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Impact investing making a difference amid volatility

Impact investing making a difference amid volatility

While funds investing in companies in utility and infrastructure-related businesses got hit amid volatility in the equities market in the last six months, the underlying investment cycle for environmental markets remain strong.

‘The last six months has been volatile given the inflexion point in interest rates negatively impacting equities generally, but more so for utility and infrastructure type businesses, which carry large weights in environmental markets,’ David Li, Hong Kong-based senior portfolio manager at Impax Asset Management, told Citywire Asia.

He said the market weakness in the last six months has resulted in relative cheap valuations for longer term investors.

The outlook for companies that ride on the environmental themes remain as strong as ever as governments respond to the severe environmental and health issues, according to Li.

‘This year we are seeing continuing strong take up of natural gas, industrial upgrades through automation, and a recovery in rail capital expenditure,’ he said. 

Impax is an affiliate of BNP Paribas Asset Management focused on sustainable investing. It manages funds in both environmental equipment providers and the companies that use the equipment.

In including the environmental themes in their portfolio, Li said investors should be mindful of bubbles in certain sectors and companies jumping on the environmental bandwagon.

Additionally, investors should be aware of the underlying government policies and technologies which drive these companies’ long term fundamentals.

Currently, both China and India are heavily investing in the transition to a sustainable economy, and Impax’s strategies are to capture the growth opportunities as these two economies continue to make progress towards reducing their carbon dioxide emissions.

Among the beneficiaries from these environmental themes as listed companies involved in the natural gas, railways, electric vehicles, and industrial automation sector, according to Li.

Given the strong underlying drivers and diverse nature of these environmental themes, asset managers can construct a diversified and higher growth portfolio consisting of listed co active in these markets.  

Among BNP Paribas' funds that invest in environmental themes include the Parvest Aqua fund, Parvest Global Environment fund, Parvest Climate Impact fund and Parvest Greet Tigers fund.  

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