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The fund, a broad play across the spectrum of environmental markets, stands to benefitfrom U.S. and Chinese stimulus packages, which spur the transition to a greener economy.
Conventional wisdom, which pits environmental protection against economic vitality, finally turned on its head in early 2009, when U.S. and Chinese stimulus packages advanced environmental measures as tools to invigorate their economies. The $787 billion American Recovery and Reinvestment Act seeks to jump-start the economy by promoting the transition to a greener economy fueled by low-carbon energy. And China dedicated 12 percent of its $585 billion stimulus package to direct energy efficiency and environmental improvements, and committed to avoid investment in “energy and resource-intensive industries or high-pollution industries,” according to Minister of Environmental Protection Zhou Shengxian.
Pax World Funds’ launch of its Global Green Fund almost a year before seems prescient, as the fund seeks to capitalize on the transition to a green economy that the fund managers considered inevitable.
“As the Global Green Fund enters its second year, several of the stimulus measures being put in place, especially in the U.S. and China, have environmental issues very much at their core,” said Bruce Jenkyn-Jones, Portfolio Manager and Investment Director of London-based Impax Asset Management, the fund’s sub-adviser and a world leader amongst environmental asset managers. “Within the U.S. stimulus package, more than $80 billion has been allocated to direct investment in environmental markets and technologies, which will likely benefit selected portfolio holdings directly.”
The fund invests in environmental leaders around the globe, with holdings roughly balanced between companies in three broad categories: alternative energy and energy efficiency; water treatment and pollution control; and waste technology and resource management. This strategy exemplifies Pax World’s Sustainable Investing approach, an emerging investment discipline that fully integrates environmental, social, and governance (ESG) factors into investment analysis and decision-making.
In Pax World’s view, this process helps its fund managers identify companies that are more forward thinking and acting, better at managing risk, meet positive standards of corporate social responsibility, and are focused on the long term. Pax World further believes that strong corporate ESG performance correlates with strong financial performance. This belief is borne out by new research published in the 2008 book Sustainable Investing that found sustainable investment funds outperformed the S&P 500 by more than five percent between December 2002 and December 2007.
Instead of focusing narrowly on renewable energy, as some “green” funds are doing, the Pax World Global Green Fund is a broader play that harnesses returns across the spectrum of environmental markets, from energy efficiency to waste management. Indeed, clean energy is not alone in stimulating the transition to a greener economy, as all sectors are increasingly incorporating environmental technologies.
“As the world confronts converging crises such as climate change, resource depletion, and water scarcity, we need to undergo a sustainability revolution equal to the industrial revolution that shaped the world we live in today,” said Pax World CEO Joe Keefe. “The Pax World Global Green Fund is helping fuel this revolution, using sustainable investing as a tool to promote progressive change and benefit investors.”
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