Annual Report & Accounts

For the year ended 31 December 2022

Annual Report & Accounts

For the year ended

31 December 2022

impaxam.com

IMPAX ASSET MANAGEMENT

clientservices@impaxam.com



@ImpaxAM

Impax Environmental Markets plc Annual Report and Accounts 2022

Impax Asset Management

CBP018022

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IMPAX ENVIRONMENTAL

MARKETS PLC

clientservices@impaxam.com

@IEMplc

Impax Environmental Markets plc



impaxenvironmental

marketsplc.co.uk

Contents

Strategic Report

Investment Objective, Financial Information

Performance Summary 1

Chairman’s Statement 2

Manager’s Report 5

Structure of the Portfolio 9

Ten Largest Investments 10

Details of Individual Holdings 12

Environmental Markets 14

Sustainability & Stewardship in the Portfolio 19

IEM Climate Disclosure 21

Biodiversity and Nature 25

IEM Stewardship 30

Investment Policy, Results and

Other Information 32

Engaging with our Stakeholders 39

Governance

Board of Directors 43

Directors’ Report 45

Corporate Governance 49

Directors’ Remuneration Policy 53

Directors’ Remuneration Implementation Report 54

Report of the Audit Committee 57

Statement of Directors’ Responsibilities 59

Independent Auditor’s Report 60

Financials

Income Statement 66

Balance Sheet 67

Statement of Changes in Equity 68

Statement of Cash Flows 69

Notes to the Financial Statements 70

Investor Information

10 Year Financial Record 84

Alternative Performance Measures 85

Glossary 87

Directors, Manager and Advisers 88

Notice of Annual General Meeting 89

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 1

Strategic report

2021

2022

-15.0%

-20.1%

-22.8%

-8.1%

21.3%

13.1%

30.1%

19.6%

FINANCIAL INFORMATION

At 31 December 2022

PERFORMANCE SUMMARY

For the year ended 31 December 2022 % Change

Investment Objective

-15.0%

NAV total return per ordinary share

-22.8%

Share price total return per ordinary share

-8.1%

MSCI AC world index

-20.1%

FTSE ET100 index

ALTERNATIVE PERFORMANCE MEASURES (“APMS”)

The disclosures as indicated in footnote 1 above are considered to represent the Company’s APMs. Definitions of

these APMs and other performance measures used by the Company, together with how these measures have been

calculated, can be found on pages 85 and 86.

The investment objective of Impax Environmental Markets plc (the “Company” or

"IEM") is to enable investors to benefit from growth in the markets for cleaner or

more efficient delivery of basic services of energy, water and waste.

Investments are made predominantly in quoted companies which provide, utilise, implement or

advise upon technology-based systems, products or services in environmental markets, particularly

those of alternative energy and energy efficiency, water treatment and pollution control, and waste

technology and resource management (which includes sustainable food, agriculture and forestry).

1. These are alternative performance measures

2. Total returns in sterling for the year to 31 December 2022

3. Source: Bloomberg and FactSet

2021

2022

419.5p

496.4p

419.5p

547.0p

0.0%

10.2%

£1,276m

0.81%

£1,480m

0.85%

419.5p

Net asset value (“NAV”) per ordinary share

419.5p

Ordinary share price

0.0%

Ordinary share price premium to NAV

£1,276m

0.81%

Net assets

Ongoing charges

2 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Chairman’s Statement

PERFORMANCE

After many years of outperformance, there is no disguising

the fact that 2022 was a difficult year for IEM, both on

an absolute and relative basis, with IEM losing ground

relative to its global equity comparator index (the MSCI All

Countries World Index or “MSCI ACWI”). IEM’s net asset

value (“NAV”) per share on a total return basis declined by

-15.0%, compared to a fall in the MSCI ACWI of -8.1%. As

our Manager, Impax Asset Management (AIFM) Limited

(the “Manager”, or “Impax”), explains in more detail, much

of this was due to the valuations at which our investee

company holdings trade coming under pressure, but some

underperformance was also due to the fact that we do

not invest in sectors such as fossil fuels and commodity

companies, which performed strongly during 2022.

