Skip to Content
Morningstar

Impax Sustainable Allocation Inv PAXWX Sustainability

Morningstar Medalist Rating
| Medalist Rating as of | See Impax Investment Hub

Sustainability Analysis

Author Image

Sustainability Summary

 | Published as of .  Based on data as of

Impax Sustainable Allocation Fund has a number of positive attributes that a sustainability-focused investor may find appealing.

This fund lands in the 10% of strategies with the lowest ESG risk in the Moderate Allocation category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Impax Sustainable Allocation Fund holds itself out to be a sustainable or ESG-focused investment. In other words, ESG concerns are central to the investment process of this strategy. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One key area of strength for Impax Sustainable Allocation Fund is its low Morningstar Portfolio Carbon Risk Score of 5.24 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.

The fund's 11.5% involvement in carbon solutions is roughly in line with the 11.1% average involvement of its peers in the Moderate Allocation category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, thermal coal, and and small arms. The fund mostly fulfills this goal; however, it does exhibit 0.49% exposure to companies involved in thermal coal. This compares with 1.17% for its average peer in the Moderate Allocation category. The fund has a modest level of exposure (3.48%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.

Author Image

ESG Commitment Level Asset Manager

 | Leader , 

Long-standing dedication to sustainable investing.

At its foundation, the firm pioneered sustainable investing by focusing on solutions to address resource scarcity, including alternative energy, water, and waste management. Since then, the firm has broadened its product lineup to include fixed-income and private-market strategies, while maintaining its focus on sustainability.

The listed equity business accounts for around 95% of the GBP 38.9 billion total firm assets as of May 2023. Most of the strategies within this group invest in companies that can benefit from the transition to a more sustainable economy. Following this focus, the different investment approaches tend to rely on positive inclusion rather than negative screenings or exclusions.

Impax’s environmental, social, and governance research is largely internally generated, although it uses data from a significant number of external sources as an input. ESG analysis at Impax is performed by its investment teams, most notably its listed equity team. This is a stable 35-plus member team that boasts a wealth of experience, both on the investment front as well as on the sustainability side. In 2021, Impax merged its original listed equity team with the equity team of Pax, a U.S.-based and sustainability-conscious firm that Impax acquired in 2018. This move added three portfolio managers and six analysts to the team. Impax’s Sustainability and Stewardship team, led by the experienced Lisa Beauvilain, provides support and oversight. The team has been strengthened in recent years, with no departures.

Next to the firm’s robust proprietary ESG research and tools, which includes a company-level ESG review and score, its high-quality ESG research is bolstered by its regular publication of insightful thought leadership pieces.

Furthermore, Impax’s sustainable-investing philosophy permeates its proxy-voting strategy. True to its DNA, the firm has supported all of the key ESG shareholder resolutions it voted on in the last three proxy seasons. Impax also regularly cooperates with other investors in their engagement efforts and in recent years has increased its policy advocacy efforts. We appreciate the introduction of its “Beyond Financial Returns” disclosures, which has extended its sustainability reporting practices, as these fund level reports provide more detail on sustainability aspects, including environmental footprint and active ownership practices. However, we still see some areas for improvement. For example, including ESG metrics on their fund fact sheets would be a positive step.