Impax Environmental Markets : Monthly Commentary

Impax Environmental

Markets plc

Monthly commentary: 30 November 2023

For professional investors only. This is a marketing communication. This communication is for informational purposes only and does not constitute investment advice nor an offer or invitation to invest. Not for further distribution.

Portfolio managers

Jon Forster	Fotis Chatzimichalakis
Bruce Jenkyn-Jones
Portfolio Manager	Portfolio Manager	Portfolio Manager

Market review

Global equities as measured by the MSCI All Country World Index (ACWI) gained 4.7% over the month.1 This reflects growing consensus that the US Federal Reserve has finished hiking interest rates. The view is underpinned by cooler inflation data, itself driven by lower energy and materials costs, as well as moderating wage pressure. Company results have also been encouraging, with positive earnings surprises outweighing negatives, and forward expectations improving in some parts of the market.

At a sector level, Information Technology stocks led the rally, followed by Real Estate and Industrials. Energy was a notable laggard as oil prices retreated from peak levels. While developed markets led the rally, China also fared better over the period, following further central bank stimulus, and a relatively positive summit between US President Biden and Premier Xi.

Within Environmental Markets, November saw the EU announce its "Grid Action Plan". The EU Commission expects European power demand to rise 60% between now and 2030, with renewables contributing much of the supply.2 The plan seeks to ease permitting for transmission and distribution networks, improve financing and reduce grid interconnection queues.

5 year cumulative performance: Rebased to 100 at start

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Nov-23

IEM (NAV)

IEM plc Share Price

MSCI ACWI

FTSE ET Index

Portfolio review

Over the month, the Impax Environmental Markets (IEM) portfolio's Net Asset Value (NAV) delivered strong positive returns, outperforming global equity markets as measured by the MSCI ACWI. NAV returns were modestly behind the FTSE ET 100, a more concentrated index focused on Environmental Markets.

The perceived direction of travel for interest rates continues to exercise a significant influence on performance. Having acted as a headwind for much of this year, rising market confidence that the US has now reached peak interest rates boosted appetite for smaller companies, as well as growth stocks, in which IEM predominantly invests. November also saw a continuation of Q3 earnings season, with portfolio companies largely reporting either resilient trading conditions or no further deterioration.

In addition to these top-down effects, stock selection has been positive. The Trust's positions within Water Infrastructure &

Technologies made some of the largest contributions to returns, with Aalberts - a fluid control specialist -reporting organic growth numbers which beat expectations, in part thanks to stronger construction-related performance. Construction's resilience has been a theme throughout 2023, although improving data in Europe has also seen Kingspan (Energy Management & Efficiency) boost performance over the month.

Past performance does not predict future returns. Figures refer to the past and that past performance is not a reliable indicator of future results. There is no guarantee that any forecasts made will come to pass. Benchmark references are selected

based on their investment orientations which were deemed comparable to the investment vehicles. The manager is not constrained by the fund's benchmark, which is used for performance comparison purposes only. The specific securities identified and described are for informational purposes only and do not represent recommendations. Holdings subject to change.

Source: Bloomberg as at 30 November 2023. Performance a bid-to-bid price basis, with net income reinvested, net of ongoing charges and portfolio costs. 1Total Return in GBP. Bloomberg, as of November 30, 2023. 2EU Commission announces electricity grid action plan | Reuters.

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The specific securities identified and described are for informational purposes only and do not represent

Impax Environmental

Markets plc

Monthly commentary: 30 November 2023

Past performance does not predict future returns.

Cont.

Companies with exposure to bioprocessing - the act of producing complex chemicals through living organisms, rather than manufacturing - also lifted performance. Results from portfolio holding Repligen (Resource Efficiency & Waste Management), a US-based bioprocessing company, acted as a bellwether for the sector. While year-on-year revenues came in lower due to diminished Covid activity, inventory destocking and reduced spending from Big Pharma, base business growth is now flat.

The portfolio's Independent Power Producer (IPP) holdings also rallied. Year to date, a combination of high inflation and rising interest rates has eroded investor sentiment in the business model. Yet having already assured ourselves that IEM's holdings in

the sector are more than sufficiently financially robust, it is gratifying to see wider sentiment improve. Vestas (Alternative Energy) in particular made a strong positive contribution after posting results which saw sequential earnings improvement, greater pricing discipline and growth in orders.

Weakness within the portfolio has been concentrated in a handful of names. The weakest three contributors to performance - Trimble (Digital Infrastructure), as well as Darling Ingredients and Steris (both Resource Efficiency & Waste Management) - all reported results that were broadly in line with expectations, but fell down in terms of forward guidance. However, conversations

with these companies broadly indicate that this is conservatism on management's part, reflecting cautious uncertainty rather than outright pessimism.