IEM’s NAV did, however, outperform its environmental

markets comparator, the FTSE Environmental Technology

100 index (“FTSE ET100”), which fell by -20.1% over the

year. This index was greatly affected by sharp declines in

some expensive technology companies which dominate

that index, including electric car companies Tesla and Nio,

and semiconductor names including Tokyo Electron and

Infineon Technologies, all of which are types of investment

which our Manager tends to avoid.

IEM’s share price total return was -22.8% over the year,

affected by the -15.0% decline in NAV per share and

exacerbated by the evaporation of the premium at which

our shares were trading at the start of the year. We ended

the year with our share price on par with NAV.

Notwithstanding the disappointing outcome for 2022, the

longer term returns for IEM remain very respectable: three-

year annualised performance of the share price and NAV are

9.0% and 10.6%, respectively, compared to 7.4% for MSCI

ACWI. Over five years, the annualised returns are 11.4% for the

share price and 9.5% for the NAV versus 7.7% for MSCI ACWI.

THE INVESTMENT CASE

The Board enthusiastically supports the Manager’s belief

that companies offering solutions to the sustainability

challenges facing the world will tend to outperform the

wider market over the longer term.

The rise in energy prices that is causing financial hardship

is expected, over the longer-term, to be a boost for IEM

and the sectors in which it invests. High fossil fuel prices

and concerns about energy security, allied with efforts

to mitigate and adapt to climate change, support the

economics of energy efficiency investments and reinforce

the case for the transition away from hydrocarbons and

towards renewables. This is a message which IEM has been

preaching for many years; what is new for 2022 is that the

outrageous behaviour of Russia should be the factor to

validate the thesis beyond doubt.

The year ended 31 December 2022

has seen the outbreak of a war in

Europe, the return of inflation and the

highest interest rates in 15 years. These

factors created a difficult backdrop for

financial markets across most asset

classes and especially for the higher

rated ‘growth’ companies in which

Impax Environmental Markets plc tends

to invest. Thus, after several years of

strong performance, IEM’s share price

declined and the Company’s net asset

value underperformed its global equities

comparator index during the year (the

MSCI ACWI index), while outperforming

its environmental markets comparator

index (the FTSE Environmental

Technology 100 index).

High inflation, driven by surging energy and food prices,

and continuing supply chain bottlenecks, were among the

defining features of 2022. Global consumer prices rose

by 8.8%, prompting central banks to tighten monetary

policy dramatically. Rising interest rates typically act to

the detriment of smaller and growth companies, as the

value ascribed to their future cashflows is discounted at a

higher rate. This process, often referred to as ‘de-rating’,

has been seen across our portfolio and, while painful for our

existing holdings, is now creating interesting investment

opportunities. There are signs that inflation may be close to

peaking, and that we may be near to the end of the interest

rate rises planned by central banks.

More than a year on from Russia's invasion of Ukraine, the

war continues to hang as a black cloud over the outlook

for all western economies. It is a deeply unpleasant conflict

in which new horrors emerge on a weekly basis; however,

as noted in my previous report, for IEM there is something

of a silver lining within that cloud. High energy prices

and Russia’s use of hydrocarbon exports as a weapon

are causing a major re-think on fuel usage and security

of supply. This in turn is increasing the West’s focus on

renewable sources of energy, while elevated gas prices

drive up returns on investment in solar, wind and other

green power technologies.

John Scott

Chairman

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 3

Strategic report

This transition is being supported by continuing positive

policy developments. The EU has responded to the energy

crisis by redoubling its policy support for clean energy, with

the introduction of its €210 billion REPowerEU package of

legislation.

In an unexpected development in July 2022,

the

US Senate passed the Inflation Reduction Act, President

JoeBiden’s re-badged climate legislation. This contains

US$369 billion in subsidies for green technologies.

Changes of government in both Australia and Brazil have

improved the climate policy outlook in those important

economies. In China, meanwhile, the 14

Five-Year Plan is

driving the deployment of renewables.

