Impax Asset Management : BIPRU Pillar 3 Disclosures 31 December 2020

Impax Asset Management Limited

BIPRU Pillar 3 Disclosures 31 December 2020

Introduction

Impax Asset Management Limited (the 'Company' or 'Impax') is regulated by the Financial Conduct Authority ('FCA'). The Company is a BIPRU Limited Licence Investment Firm ('LLIF').

Impax benefits from FCA derogation regarding the Capital Requirements Regulation (CRR) allowing it to carry forward the Capital Requirements Directive (CRD) III rules. Therefore, the following disclosures are in accordance with the requirements of Chapter 11 of the FCA Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU).

The CRD III framework for the assessment and monitoring of capital adequacy for Impax has three elements:

Pillar 1 sets out the minimum capital requirements to meet the credit, market and operational risks calculated in accordance with set rules;

Pillar 2 is an Internal Capital Adequacy Assessment Process ('ICAAP'), whereby the Group assesses the capital impact of the potential risks faced by the Group and the capital required to cover the risks identified;

Pillar 3 requires the disclosure of specified information about the underlying risk management controls and capital adequacy of the company.

Scope of Application

Impax Asset Management Limited is part of the group of companies headed by Impax Asset Management Group Plc (the 'Impax Group' or the 'Group'). The Group has been granted an investment firm consolidation waiver and accordingly the Pillar 3 disclosures set out in this document are made at the Company level.

Frequency of Disclosures

These disclosures are required to be made at least annually and, if appropriate, some disclosures will be made more frequently as a result of material updates to the company's internal capital adequacy assessment. Impax Asset Management Limited has a financial year-end reporting date of 30 September and disclosures are made as soon as is practicable after finalisation of its Annual Report and Accounts. Disclosures will be made at other dates if appropriate.

Verification, Media and Location

These disclosures explain the basis of preparation of certain capital requirements and provide information about management of specific risks. They do not constitute, in any form, audited financial statements and have been produced solely for the purposes of Pillar 3 disclosure. These disclosures are published on the Group's website within the Investor Relations section

(www.impaxam.com/investor-relations/group-documents ).

Company capital requirements and resources

The Company's capital resources are approximately £21.7m as at 30 September 2020.

The Pillar 1 capital requirement is the greater of (i) the Fixed Overheads Requirement and (ii) the sum of the Market and Credit risk requirements. Both measures are calculated in accordance with the criteria set out by the FCA. For Impax the applicable measure is the Fixed Overheads Requirement; the Company's Capital resources are significantly in excess of this requirement.

The Pillar 2 capital requirement is developed using the ICAAP. The process covers the identification and probability of occurrence of the different business and operational risks faced by the Group and an assessment of the capital required to be held against those risks. The process also includes performing stress and scenario analysis to project the financial impact of various stress events, for example a significant equity market downturn. The ICAAP is prepared by the executive management of the Group and then reviewed in detail by the Audit and Risk Committee of the Board of Directors, before final approval by the Board itself.

The Company capital resources are in significantly excess of the maximum capital requirement identified by the ICAAP process.

Risk Management Policy

Impax faces a wide variety of risks, including physical risks to people or property, financial loss, failure of service delivery, information management and damage to the organisation's reputation. Impax is committed to ensuring that an effective risk management system is in place and considers that this is an integral part of its overall governance framework.

Risk Management Roles and Responsibilities

Risk Ownership - Business Units

• • Top-Down Ownership: Each Board member has a Statement of Responsibilities which clearly documents their personal accountabilities for overseeing compliance and risk matters within key business functions and for reporting to the Board and/or Management Committees regarding these activities.

• • Bottom-up Ownership: The Board recognise that Impax employees are best positioned to manage business processes and observe the related risks controls. Every member of staff receives training to help them actively identify, monitor and report risks that inherent in their day to day activity. Key business units complete Risk Control Self Assessments (RCSAs) on a regular basis to formally document key risks and the effectiveness of related controls.

Risk Oversight - Independent Assurance

• • The Risk Management Function independently monitors the adequacy of first line risk control environments. This team facilitates Risk Control Self Assessments of business functions, co-ordinates internal control testing by external auditors and oversees the management of any significant control failures.

• • The Risk Management Function reports to the Audit and Risk Committee of the Impax Asset Management Group Plc Board of Directors (the 'Group Board'). The Audit and Risk Committee Members are all Non-Executive Directors, who monitor risks and the processes in place to control or mitigate those risks and report to the relevant Boards.

Risk Effectiveness - Internal Audit

• • The effectiveness of both business units and the Risk Management Function are assessed by an independent Audit Function. These audit reports are presented to the Audit & Risk Committee, which also approves the Group Audit Programme, including the scope and frequency or review.

Risk Appetite

Risk appetite is the amount and type of risk that the Board regards as appropriate for Impax to accept in achieving business objectives. The Audit and Risk Committee reviews the risk appetite at least annually before final approval by the Group Board. Impax's risk appetite forms the basis against which business and financial decisions are taken.

Key Risks

The principal risks that the Company faces are described below.

Market risk

The Company's Listed Equity business charges management fees based on assets under management and accordingly its revenue is exposed to market risk. The Company has chosen not to hedge this risk.

Currency risk

A significant amount of the Company's income is based on assets denominated in foreign currencies and an element of the Company's costs are incurred in foreign currencies. The Company converts foreign currency income to sterling as soon as practically possible after receipt and buys foreign currency to settle expenditure at the point of payment.

A proportion of the Company's assets and liabilities are denominated in foreign currency, this exposure is managed on a case by case basis.

Liquidity and cash flow risk

The Company's approach to managing liquidity risk is to ensure that it has sufficient cash on hand to meet liabilities when due under both normal and stressed conditions and to satisfy regulatory requirements. The Company produces cash flow forecasts covering a twelve-month period which are reviewed by senior management. The Company does however have significant cash reserves.

Operational risks

The Company has established a control framework so that the risk of financial loss to the Company through operational failure is minimised. As part of this the Company has obtained full 'ISAE 3402' certification, for the twelve months ended 30 September 2020, for its listed equity business.

Furthermore, the Company has put in place measures to minimise and manage possible risks of disruption to its business and to ensure the safety of its staff. This plan has been put in place to manage its strategic and operational business risks during emergencies and is aimed at bringing together particular responses such as IT disaster recovery, contingency plans, off-site storage of records, data back-up and recovery procedures, evacuation procedures and customer/staff communications.

The Company has insurance cover, which is reviewed each year prior to policy renewal.

Credit risk

The Company is also exposed to the risk of default of counterparties including banks and other institutions holding the Company's cash reserves. The Company seeks to manage this risk by only depositing cash in institutions with high credit ratings and by spreading cash holdings across at least 4 institutions.

Financial regulatory risks

The Company's operations are subject to financial regulations including minimum capital requirements and compliance procedures in each of the jurisdictions in which it operates. The Group seeks to manage the risks associated with these regulations by ensuring close monitoring of compliance with the regulations and by tracking proposed changes and reacting immediately when changes are required. The Impax Group has a dedicated Compliance Team.