Doing well by doing good
Investors have shown a growing appetite for investing to support social matters, environmental issues or other mission-based factors. But does it make money? Pax Global Environmental Markets says its primary aim is to deliver returns to investors while also producing a positive environmental impact. Hubert Aarts, the fund’s co-portfolio manager, says it employs a “fossil-fuel free strategy” of investing in companies around the world that develop solutions for the energy, water, waste, food and agricultural markets.
How has the understanding of environmental concerns in investing evolved since the fund’s inception in 2008?
One thing that is interesting about the fund is we try to capture any environmental issue there is in companies that provide solutions. What are these issues? They are global and touch many end markets — efficiency of buildings, water, the whole recycling stage (and more). At the end of the day we are equity investors so we need to invest in companies that deliver strong returns and have strong management teams. We offer investors a very attractive package that combines everything — social management and strong returns.
Is that a shift? Some environmental investing seems focused on “do no harm,” but you are talking about solutions.
We have seen so many more investors approach us and say “Explain again what you do, we are now ready,” and that is a change in investor interest in environmental and sustainable investing. The fund’s top sectors are energy efficiency and water infrastructure. Can you explain them and why it is weighted that way? Some of it is a reflection of the amount of opportunities to invest. About 45 percent of (our fund) is in energy efficiency, 25 percent is water related. Water infrastructure can be broken in two parts — developed markets and emerging markets. In developed markets, there is a massive opportunity to rebuild infrastructure. And in emerging markets you have big issues of quality that are important from the environmental, health and safety side of things.
Answers edited for clarity and length.