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Impax Asset Management

PRI reporting framework 2019

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Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

          Governance policy for Chinese companies
        
          UK Stewardship Code statement
        

01.3. Indicate if the investment policy covers any of the following

Other description (1) Region specific ESG policy, China/Hong Kong-based companies: For HK/China-based companies, we have established "Governance Analysis", considering specific regional governance circumstances and challenges. We have identified five governance parameters that companies must have in place, to enter our investable universe and other engagement issues with companies.

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Impax's investments are based, among other things, on our strong conviction that population dynamics, resource scarcity, inadequate infrastructure and environmental constraints 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 the rising risks and expanding opportunities from this transition and guides our search for investments that will deliver long-term outperformance. ESG-analysis is an integral part of the investment process. We analyse companies' governance structures, environmental, social and other material risks and how well these are managed as well as controversies encountered and managed by companies. As part of the ESG-analysis, we aim to understand companies' "character" and assign a proprietary ESG-score. We engage actively with companies on ESG-issues for risk monitoring and to encourage improvement in governance structures and sustainability processes and transparency. 

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

The ESG policy contains the following elements:

  • Overall approach, integrating ESG in the investment process
  • Rationale for integrating ESG

Main tools and processes for ESG integration:

  1. Normative Screen, UN Global Compact 
  2. Impax Proprietary ESG-analysis & scoring
  3. China / Hong Kong Governance-analysis

Integrating ESG in the investment process, the materiality framework:

  • Governance (country-based KPIs)
  • Environmental and Social (company-specific, most material KPIs)
  • Controversies
  • Proprietary ESG scoring methodology

Active Stewardship:

  • Engagement as part of the investment process
  • Proxy voting as part of the investment process
  • Impax RI Memberships (platforms for RI dialogue and active stewardship)

01.6. Additional information [Optional].

          
        
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SG 01 CC. Climate risk

01.6 CC. Indicate the climate-related risks and opportunities that have been identified and factored into the investment strategies and products, within the organisation's investment time horizon.

All Impax's investments and strategies are gaged through the proprietary “Impax Lens”, which contains and captures sustainability risks and opportunities across time horizons (short to long-term). It includes climate change both as a risk (transition and physical) and as an opportunity (mitigation and adaptation). Sub-sectors that have low Lens risks and high Lens opportunities, are set to benefit from a transition to a sustainable economy and are well positioned for the long-term.

Impax specialises in investments providing environmental and climate solutions, (energy efficiency, renewable energy, water, waste management and recycling and sustainable food and agriculture) through our thematic listed equity strategies (environmental), private equity funds (renewable infrastructure) and fixed income (green bonds).

Across all strategies and asset classes, whether thematic or unconstrained, the Impax Risks and Opportunities Lens is applied.

Throughout Impax's investments and strategies climate and other material risks are thoroughly analysed through integrated ESG analysis. We also actively engage with our investee companies to encourage improved climate risk management, processes and disclosures, across the four TCFD pillars. We are signatories to the TCFD initiative.

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

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

01.8 CC. Indicate the associated timescales linked to these risks and opportunities.

Impax is a long-term investor and our view is that the opportunities arising from investing in companies and sectors benefiting from the transition to a sustainable and lower carbon economy span over the shorter and longer terms. We use the Impax Lens to identify sectoral risks and opportunities. Companies and sectors that are well aligned to sustainability and are less likely to be disrupted by adverse changes in regulation, societal and consumer preference changes will benefit also in the longer term. In our thematic environmentally-focused strategies we typically invest with a 5-year investment horizon, but in many cases own companies for much longer than that. 

In terms of climate risks, we are assessing both 1. transition risks (policy risks) and 2. physical climate risks. 

1. Transition risks. We have developed a framework (Smart Carbon™) with scenario analysis spanning 5 years, followed by a terminal value (or time), for the probabilities and magnitudes of a carbon price or tax affecting carbon intense sectors.

2. Physical climate risks. We have accelerated our focus on physical climate risks. Partly because of observed changes and much more frequent extreme climate events, but also because companies that provide environmental and climate solutions - and that typically would not be adversely affected by e.g. carbon policy risks - are not shielded from possible physical climate risks. We have not set a specific time horizon for this, but rather are using the IPCC "B2" climate scenarios of 1.5 and 5.5 degree increases. Engagement is a major element in this analysis, in understanding the companies' exposures (physical assets and facilities), understanding and preparedness (scenario analysis conducted, use of insurance, plans for improving resilience etc).

01.9 CC. Indicate whether the organisation publicly supports the TCFD?

01.10 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

In 2017, Impax became one of the initial signatories 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's investments are based on our strong conviction that population dynamics, resource scarcity, inadequate infrastructure and environmental constraints 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. 

In terms of climate risks, we are assessing organisation-wide: 1. transition risks (policy risks) and 2. physical climate risks. 

1. Transition risks. We have developed a framework (Smart Carbon™) with scenario analysis spanning 5 years, followed by a terminal value (or time), for the probabilities and magnitudes of a carbon price or tax affecting carbon intense sectors.