Past performance does not predict future returns
Annualised returns (%)	3M	1Y	3Y	5Y	10Y	SI3
IEM (NAV)	-5.6	-8.4	1.6	9.1	10.2	7.2
IEM plc Share Price	-9.2	-15.7	-4.6	6.7	10.4	6.7
MSCI ACWI	1.7	5.4	7.6	9.2	10.4	7.8
FTSE ET Index	-2.4	-0.1	2.2	17.9	13.8	7.4

Rolling 12m returns (%)
	NOV-22NOV-21	NOV-20NOV-19	NOV-18	NOV-17NOV-16	NOV-15	NOV-14NOV-13
	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-	TO NOV-
	23	22	21	20	19	18	17	16	15	14
IEM (NAV)	-8.4	-10.9	28.4	24.8	18.1	-1.6	18.2	34.9	4.6	3.9
IEM plc Share Price	-15.7	-21.3	31.0	32.4	20.0	7.0	22.8	36.6	4.5	4.1
MSCI ACWI	5.4	-1.8	20.4	11.4	12.1	5.1	15.0	24.9	1.4	13.0
FTSE ET Index	-0.1	-14.8	25.3	85.7	15.0	-2.8	23.2	19.8	1.8	9.6

Figures refer to the past and that past performance is not a reliable indicator of future results. There is no guarantee that any forecasts made will come to pass.

recommendations. Holdings subject to change.

Source: Bloomberg as at 30 November 2023. Performance a bid-to-bid price basis, with net income reinvested, net of ongoing charges and portfolio costs,

3First full month since inception: March 2002.

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Impax Environmental

Markets plc

Monthly commentary: 30 November 2023

Significant transactions

Increased earnings visibility, combined with lower valuations, has increased our conviction levels across certain portfolio holdings. To this end, we have been increasing the weight of our top ten positions, particularly adding to defensive names we view as unfairly discounted, as well as more cyclical stocks where the prospect of short-term economic headwinds appear to be outweighing long- term growth prospects. We have also recently initiated two new positions.

Prysmian (Energy Management & Efficiency) manufactures electrical wires for the power grid, as well as fibre optic cables. Rapid growth in renewables, as well as the electrification of power systems, heating and transport are driving substantial investment in the grid. With substantial market share, particularly in the more operationally demanding High Voltage segment, we believe Prysmian is well-placed to benefit.

Veralto (Environmental Services & Resources) is a spin-out from US testing and analysis company Danaher, focused on providing quality control services for the water, food, and pharmaceutical markets. As part of Danaher, the company has a track record of high margin recurring business and strong growth.

Environmental Markets exposure

Geographical exposure4

Resource Efficiency & Waste Management

Energy Management & Efficiency

Water Infrastructure & Technologies

Alternative Energy

Sustainable Food & Agriculture

Digital Infrastructure

Transport Solutions

Environmental Services & Resources

Cash

22%	North America
16%	Europe
16%
13%	Asia-Pacific ex Japan
12%	Japan
9%
6%	RoW

4%	Cash

1%

49%

36%

10%

1%

2%

1%

Top 10 holdings5

Sub-sector

Country6

%

STERICYCLE INC	Hazardous Waste Management	United States	2.64
EDP RENOVAVEIS SA	Renewable Energy Developers & IPPs	Portugal	2.62
PENTAIR PLC	Water Distribution & Infrastructure	United States	2.52
PTC INC	Efficient IT	United States	2.52
AALBERTS NV	Water Distribution & Infrastructure	Netherlands	2.43
SPIRAX-SARCO ENGINEERING PLC	Industrial Energy Efficiency	United Kingdom	2.32
CLEAN HARBORS INC	Hazardous Waste Management	United States	2.17
CRODA INTERNATIONAL PLC	Recycled, Recyclable Products & Biomaterials	United Kingdom	2.10
DSM-FIRMENICH AG	Sustainable Agriculture	Netherlands	2.08
EUROFINS SCIENTIFIC	Environmental Testing & Monitoring	France	2.06
TOTAL			23.46

The specific securities identified and described do not represent all securities purchased, sold, or recommended for the portfolio, and no assumptions should be made that the securities identified and discussed were or will be profitable.

Source: Impax/FactSet/Bloomberg. Data as at 30 November 2023. Charts may not add to 100% due to rounding. 4Geographic allocation by country of listing. 5Holdings are subject to change without notice. 6MSCI classification if available.

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Impax Environmental

Markets plc

Monthly commentary: 30 November 2023

Outlook

Current market expectations are for no further interest rate hikes, with cuts beginning as early as Q1 next year.7 Similarly, economic growth is expected to slow only moderately, with at worst a mild recession in Europe.8 This is expected to be a clear tailwind for the portfolio, in terms of IEM's preference for both smaller and rapidly growing companies. As an asset class, smaller companies are generally more cyclical and carry higher levels of debt. Macro concerns and higher interest rates have thus made for a meaningful headwind in 2023.

The portfolio has also seen several material but temporary challenges in certain Environmental Markets sectors. In addition to rising rates, renewables have faced supply chain challenges and soaring costs. In natural ingredients, the path to inventory destocking after Covid has been much less transparent and taken much longer than expected. There are now signs that these headwinds are starting to abate.