There was a meaningful agreement to tackle biodiversity

loss at the COP15 biodiversity summit in December 2022.

An important pledge was made to protect 30% of

the world’s land and oceans, alongside commitments

on reducing risks posed to nature from nutrients and

pesticides, and a pledge to direct US$200 billion towards

protecting biodiversity by 2030.

While it arguably

fell short of what some had hoped for, it provides a

framework for starting to address the global crisis in nature.

Society has come to understand that it cannot address

climate change without solving biodiversity challenges,

and vice versa.

The financial services industry is trying to catch up rapidly

and is now offering investors many products purporting to

be sympathetic to environmental concerns. We welcome

the sharply increased scrutiny by investors, media and

regulators of the environmental, social and governance

(ESG) credentials of sustainable investment vehicles, of

which IEM has been one for more than two decades. The

Company has always been transparent in its approach to,

and management of, ESG factors (even before the term

ESG was invented), and in recent years the Company has

tracked and disclosed measures of the impact that the

portfolio investments make on a number of environmental

metrics (see pages 17 to 20). We also report our climate

risks and opportunities, which we continue to develop

in line with the recommendations of the Task Force on

Climate-related Financial Disclosures (see pages 21 to 24).

Ensuring that we continue to follow leading market practice

in this area is squarely on the Board’s agenda.

DIVIDEND

IEM’s net revenue return for the year was £13.6million,

compared with £9.4 million earned during 2021. The

increase reflects the recovery in earnings seen in our

underlying investments as they put behind them the effects

of the Covid-19 pandemic.

IEM’s dividend policy, as approved by shareholders at the

May 2022 AGM, is to declare two dividends each year.

On 28 July 2022, the Board announced a first interim

dividend for this financial year of 1.5 pence per Ordinary

Share which was paid on 26 August. Thesecond interim

dividend, of 2.5pence per Ordinary Share, was declared

on 1 February 2023 and paid on 10 March 2023. The total

dividend per share paid for 2022 is therefore 4.0 pence

per share, an increase of 42.9% on the 2.8 pence paid in

respect of 2021.

It remains the Board's intention to pay out substantially

all earnings by way of dividends, the quantum of which

is affected both by the level of dividends received by the

Company and by the number of shares in issue at the

relevant record date.

GEARING

At 31 December 2022, IEM’s net gearing was 2.1%, slightly

above the 1.6% net gearing at the end of 2021. In recent

years IEM has made little use of gearing, allocating

whatever new capacity was available from our Manager to

issue additional equity and thereby meet the strong investor

demand that prevailed. The Manager continues to advise

of capacity constraints with our investment bias towards

the smaller end of the market; any increase in our capital

by way of borrowings results in a concomitant reduction in

our ability to issue equity. However, as discussed below, IEM

is now trading close to NAV and expanding the investment

capacity via increased gearing has become an option which

is under active consideration; credit facilities are due for

renewal in September 2023.

PREMIUM AND DISCOUNT CONTROL

IEM’s Ordinary Shares traded at a premium to NAV of 10.2%

on 31 December 2021, at NAV (no premium or discount) on

31 December 2022 and traded during the year between a

premium of 14.1% and a discount of -6.6%.

The premium or discount to underlying NAV is actively

monitored by the Board and our brokers. Havingstarted the

year with continued investor demand and issuing shares at

a premium, in February 2022 – with the onset of the Ukraine

war and in tandem with many other investment companies –

IEM's shares moved to a discount. Since then, the Board has

used its authority judiciously to purchase its own shares, to

prevent a material discount from emerging.

The Board’s intention remains to keep IEM’s shares trading

close to NAV during normal market conditions and it will

continue to exercise its authority to buy back or to issue

shares accordingly.

There were 298.1million Ordinary Shares in issue at the

start of the year, increasing to 304.2 million by the year

end, reflecting new shares issued of 7.6million with

3.1million bought back into treasury. Of the shares bought

1 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_3131

2 https://www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/

3 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7834

To Come

“ We welcome the sharply increased

scrutiny by investors, media and

regulators of the ESG credentials of

sustainable investment products, of

which IEM has been one for more than

two decades.”

