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Impax Asset Management

PRI reporting framework 2019

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation undertakes scenario analysis and/or modelling and provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Impax has developed a methodology that enables investors to assess and manage the risk of the value of their assets by an introduction of carbon prices. Investors can use this tool to adjust their portfolios and hedge against upcoming carbon policy-related risks, based on scenario analysis.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

          ESG is key in the Impax Environmental Markets classification system, Impax Sustainability Risk and Opportunity Lens and the Pax World Gender Lens Index.
        

13.3. Additional information. [OPTIONAL]

Impax has developed a methodology that enables investors to assess and manage the risk of the value of their assets by an introduction of carbon prices. Investors can use this tool to adjust their portfolios and hedge against upcoming carbon policy - related risks. The methodology is based on scenario analysis.

The Smart Carbon™ methodology: 

https://www.impaxam.com/sites/default/files/white-paper-Impaxs-SmartCarbonTM-strategy.pdf

Pax Ellevate Global Women's Leadership Fund (GWLF):

Fund based on Pax's Global Women's Leadership Index (GWLI), an index of companies around the world that are leaders in advancing women through gender diversity on their boards of directors and in management, and through other policies and programs.

https://paxworld.com/funds/pax-ellevate-global-womens-leadership-fund/

 


SG 13 CC.

13.4 CC. Describe how the organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, the results and any future plans.

Describe

PHYSICAL CLIMATE RISK APPROACH

Physical risk scenario analysis is a complex area that is not yet fully developed and Impax is working on a methodology to assess our investee companies’ physical risks and opportunities through a multi-faceted approach below. Existing climate scenario tools such as PACTA are not relevant for the types of companies Impax invests in.

The approach is qualitative, analysing companies following a climate scenario approach by the IPCC. The IPPC pathways include carbon concentration scenarios leading to physical climate conditions (incl. different temperatures and distributions of extreme weather events) under different economical and societal circumstances (Storyline).

The goal is to understand the risks and opportunities that each company may face in a 1.5D and a 5.5D world. We will focus on the impact on company physical assets due to Mitigation(Transition) and Adaptation(Physical).

Indicators for physical climate risks used:

Key exogenous indicators (external vulnerability, can not be controlled):

  1. Water risks (drought, flooding, sea level rise)
  2. Heat risks (wild fires, land degradation, human health issues, heat-related)
  3. Extreme weather event risks (storms, hurricanes, typhoons)

Key endogenous indicators (internal exposure, can be controlled to an extent):

  1. Geographic location of plants, facilities, operations (direct assets)
  2. Geographic location of and dependency on supply chains (indirect exposures)
  3. Land and resource risks (agricultural and natural raw materials, crop yield exposures)

An important consideration and one of the data gaps is related to geographic locations of companies’ facilities, operations, plants and supply chains. This is data we are seeking from our companies through engagement.

The physical asset location data provided by companies such as 427.com, are not directly applicable to our investee companies.

Climate scenarios used, IPCC:

In order to understand the overall physical risks and to better understand its connection to other assumptions, we will use the “B2” IPCC scenario as a framework (brief below).

The B2 scenarios are of a world that is more divided, but more ecologically attuned, with better data availability. The B2 scenarios are characterised by:

  • Continuously increasing population, but at a slower rate than in A2.
  • Emphasis on local rather than global solutions to economic, social and environmental stability.
  • Intermediate levels of economic development.
  • Less rapid and more fragmented technological change than in A1 and B1.

Full details: http://www.ipcc.ch/ipccreports/sres/emission/095.htm

The aim is to understand and be able to express the levels of physical climate risks and opportunities across portfolios, under different climate scenarios. The approach requires qualitative analysis and company engagement.

Describe

Information about companies' physical climate risk exposures, preparedness and management received through the scenario analysis and ensuing engagements are part of our proprietary ESG reviews and inform the companies' ESG scores, hence can have portfolio construction and sizing implications. 

The aim is to understand and be able to express the levels of physical climate risks and opportunities across portfolios, under different climate scenarios. The approach requires qualitative analysis and company engagement.

Describe

This analysis informs which companies we need to prioritise for physical climate risk analysis and for engagement. But engagement is also part of the physical climate risk analysis, in confirming among other things where companies' physical assets and facilities are based, how well the companies understand the challenges, what their preparedness and management of (physical) climate risks are. 