Thus, while the speed of this year's interest rate hikes has been a meaningful headwind to sentiment and share prices, the underlying business models of our holdings remain intact. Many of our portfolio companies are now showing their ability to adjust to a higher rate environment, either through increased pricing, operational efficiencies, or lowering debt levels. Share prices have already shown signs of increasing strength even without the tailwind of more stable interest rates. As a result, heading into 2024, the management team has high conviction in a portfolio in which debt is low, valuations remain attractive and the thesis for Environmental Markets is stronger than ever.

There is no guarantee that any forecasts made will come to pass. 7Bloomberg as at 30 November 2023. 8Global Economics Analyst Macro Outlook 2024 The Hard Part Is Over (goldmansachs.com)

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Important information

This document has been issued by Impax Asset Management (AIFM) Limited ("Impax"; FRN: 613534) which is authorised and regulated by the Financial Conduct Authority. Before making any investment decision, please consult full details of the objectives, investment policies and risks in the prospectus, key investor information documents (KIID) and/or key information document (KID).

Impax Environmental Markets Plc (the "Fund") is incorporated in England and Wales under the Companies Act 1985 with registered number 4348393 and registered as an investment company. The Fund is classified as an Alternative Investment Fund under Directive 2011/61/EU as onshored into the domestic body of UK legislation ("UK AIMFD"), and in respect of which Impax acts as the Alternative Investment Fund Manager (the "AIFM").

This communication is for informational purposes only for the sole use of the intended recipient and does not constitute an offer or invitation to invest in any fund, security, financial instrument or product for which Impax provides investment advisory and/or investment management or any other services. Any data services and information available from public sources used in the creation of this communication are believed to be reliable. Unless stated otherwise the source of all information is Impax as of the date indicated.

This document is solely for the use of (a) "Professional Clients" as defined in the Glossary to the UK Financial Conduct Authority Handbook or (b) to whom it may otherwise lawfully be communicated. It is strictly confidential and must not

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Performance - This document contains information on the past performance of the Fund. Past performance does not predict future returns. Information on past performance refers to the past and past performance is not a reliable indication of future performance. This also applies to historical market data. The performance data does not take into account the commissions and costs incurred on the issue and redemption of units. The annual investment management charge and other charges are generally deducted from income, although a portion may be deducted from capital of the trust. Where charges are deducted from capital, the potential for capital growth will be reduced. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Investments in funds are subject to risk. It is important to choose a fund that does

not exceed the risk level you are prepared to accept. Portfolio characteristics, including specific holdings, country,

sector and industry exposure, are as of the date indicated and are subject to change without notice. Portfolio characteristics illustrate the application of Impax's investment style only and should not be considered a recommendation by Impax. The money invested in a fund can increase and decrease in value and there is no guarantee that you will get back the full amount invested.

There is no guarantee that any forecasts made will come to pass. There is no guarantee that the investment objective will be achieved or that return expectations will be met. This document contains forward looking information which is subject to inherent uncertainties and qualifications and is based on numerous assumptions, in each case whether or not identified herein. Forward looking information is provided for illustrative purposes only and is not intended to serve as and must not be relied upon by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and may differ from assumptions. Undue reliance should not be placed on such forward-looking statements and information.

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Important information

Benchmark - Impax uses the MSCI ACWI and the FTSE ET indices as indicative benchmarks for its strategies. The MSCI ACWI captures all sources of equity returns in 23 developed and 26 emerging markets, and it assumes any net cash distributions, including dividends, are reinvested. The FTSE ET represents the performance globally of companies with a core business (at least 50%) in the development and operation of environmental technologies, and it assumes any gross cash distributions, including dividends, are reinvested. Both indices have investment orientations which are comparable to the sub-funds' strategies.

The information and any opinions contained in this document have been compiled in good faith, but no representation or warranty express or implied, is made to their accuracy, completeness or correctness. Impax, its officers, employees, representatives and agents expressly advise that they shall not be liable in any respect whatsoever for any loss or damage, whether direct, indirect, consequential or otherwise however arising (whether in negligence or otherwise) out of or in connection with the contents of or any omissions from this document.

Distribution of this communication and the availability of the Fund is restricted. It is important that potential investors are able to ensure compliance with regulations prior to making a subscription. Please refer to the offering documentation for additional information. The Prospectus, key investor information documents (KIID) and/or key information document (KID) of the Fund are available in English at https://impaxenvironmentalmarkets.co.uk, free of charge. Before any subscription, it is recommended that you read carefully the most recent Prospectus and review the

latest financial reports published by the Fund.

Potential investors should consult with their professional advisers in relation to the tax treatment of their holdings. Please note that the dividends/interest which the Fund may receive may be subject to withholding taxes. The tax treatment depends on the individual circumstances of each investor. Impax does not provide legal or tax advice.

In the United Kingdom, this material is a financial promotion and has been approved by Impax Asset Management (AIFM) Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority.

Impax is trademark of Impax Asset Management Group Plc. Impax is a registered trademark in the EU, US, Hong Kong, and Australia. © Impax Asset Management LLC, Impax Asset Management Limited and/or Impax Asset Management (Ireland) Limited. All rights reserved.

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