‘Five of our seven unlisted investments failed’

You don’t have to be a climate change warrior to want a slice of the fastgrowing concept of environmental markets. Jon Forster, co-manager of the £595m Impax Environmental Markets investment trust, tells Telegraph Money why he no longer trusts solar power and why sustainable investing is not just for the philanthropic.

WHO IS THE FUND FOR?

We cater for all investors who want to invest in “environmental markets”. We break these down into four broad categories: renewable energy, water, sustainable food and agriculture, and waste management.

It’s a myth that idealistic younger people are driving the shift towards sustainable investing. Some people come to us because they care about the environmental aspects of the trust, but for me – and most of our investors – the most exciting part is the amazing growth you can find in this area.

HOW DO YOU PICK STOCKS?

We look for companies that derive at least half of their revenues from environmental markets. Then we look at the business model: is it supplying a growing market? Has the management proved itself? We then analyse environmental, social and governance factors (ESG). We also do more general economic analysis and look at how much we have allocated to each of our four categories.

ARE THERE ANY SECTORS OR COMPANIES THAT YOU AVOID?

Although we’re interested in electric vehicles, we would never invest in Tesla because it is reliant on the success of one product. We take a flexible approach and look for companies that make parts for electric batteries, as they can supply other types of company too.

We also steer clear of contentious areas such as nuclear power and have “soft” limits on how much we invest in emerging markets and volatile sectors such as wind and solar power. We don’t like companies that rely on subsidies: as these can be taken away by the government. This affected us in 2012.

Environmental laws are getting tighter. Impax’s Jon Forster tells Marianna Hunt which stocks should soar as a result

HOW DO YOU DIFFER FROM YOUR RIVALS?

We launched 17 years ago so have one of the longest track records in the industry. Over that time we’ve seen these sectors go through multiple cycles, so we understand them well. It’s also important that environmental markets are Impax’s sole focus. Many of our competitors are small teams specialising in this area but working within a broader company, so they don’t have the same resources we do.

IS THERE POTENTIAL FOR ‘ETHICAL INVESTORS’ TO BE MIS-SOLD?

The funds in this area are doing very different things, so there is a real danger of misunderstanding. There’s a lot of “greenwashing”, where funds claim to be more ethical or sustainable than they really are.

WHAT EFFECT WILL TIGHTENING ENVIRONMENTAL REGULATION HAVE ON YOU?

About 90pc of the trust is invested in

companies that are likely to benefit from more stringent policy on things such as recycling, pollution and water quality.

For example, from April 2020 some single-use plastics, including drinking straws, will be banned in Britain, which is good news for the companies we hold that are developing alternatives to plastic.

£1,000 invested at launch would be worth £3,510 today

THE MAJORITY OF THE TRUST’S BOARD IS FEMALE. WAS THIS A PROACTIVE DECISION?

We made a concerted effort to be more diverse. Our board went from being all-male to majority female – it