The coronavirus pandemic has highlighted the importance of good health, sanitation and food supply. And Jon Forster, co-manager of Impax Environmental Markets (IEM), argues that it will also strengthen the case for investing in environmental markets. “Governments are really looking to align themselves with sustainability and focus on resilience,” he explains. “They are also thinking about other tail risks. No one expected this low-probability high-impact event, and climate change could be [another] of these high-impact events.”
Over the first five months of this year, the trust underperformed the MSCI All Country World Index due to its bias to small and mid-cap companies. Mr Forster says that being overweight industrials and underweight healthcare has also hindered its relative performance. And having gearing – debt – amplified its losses. The trust had gearing of about 3 per cent as of 12 June, according to broker Winterflood.
However, in recent weeks the trust has recovered most of its losses. Mr Forster says that smaller companies have experienced share price falls over the past few months because they are less well covered and understood, but Impax Environmental Markets' holdings are “well established, proven profitable businesses”.