Impax Shares Plummet as Green Investment Trust Faces Client Exodus

Impax Asset Management has reported a significant £2 billion withdrawal from its environmentally focused funds in the first quarter of the year. This mass exit has led to a sharp decline in the firm’s share price, prompting concerns about its future viability.

The London-based firm, which is listed on the AIM, anticipates a drop in revenue for the full financial year ending in September. Predicted figures range between £109 million and £113 million, a notable decrease from £141.9 million received in the previous year.

Impax is expected to lose a substantial portion of the assets tied to Impax Environmental Markets, an £800 million investment trust that faces challenges from Saba Capital, an activist investor based in New York. The trust is currently navigating an exit tender process designed to address these challenges.

In response to this financial turbulence, Impax has initiated a cost-cutting strategy that includes the elimination of an additional 20 positions. Analysts estimate that annual costs will decrease to approximately £94 million this financial year, down from £108.2 million last year.

Brokerage firm Peel Hunt has revised its forecast for Impax’s pre-tax profit, now estimating it at £16 million, reduced from £31.4 million, which is less than half of the previous year’s £34.3 million. Despite these setbacks, Impax’s founder and CEO Ian Simm indicated that investment performance has shown improvement in the second quarter, with 63 per cent of assets under management outperforming their benchmarks.

Simm expressed hope that a meaningful percentage of shareholders in the Impax Environmental Markets trust would remain loyal to the firm, potentially transitioning to an Impax-managed open-ended fund that pursues a similar investment strategy. He noted withdrawals in the quarter were largely driven by a small number of institutional investors, while funds managed for wealth managers catering to retail clients remained stable.

As of the latest quarter, total assets under management decreased to £22.3 billion from £24.2 billion recorded a year prior. Founded in 1998, Impax has specialised in green investments, thriving until 2022 amid significant influxes of investor capital into renewable energy and energy efficiency projects. However, rising interest rates, negative sentiment surrounding the sector, and a broader shift away from actively managed funds towards passive index tracker options have adversely affected the firm’s performance.

The shares, which soared as high as £14 in 2021, saw a sharp decline of 30.5p, or 24.2 per cent, falling to 95.25p in Friday trading.

Last year, Impax allocated £10 million to a share buyback programme, purchasing shares at an average rate of 180p. Simm, who owns 7.5 per cent of the firm, stated that the fundamentals supporting their investment thesis continue to strengthen, particularly in renewable energy and energy efficiency, which are vital components of energy security, especially amid current geopolitical tensions.