This is the third year that we have quantified and reported on the environmental benefit derived from activities of companies that are held in the Pax Global Environmental Markets Fund.
In the Fund’s profile, and in the graphic below, we share our data on three environmental outputs per $10 million for one year of investment: renewable electricity generated, in megawatt hours (MWh); water treated, saved or provided, in gallons; and materials recovered/waste treated, in tons.
We also report on a fourth metric, net carbon dioxide avoided, in million tons of carbon dioxide equivalent (CO2), which reflects the positive outcome that portfolio companies are having on the global climate. This metric is more complex to measure, as it involves calculating not only a company’s direct and indirect emissions (from its operations and energy use), but also the emissions avoided by the use of its products or services compared with conventional alternatives.
Source: Impax Asset Management.
The Fund’s portfolio managers seek to maximize risk-adjusted financial returns through their investment approach — not to maximize the impact metrics that we track. Nonetheless, most of the impact metrics that we track have improved year-over-year, underscoring our conviction that we can deliver competitive financial returns by addressing the world’s pressing sustainability challenges.
We are pleased to report that all but one of the metrics improved in comparison to last year, reflecting the increased efficiency with which our portfolio companies are providing solutions to environmental pollution and resource scarcity.
As interest in measuring impact has grown, techniques and methodologies have proliferated. Alongside excitement over how impact metrics can help individual investors connect with their savings, there are questions about what these numbers really mean.
At Impax we continue to report metrics that naturally emerge from our investment philosophy and attempt to put our portfolio companies’ impact into a meaningful context. That is why we relate the three environmental output metrics in context of household equivalents, and we relate CO2 avoided in context of the Paris Agreement.
Delivering meaningful impact reporting is a complex process that requires specialist expertise to understand and scrutinize the data involved. When we started this process, few of the companies in which we invest had the systems in place to capture and report the data we sought. Today, while data quality varies, it is improving, and we are confident it will continue to do so. In particular, we expect to engage more actively in coming years on water and waste data to encourage companies to begin to match carbon reporting in its scale and rigor. Our methodology has evolved to adapt to the improvements in the data available and will continue to do so. Looking ahead, Impax commits to invest the time and resources to demonstrate the positive impact of our investments as we work to maximize returns for our clients.
View the Fund’s profile to learn about the measurable impact that the Fund’s investments can have when it comes to reducing greenhouse gas emissions, increasing renewable energy production, saving water and recovering waste.
1US Tons. Impact of $10m invested in the Fund for one year. Based on most recently reported annual environmental data for holdings in the Pax Global Environmental Markets Fund as of December 31, 2018. Impax’s impact methodology is based on equity value.