Impax Environmental is performing well despite falling oil price

But since 2011, the performance of this IC Top 100 Fund has picked up, beating the FTSE ET 50 and MSCI AC World indices over one and three years, both in terms of its NAV and share price performance. The improvement has largely been driven by portfolio companies' earnings delivery.

Over 2015 renewables companies delivered the strongest positive performances, with German company SMA Solar (Ger:S92X) more than doubling on a recovery in its end markets and the successful execution of an extensive turnaround plan.

Bruce Jenkyn-Jones, manager of the trust, has been increasing exposure to solar. Some companies in the sector have experienced problems, for example US-listed SunEdison (SUNEQ:PKL), which has gone into bankruptcy. "We didn't own it because of the business model, but that has led to quite a sell-off in some of these names," he explains.

Solar companies in the portfolio include SunPower Corporation (US:SPWR) and Chinese companies Trina Solar (US:TSL) and Xinyi Solar (968:HKG).

"The solar industry has been through a process over the past 15 years where governments have been trying to manage down the subsidies as the cost of the technology has fallen," he says. "Subsidies are now a much smaller part of the equation and, as a result, the industry is much more stable and the visibility on the policy regimes is much more clear."

>Over 2015 renewables companies delivered the strongest positive performances, with German company SMA Solar more than doubling

Energy efficiency is another area of opportunity and holdings in this area include UK-listed Spirax-Sarco Engineering (SPX), a multinational company that specialises in steam and pump technology.

"Buildings have been a great investment area as you can't really build a new building now without using much more insulating products and the latest energy-efficient lighting," adds Mr Jenkyn-Jones. "There's been a good combination of cyclical recovery plus new regulation driving the adoption of the sort of companies we are interested in."

Over 2015, companies involved in the energy efficiency of buildings continued to thrive on the combination of recovering construction markets and tightening efficiency standards. "Kingspan (KRX:ISE) and Nibe (NIBE B:STO) also benefited from increasing market penetration of their products, together with the successful integration of recent acquisitions," adds Mr Jenkyn-Jones.

When the prices of fossil fuels fall there is a risk that consumers will turn away from renewables as the latter are more affordable. But the trust's performance has not been affected by the collapse of the oil price.

"This has not had an effect on renewables because the price is set by regulations, and gas and coal more than oil," he explains. "When the oil price fell people actually bought more cars, and cars use more energy-efficiency equipment now because of regulation, so actually the oil price had a positive effect here.

"But where we had to be quite careful was in water because there had been a lot of investment in shale gas in the US, which needs a huge amount of water treatment and management."

So he has sold out of companies that had bigger exposure to US shale, and waste companies.

Companies with exposure to oil and gas were weak over 2015, especially US water holdings Pentair (US:PNR) and Franklin Electric (US:FELE), and Clean Harbors (US:CLH), which treats waste oil. "But we believe oil and gas exposures in these holdings represent a relatively small part of these businesses and that valuations are attractive relative to the long-term prospects of these strong franchises," he adds.

The trust's managers have added to the sustainable food area. Holdings include French testing company Eurofins Scientific (Fr:ERF) and Trimble Navigation (US:TRMB). "This is a software company that integrates weather and soil data and then optimises how much [water, pesticide and fertiliser] you put into the soil," says Mr Jenkyn-Jones.

Impax Environmental Markets has an overweight position in industrial and technology companies, and if there is a cyclical slowdown it's likely that industrial companies will underperform. The trust also has a small- and mid-cap bias and is typically overweight industrials, utilities and technology relative to MSCI AC World Index.

"The trust's historical relative performance demonstrates its higher-risk, potentially higher return profile," comment analysts at Winterflood. "However, that risk is mitigated to an extent by the diversification across subsectors, reflected in the overall positive impact of the recent fall in the oil price."

Source: Morningstar & *Impax Asset Management

Performance

Source: Morningstar, as at 20 June 2016

Top 10 holdings, as at 31 May 2016

Sector breakdown (%)