2. Physical climate risks. We have accelerated our focus on physical climate risks. Partly because of observed changes and more frequent extreme climate events, but also because not even companies that provide environmental and climate solutions (e.g. in the Impax environmental thematic strategies) - that typically would not be adversely affected by e.g. carbon policy risks - are not shielded from possible physical climate risk. We have not set a specific time horizon for this, but rather are using the IPCC "B2" climate scenarios of 1.5 and 5.5 degree increases. Engagement is a major element in this analysis, in understanding the companies' exposures (physical assets and facilities), understanding and preparedness (scenario analysis conducted, use of insurance, plans for improving resilience etc).

1.12 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

Other, specify (1) description

          Governance policy for Chinese companies
        

URL/Attachment

Other, specify (2) description

          UK Stewardship Code statement
        

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

Other description (1) Investing in Environmental Markets.

02.3. Additional information [Optional].

Across all Impax strategies we focus on the risks and opportunities arising from the transition to a more sustainable global economy. The analysis of environment, social, and governance (ESG) issues is complementary to our focus on risk management and quality and is integrated into the investment process of each of our strategies and portfolios.


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Our aim is to treat all our clients fairly at all times and to preserve accountability and transparency. Impax has a clear policy on identifying, recording, managing and disclosing any conflicts, or even the appearance of conflict. 

Impax arranges its business to minimise the potential for conflicts of interest and where they do arise it manages such conflicts to ensure that its own interests are never put ahead of those of its clients, and that one group of clients is not treated more favourably than another.

Conflicts of interest may arise as part of our investment, ESG and stewardship activities; however, we have arrangements in place to minimise their effects and to treat all clients fairly in relation to:

  • Varying client objectives and interests
  • Impax’s shareholder interests
  • Impax’s specific client interests
  • Impax’s employee interests
  • Impax’s corporate investments and interests
  • Impax’s inter-departmental interests

We have a Conflicts of Interest policy. The policy applies to all staff.

The Board of Impax Management Group plc has overall responsibility for ensuring the proper control over conflicts of interest. On a day to day basis, this responsibility is delegated to the Executive Committee, and is monitored by the Compliance department.

 

03.3. Additional information. [Optional]

Possible sources of conflicts of interest and how they are addressed:

Varying client objectives and interests. Different clients may have different expectations, objectives and priorities regarding stewardship and Impax has a number of investors who are highly focused on stewardship issues and have very specific priorities. At the very outset of the client relationship it is determined how closely the stewardship priorities are aligned between the client and Impax. We have a number of clients who have retained their voting rights, in order to follow their specific stewardship objectives. For all other clients, we vote following our voting policies, utilising our ESG-analysis and knowledge of the companies in question and local and regional corporate governance best practice. We report the outcomes of our voting on our website, every quarter. Some of our clients have invested with us through separate accounts where their own specific responsible investment objectives are followed and expressed. We are not involved in stock lending, simplifying the management of proxy voting and reducing possible conflicts of interest relating to voting.

Impax’s shareholder interests. Impax is owned by individuals and financial institutions which each have their own investment, financial and stewardship objectives, which could create conflicts of interest. Impax’s investment process and stewardship activities are conducted following set and publicly disclosed policies and removed from the influence of shareholders.

Impax’s specific client interests. Impax could be managing investments for e.g. the corporate pension fund of a company that is also owned in one or several of Impax’s funds, which could create conflicts of interest. Impax’s investment process and stewardship activities are conducted following set and publicly disclosed policies and removed from any influence of specific clients.

Impax’s employee interests. An Impax employee could own shares or have an interest in a company that is also owned in one or several of Impax’s funds, which could create conflicts of interest. Impax has strict checks, controls and reporting regarding trading and ownership of companies and shares by the Impax staff. Impax’s investment process and stewardship activities are conducted following set policies and removed from any influence of any employee interests.

Impax’s corporate investments and interests. Impax does not hold any proprietary positions or conduct any proprietary trading, but may make a seed investment into a new Impax fund. When this is the case the fund and the investment is treated like any other client and is subject to the very same policies and procedures regarding stewardship that any other client funds would be.

Impax’s inter-departmental interests. The Impax investing departments outside of the Listed Equity business, such as its Private Equity department, may have ownership or an interest in a company that is an investee company in an Impax Listed Equities fund. There are formal Information Barrier structures in place between the Impax Listed and Private Equity departments and Impax’s investment process and stewardship activities are conducted following set policies and removed from any influence of any inter-departmental interests.


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

Every holding in Impax's portfolios is reviewed periodically after inclusion in the portfolio. 

Identification of incidents and events in companies is managed through:

  • Third party ESG research tools and alert mechanisms
  • Market data provider research, data and alerts
  • Sell-side research reports and alerts
  • Proprietary ESG analysis of company information and filings

When significant events occur, we may conduct reviews more frequently and contact the company for further information and clarification. This may result in divestment, engagement, or continued monitoring.

 

 

 


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