings despite Ecolab’s premium price point. The company benefits from a high stream of recurrent earnings, which, together with the high margins, drives strong cashflow. Customer penetration rates remain low, but they are rising and the company is gaining market share. This combination offers excellent growth opportunities.
China Everbright International Limited
China Everbright International (“CEI”) is a leading player in China’s waste industry, with a focus on waste-to-energy, waste sorting, hazardous/medical/food waste, waste water treatment, and environmental sanitation. This mid-cap company is a market leader that has demonstrated a strong ability to win new projects and execute effectively, achieving strong new project growth and good project returns. Despite rapid growth of waste water treatment capacity in China, the penetration rate is still comparatively low within a market that remains fragmented. CEI is thus in a strong position to continue to benefit from the waste processing capacity build-out and market consolidation. A subsidiary of the parent China Everbright (a State Owned Enterprise, or “SOE”), CEI has locations in 21 out of 23 Chinese provinces and is a strategic partner in the Chinese government’s Belt and Road (or Silkroad) Initiative, an ambitious infrastructure project for land and maritime route expansions to promote trade and economic growth.
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 & Health, Climate & Energy, and Resources & 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 research and development and stay at the forefront of innovation — DSM is involved in more than 80 partnerships with academic and other institutions.
* Pax Global Environmental Markets Fund holdings as of 12/31/18.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.