Russia-Ukraine Conflict: Market Perspective from Impax

Russia's invasion of the Ukraine has sent shockwaves around the globe, leading to a devastating human cost, market volatility and economic uncertainty. As this is a developing and potentially escalating conflict, we anticipate that the geopolitical and economic effects will rapidly change.

Below is a summary of the investment team's current perspective on how the crisis is impacting the IEM portfolio and the global investment outlook.

• IEM has no direct holdings in either Russian or Ukrainian equities. The managers have also implemented a trade block on Russian and Belarus securities across all products effective 10 March. This block will be reviewed end September 2022.
• Direct revenue exposure to Russia and Ukraine in companies held within the IEM portfolio is very limited.
• The current tension has initially led to inflationary rises in oil, gas and soft commodities. This has led to strong performance from names in the MSCI GICS Energy sector, to which the IEM portfolio has no exposure.
• There are potential secondary effects on the IEM portfolio from these rises in commodity prices:
  • Impax expects that the rising cost of energy and oil derivatives will impact portfolio companies to varying degrees depending on their hedging policies and ability to pass through higher input costs.
  • Impax also expects this rise in input prices to drive an increased focus on energy efficiency as longer-term, energy spikes tend to accelerate the shift to diversify and decarbonise.
  • At a policy level, security of energy supply concerns will increase, further prioritizing the shift away from fossil fuels such as natural gas.
• Impax will position the IEM portfolio to take advantage of share price falls in companies where we believe they have been sold more on sentiment than for reasons relating to changes underlying earnings or long-term fundamentals.

Impax Asset Management Group

Impax has undertaken a review of clients, suppliers and vendors to Impax Asset Management Group companies to confirm compliance with recently introduced sanctions and have found no areas of concern. Sanction screening is part of our regular onboarding process, and we will continue to develop our approach to encompass any new sanctions with regard to the conflict in Ukraine as they are announced.

Impax is donating to the British Red Cross' Ukraine appeal and will be matching colleagues' personal donations to support humanitarian efforts for the people of Ukraine.

A fuller discussion on the climate implications of the conflict are available in Impax Chief Executive, Ian Simm's article "Why market turmoil will not derail the Transition to a More Sustainable Economy" here.