The BNP Paribas Environmental Equity Trust seeks to achieve sustainable, above market returns over the longer term by investing
globally in companies active in the growing resource efficiency and environmental markets. The Trust shall invest in listed companies with at least 20% of their revenue, profits or capital employed derived from environmental markets (average exposure to environmental markets is substantially higher – with the average exposure in the three years ended 31 March 2018 being 61%).Environmental markets include renewable & alternative energy, energy efficiency, water infrastructure & technologies, pollution control, waste management & technologies, environmental support services, and sustainable food, agriculture & forestry.
Impax developed a proprietary global equity universe of stocks in 1999, with ideas sourced both through internal research of sector and geographical developments as well as via a large network of contacts developed over a longer time period. Inclusion in the ‘Impax Universe’ is contingent on the environmental product or service having at least 20% of group revenue, profitability or invested capital derived from environmental markets (average exposure to environmental markets is substantially higher – with the average exposure in the three years ended 31 March 2018 being 61%). As the sector has expanded, there have been new universe entrants (IPOs, spin-outs and companies identified by the team’s detailed research), as well as companies leaving the universe due to both merger and acquisition activity, and due to the de-emphasis of environmental activity within business’ portfolios as a whole.
Our universe and underlying sector classification system is used by FTSE as the basis for a series of environmental market indices. The methodology for inclusion and the classification system itself is tested and validated bi-annually by an independent committee appointed by FTSE.
The investment team apply a primary screen to all potential investee companies to ensure they meet the criteria for inclusion in the universe. This is followed by initial research by a lead analyst into the stock’s financial performance and a review of consensus earnings.
If it is decided that full research should be completed, the lead analyst completes our proprietary ‘10 step approach’, which covers business fundamentals, market dynamics and outlook.
A summary paper covering the key qualitative and quantitative issues identified is then produced. The investment team debate the research in more detail during the weekly Investment Committee meeting and decide whether or not to include it on the ‘A’ List of investable stocks. If it is approved, the investment team agrees a valuation approach and stock strategy. Co-Heads of Listed Equity, Bruce Jenkyn-Jones, Hubert Aarts and Chief Executive Ian Simm, have a veto over decisions regarding the ‘A’ List of investable stocks.
The inputs to the Macro Overlay process that drive our economic analysis, country, and sector weighting decisions include macro-economic analysis, microeconomic and technology analysis, legislative impacts and valuation.