13 Questions to Impax’s Jon Forster

In this series of short profiles, we ask top fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they would never buy.

This time our interviewee is Jon Forster, Senior Portfolio Manager at Impax Environmental Markets Trust (IEM), rated 5 stars by Morningstar.

Which sector shows the greatest promise in 2022?

We have found good opportunities in solar energy. Equity prices had been weak during the market downturn, reflecting regulatory uncertainty in the US, which we believe is overdone. Solar is also a key beneficiary of the “RepowerEU” plan aimed at reducing Europe’s dependence on Russian fossil fuels.

What is the greatest economic risk today?

Risk of recession, driven either by the escalation of the Russian-Ukrainian conflict disrupting gas supplies in Europe, or by the timing and scale of interest rate hikes implemented to control inflation. Other inflation drivers include supply chain constraints and the effect of the Russian-Ukrainian conflict on energy and food costs. Difficult to achieve a “soft landing” in these conditions.

Describe your investment strategy

Invest globally in pure-play growth companies operating in a wide range of environmental markets, including new energy, water, clean and efficient transport, circular economy, sustainable food and smart environment.

We have a large universe of 1,300 stocks to choose from. Our strategy offers a well-diversified portfolio of around 60 holdings across environmental markets and regions, with a balance of cyclical and defensive exposures and exciting growth stories.

The strategy is focused on ‘growth’ and ‘quality’ with less exposure to value (no financials or energy). The current year’s rotation from quality/growth to value led to a significant downgrade of the portfolio, while earnings production remained strong overall, especially given inflationary/chain challenges supply.

Which famous investor do you admire?

I would probably say Terry Smith for his disciplined fundamentals-driven investment process and focus on free cash flow and his consistent approach.

Name your favorite “Forever Stock”

Nothing is “forever” and our investment process will lead to sell discipline if we believe our bullish scenario is already priced in. But, in terms of name, a name with a huge market opportunity ahead of it, with strong management, market position, business model and strategy, I would say Nibe, a leading heat pump player listed in Stockholm, which have a critical role to play in decarbonizing heating and are particularly relevant given the Russian-Ukrainian conflict. Owned for 15 years with a management team throughout, they have a strong track record of organic and inorganic growth, tested in good and bad markets. It’s not a cheap name, but it’s downgraded significantly in current market conditions.

What would you never invest in?

We avoid business models that depend on the price of a particular commodity. For example, I looked at many lithium mining opportunities, but was hesitant to invest because I concluded (i) that I knew little about mining and felt unable to have an opinion solid and informed on a given resource, (ii) I have no confidence in what the price of lithium will be in one, three or 10 years. This has made it impossible to assess the opportunities and have the conviction in this area, so as far as electric vehicles are concerned, we have focused elsewhere, in particular on the power electronics and other critical components of the Supply Chain.

Growth or value?

The IEM is above all a proposition of “growth” and “quality”. It’s hard to say when the current spin to ‘value’ will end, but we choose to continue to focus on more expensive, high-quality companies as they tend to be best positioned to navigate the multitude of channels. supply and inflationary challenges in a slowing global growth environment. Ultimately, IEM aims to capture the superior long-term growth of environmental markets relative to the global economy that comes from being solution providers to some of the world’s most pressing challenges.

House or Pension?

We recently moved and are in the middle of an epic renovation job on our new home. We love a good “project”, and my wife is very creative and hands-on, which makes it a lot of fun. That said, this is my third and possibly last “project”. But I’m also a strong believer in savings and pensions and the snowball effect of cumulative returns.

What do you think of crypto?

I’m fully engrossed in staying on top of the environmental markets, but struggle to understand the underlying value of cryptocurrencies. I don’t know enough to make the call, bright or bad, but I don’t understand them well enough so I would never invest.

What can be done to increase diversity in fund management?

More outreach in schools and colleges to engage people from diverse backgrounds. You need more applicants to increase diversity. We have also worked on offering diversity-focused summer internships to provide exposure and opportunities for these groups. We are excited about diversity because we strongly believe that diverse teams think differently and make better decisions.

Have you ever engaged with a company and been particularly proud (or disappointed) of the result?

At Impax, we have focused a lot on engaging with companies on physical climate risks. Floods, droughts, sea level rise and extreme weather events pose heightened risks not only to businesses, but also to investors and the global economy. The location where a company operates its main facilities is a major factor in its exposure to physical risks. For example, we have engaged with the American company Graphic Packaging to share precise location data of their facilities so that we can analyze their physical climate risks. This allowed us and the company to understand these risks, including water stress, wood fiber supply and impacts on biodiversity. This has improved sustainability monitoring at the next level, with a continued commitment to extending it further down the supply chain.

What’s the best advice you’ve ever received?

“You are not your performance, neither good nor bad”. It’s important to keep some distance from your fund’s performance numbers because they hamper your ability to make good investment decisions and also lead to unhealthy ups and downs, depending on market conditions.

What would you be if you weren’t a fund manager?

I’m a big believer in alternative and complementary medicine and love the idea of ​​helping people directly. In another life, I might have been a practitioner – maybe homeopathy or osteopathy.