4 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

back, 1.6million were subsequently reissued from treasury,

resulting in there being 1.5 million shares in treasury at

the year end.

THE BOARD

The Board has established a Sustainability Reporting

Committee to consider and help the Board to assess the

relevance to IEM of the growing body of sustainability

issues. The Committee will receive reports from the

Manager regarding its sustainability activities as they relate

to IEM’s portfolio, the outcomes of such activities and its

sustainability metrics. The Committee will review and discuss

the relevance of such activities and metrics in meeting IEM’s

investment objective, investment policy and stakeholders’

expectations, make recommendations to the Board, and

oversee IEM’s regulatory and voluntary sustainability

reporting. Further details on the committee and its activities

are given on pages 29 to 30.

At the AGM in May 2022, I was re-elected to the Board to

serve for a tenth year, taking account of the circumstances

following the death of chairman-designate Simon Fraser. I

am delighted to report that Glen Suarez joined the Board

in August 2022 and will succeed me as Chairman at the

conclusion of the 2023 AGM, whereupon I will retire from

the Board. Glen, who is currently executive chairman at

Knight Vinke Asset Management, was previously chairman

of Edinburgh Investment Trust plc, and earlier spent eight

years as head of European energy, infrastructure and utilities

investment banking at Morgan Stanley.

As previously announced, Vicky Hastings is retiring at the

conclusion of the 2023 AGM after 10 years and Nick Hurd

stepped down from the Board at the end of 2022. I would

like to thank both Vicky and Nick for their excellent service

and invaluable contributions to the Company during their

tenures. Recruitment is underway to find their replacements.

ANNUAL GENERAL MEETING

This year's annual general meeting will be held at 7th

Floor, 30 Panton Street, London, SW1Y 4AJ on Tuesday,

16 May 2023 at 3.00pm.

We are pleased to invite shareholders to attend the AGM in

person to meet the Board and our investment managers.

There will be a presentation and the opportunity to ask

questions. Shareholders are welcome to join through our

website at www.impaxenvironmentalmarkets.co.uk. As is our

normal practice, there will be live voting for those physically

present at the AGM. We are not able to offer live voting via

the website, and we therefore request all shareholders, and

particularly those who cannot attend physically, to submit

their votes by proxy, ahead of the deadline of 3.00pm on

12 May 2023, to ensure that their vote counts at the AGM.

Shareholders' questions for either the Board or

the investment managers should be submitted to

clientservices@impaxam.com by midday on 12 May 2023.

IEM's website at www.impaxenvironmentalmarkets.co.uk

can be used to access more insights and also subscribe for

regular communications.

OUTLOOK

After the macro-economic and geopolitical challenges

of the past year, I am hopeful that 2023 will provide a

more encouraging backdrop for environmental markets

generally and for IEM in particular. While there appears to

be no immediate prospect of the war in Ukraine coming

to an end, we are adapting to the supply and price shocks

it has created. High energy prices and energy security

considerations have strengthened the case for investment in

alternative sources and accelerated the net-zero transition.

Geopolitical tensions make that transition less smooth than

might otherwise have been the case. COP27 demonstrated

the difficulty of maintaining momentum in global policy in

the context of intense geopolitical rivalry and wars, both

actual and (dis)informational. For the time being, we are

seeing the regionalisation of climate policy, with progress in

some parts of the world being at odds with foot dragging

(or worse) in others. As discussed in more detail in the

Manager’s Report, the Inflation Reduction Act in the US and

REPowerEU in Europe show how progress at the regional

and country level can maintain the overall momentum in

environmental policy.