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether the organisation has evaluated the impacts of climate-related risk, beyond the investment time-horizon, on the organisations investment strategy.

Describe

Yes, the IPCC climate scenarios used in this framework, go well beyond our typical investment horizon of c. 5 years.  

In order to understand the overall physical risks and to better understand its connection to other assumptions, we will use the “B2” IPCC scenario as a framework (brief below).

The B2 scenarios are of a world that is more divided, but more ecologically attuned, with better data availability. The B2 scenarios are characterised by:

  • Continuously increasing population, but at a slower rate than in A2.
  • Emphasis on local rather than global solutions to economic, social and environmental stability.
  • Intermediate levels of economic development.
  • Less rapid and more fragmented technological change than in A1 and B1.

Full details: http://www.ipcc.ch/ipccreports/sres/emission/095.htm

The aim is to understand and be able to express the levels of physical climate risks and opportunities across portfolios, under different climate scenarios. The approach requires qualitative analysis and company engagement.

13.7 CC. Indicate whether a range of climate scenarios is used.

Indicate the climate scenarios the organisation uses.
Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          IPCC, B2-scenario.
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Environmental policy and regulatory developments, including carbon and climate policy.
        

other description (2)

          Infrastructure deficit (developed and developing markets).
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

  • Impax's active listed equity investments follow the Impax Sustainability Lens approach, which highlights sectors and activities with low sustainability risks and high opportunities. It is a framework that directs our investments to sectors and companies that benefit from a transition to a sustainable economy. 

 

  • Impax's thematic investments follow the Environmental Markets classification system across environmental areas of: 
  1. New energy (energy efficiency and renewable energy)
  2. Water
  3. Waste management and recycling
  4. Sustainable food

 

  • Impax's real assets investments are in the Renewable Energy infrastructure area. 

 

other description

          Actively seeking and investing in companies that benefit from a transition to a more sustainable, low-carbon economy and those providing environmental solutions.
        

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          Impax thematic active equity strategy investments in environmental solution providers; measuring and disclosing the net positive environmental impacts from investee companies, including net carbon emissions.
        

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

 

  • Impax Impact Report 2018 (measuring positive environmental impact):

           https://www.impaxam.com/media-centre/white-papers/environmental-impact-report-2018

  • Impax Pax World Sustainability Report:

           https://paxworld.com/pax-world-impact-report/

 

 

 

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          Climate, emissions and resource exposures and risk mitigation
        
          GHG emissions, energy, water reduction targets
        
          Reported
        
Weighted average carbon intensity
          Identifies companies to prioritise for climate risk engagement.
        
          CO2e / $M revenue
        
          Used for engagement prioritisation.
        
Carbon footprint (scope 1 and 2)
          Identifies companies to prioritise for climate risk engagement.
        
          tons, equivalent
        
          Net carbon emissions ideally measured.
        
Portfolio carbon footprint
          Montreal Pledge.
        
          tons CO2e / $M invested
        
          Net carbon emissions ideally measured at the portfolio level, tons CO2e / $M invested.
        
Total carbon emissions
          Measuring "net carbon emissions"
        
          tons CO2e
        
          Net carbon emissions ideally measured.
        
Carbon intensity
          Assessing carbon exposures
        
          tons, equivalent / $m revenue
        
          Reported or estimated by peer groups
        
Exposure to carbon-related assets
          
        
          
        
          
        
Other emissions metrics
          Assessing other metric avoidance
        
          N0x, S0x, S02
        
          Reported or estimated by peer groups. Data availability issues.
        

14.7 CC. Describe in further detail the key targets.

Target type
Time Frame
Description
Attachments
          
        
          
        

          
        
          
        

          
        
          
        

          
        
          
        

          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risks management processes for identifying, assessing, and managing climate-related risks.

Please describe

In 2017, Impax became an early signatory to the TCFD recommendations. There is a Board director designated as responsible for climate risks and opportunities relating to Impax and its investments and the four TCFD pillars. Climate management processes are implemented by the Impax Environment Committee.

Impax assesses climate risks including adverse effects on physical office locations and facilities and possible climate policies.

Impax's investments are based on our strong conviction that population dynamics, resource scarcity, inadequate infrastructure and environmental constraints, including climate change, will profoundly shape global markets, creating investment risks and opportunities. We expect that these trends, reflecting the transition towards a more sustainable global economy, will drive earnings growth for well-positioned companies. Our proprietary investment framework identifies and calibrates the rising risks and expanding opportunities from this transition and guides our search for investments that will deliver long term outperformance.

