Impax Asset Management: Engagement Report 2021

Impax buys the securities of companies that we believe are well-positioned to add value over the long term, as we make the needed transition to a more sustainable, low-carbon economy. We expect the companies in which we invest to adapt intelligently to changing conditions, but no company is perfect, and sometimes we believe companies can do more to avoid the risks and embrace the opportunities associated with the transition to a more sustainable future.

That is why we engage with the companies whose securities we hold. Engagement helps us understand the companies better, and it allows the companies to understand our decisions better; buy and sell decisions convey little information by themselves. Engagement helps us determine how companies understand their own risk and opportunity landscapes and helps us improve our pricing of risks — particularly emerging ones such as physical climate risks and water availability. Finally, because companies that focus on environmental, social and governance factors often tend to outperform those that are less sustainably focused,1 successful engagements can at times make companies even better investments.

We also engage with various governmental entities whose actions can help level the financial playing field for companies with more sustainable operations. In 2020, the year that this report covers, we saw some agencies in the United States act to increase barriers to sustainable investment while the European Union and United Kingdom worked to create rules to better define the sustainable investment landscape. The public policy landscapes of the world’s economies have a lot to do with the present and future of sustainability in financial markets, and here, too, we see that investors’ voices can make a positive difference.

2020 was a year unlike any other, and our engagement activities reflect that; we focused on emergent issues such as COVID-19 and its many ancillary effects while continuing to press on the issues that we believe pose the greatest challenges to the transition to a more sustainable economy:

• climate change
• environmental issues such as pollution and resource depletion
• human capital issues such as diversity, equity, inclusion, environmental justice, and health and safety, as well as
• corporate governance

We believe that engagement done right helps our firm, our clients and the companies in which we invest. Navigating the transition to a more sustainable economy will lift all the world’s economic boats; engagement is a good compass for that journey.

Want to find out more? Read the full paper here.