Impax's TCFD commitment: https://www.impaxam.com/sites/default/files/TCFD.pdf

 

14.9 CC. Indicate whether the organisation undertakes active ownership activities to encourage TCFD adoption.

Please describe

Engagement is undertaken across the 4 TCFD pillars. We find that the framework is very useful for all companies, no matter how exposed to climate risks a company is or where in the "journey" of managing climate risks a company is. The pillars provide a framework from basic, but fundamental aspects (climate governance, strategy) to very advanced and complex aspects (scenario analysis and modelling). 

The climate analysis informs which companies we need to prioritise for physical climate risk analysis and for engagement. Engagement is also part of the physical climate risk analysis in confirming where companies' physical assets and facilities are based, how well companies understand the challenges and the level of preparedness and management of climate risks and opportunities. 


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

77 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

25 % of AUM

Brief description and measures of investment

Impax Asset Management is a leading investment manager dedicated to investing in the opportunities created by the scarcity of natural resources and the growing demand for cleaner, more efficient products and services, through listed thematic environmental strategies and private equity strategies.

Impax's thematic environmental listed equity strategies seek out mis-priced companies that are set to benefit from the long-term trends of changing demographics, urbanisation, rising consumption, and the resultant increases in resource scarcity. Investment is focused on a small number of deeply researched global equity strategies across alternative energy, energy efficiency, water, waste, sustainable food and agriculture related markets.

 

Asset class invested

5 % of AUM
100 % of AUM

Brief description and measures of investment

Impax Asset Management is a leading investment manager dedicated to investing in the opportunities created by the scarcity of natural resources and the growing demand for cleaner, more efficient products and services, through both listed and private equity strategies.

Impax's thematic environmental listed equity strategies seek out mis-priced companies that are set to benefit from the long-term trends of changing demographics, urbanisation, rising consumption, and the resultant increases in resource scarcity. Investment is focused on a small number of deeply researched global equity strategies across alternative energy, energy efficiency, water, waste, sustainable food and agriculture related markets.

Impax's private equity infrastructure funds follow an operationally focused, value-add strategy, investing in renewable power generation and related assets throughout Europe.

Asset class invested

6 % of AUM

Brief description and measures of investment

Impax Asset Management is a leading investment manager dedicated to investing in the opportunities created by the scarcity of natural resources and the growing demand for cleaner, more efficient products and services, through both listed and private equity strategies.

Impax's environmental thematic listed equity strategies seek out mis-priced companies that are set to benefit from the long-term trends of changing demographics, urbanisation, rising consumption, and the resultant increases in resource scarcity. Investment is focused on a small number of deeply researched global equity strategies across alternative energy, energy efficiency, water, waste, sustainable food and agriculture related markets.

Asset class invested

30 % of AUM

Brief description and measures of investment

Impax Asset Management is a leading investment manager dedicated to investing in the opportunities created by the scarcity of natural resources and the growing demand for cleaner, more efficient products and services, through both listed and private equity strategies.

Impax's thematic environmental listed equity strategies seek out mis-priced companies that are set to benefit from the long-term trends of changing demographics, urbanisation, rising consumption, and the resultant increases in resource scarcity. Investment is focused on a small number of deeply researched global equity strategies across alternative energy, energy efficiency, water, waste, sustainable food and agriculture related markets.

Impax includes companies with revenues of at least 20% from water infrastructure, water treatment and water utilities (provision), into the water universe. 

          Gender investing
        

Asset class invested

2 % of AUM

Brief description and measures of investment

The Impax Global Women’s Leadership Index is the first broad-market index of the highest-rated companies in the world in advancing women's leadership, as rated by Pax World Gender Analytics, and that meet key environmental, social and governance (ESG) standards, as rated by MSCI ESG Research.


The Pax Ellevate Global Women's Leadership Fund seeks investment returns that closely correspond to or exceed the price and yield performance, before fees and expenses, of the Pax Global Women’s Leadership Index, an index of companies around the world that are leaders in advancing women through gender diversity on their boards of directors and in management, and through other policies and programs. This Fund is the first of its kind – a broadly diversified mutual fund that invests in the highest-rated companies in the world for advancing women’s leadership.

 

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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