When IEM was founded in 2002, with an initial market value

of £50 million, it faced a lonely existence in an investment

sector which had yet to be properly classified. 21 years

on, ESG is on everyone’s lips and the sector – which our

investment managers at Impax Asset Management have

played a large part in defining – is now centre stage,

looking at an investable universe which is many times

deeper than two decades ago. Taking advantage of this,

IEM has delivered a 16.1% annualised share price total

return over the past 10 years and the Company is now a

member of the FTSE 250 index, with a market capitalisation

at 25March 2023 of some £1.3 billion. The Board takes

this opportunity to record its appreciation to Bruce

Jenkyn-Jones (who has been at the helm from the start), Jon

Forster (who has also been on board since inception) and

Fotis Chatzimichalakis (who became one of our investment

managers in October 2021), but also to the rest of the team

for their collective achievement in steering IEM with such a

steady hand.

It has been deeply rewarding for those of us who have

been able to observe this transformation in the fortunes of

environmentally-friendly investing, a good example of how

you can make money for investors while leaving the world

a better and cleaner place. Notwithstanding the substantial

market correction we saw in 2022, widespread recognition

of the urgent need to address the world’s environmental and

social challenges provides our investment managers with the

continuing opportunity to generate above-market returns.

Iremain convinced of the merits of the investment mandate

on which the Company is based.

John Scott, Chairman

31 March 2023

Chairman's Statement continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 5

Strategic report

Jon Forster Fotis Chatzimichalakis

Following strong performance in

the last three years, 2022 proved a

challenging year for most parts of the

market, including IEM. Since the interim

report, performance was broadly in

line with MSCI ACWI and ahead of the

FTSE ET100, leading to full year NAV

performance nearly 7%behind MSCI

ACWI but slightly more than 5% ahead of

the FTSE ET100.

Many of the themes highlighted in the interim report

remained relevant for the full year. As discussed in the

Chairman’s Statement, rising interest rates led to a

‘de-rating’ or decline of valuation multiples for growth

companies which are a core focus of IEM, and a switch

into cheaper value sectors such as energy and financials

to which IEM has no exposure since these companies

generally do not meet our criterion of having a minimum

of 50% revenues generated from environmental

products or services. This trend continued in the second

half, with the underperformance of MSCI ACWI Growth

Index vs. MSCI ACWI Value Index widening from 17.3%

at the interim report to 23.5% for the full year. This

provided a challenging backdrop for IEM's performance

and was seen across a broad swathe of environmental

markets and regions.

Whilst there were other challenges, as discussed below,

portfolio holdings mostly did a creditable job navigating

the difficulties of disrupted supply chains and an

inflationary environment, and crucially demonstrated

the pricing power essential to maintaining profitability.

Ongoing strength in renewable energy holdings

and a resurgence of M&A activity for some stocks

in the portfolio which then performed well, are also

discussed below.

KEY DEVELOPMENTS AND DRIVERS FOR

ENVIRONMENTAL MARKETS

Energy and climate

The Russian invasion of Ukraine, and its subsequent

use of energy exports as a weapon against the West,

upended energy markets in 2022 and created wider

economic disruption with dramatic increases in energy

prices generating a significant reaction from consuming

countries. With widespread concerns of recession across

Europe, prompt action by the EU in particular - both by

increasing the supply of natural gas from other sources

and influencing demand - along with a relatively warm

winter, has enabled sufficient gas to be stored in Europe,

allowing power and gas prices to retreat from their

August highs.

The response is also triggering a faster transition away

from fossil fuels. The International Energy Agency said

the energy crisis is driving “a sharp acceleration” in the

installation of renewables; and has increased its five-year

forecast by 30% over the last year as energy security

concerns have prompted governments to increase policy

support for renewables.

Specifically, the EU’s REPowerEU package directs

funding to increase renewable energy generation, raises

the bloc’s energy efficiency target and sets ambitious

goals for hydrogen production. In addition, the EU has

tightened the emission reduction targets in its ‘Fit for

55’ package, phasing out free allowances more quickly,

and creating a social climate fund to support vulnerable

households and small businesses.

The EU is also pursuing measures to ensure that its

climate policy does not simply export its greenhouse

gas emissions to countries without equivalent costs on

carbon. From October 2023, it will begin introducing

its Carbon Border Adjustment Mechanism, which will

require exporters of carbon-intensive commodities such

as iron and steel, cement, fertilisers and aluminium to

either buy EU carbon allowances or demonstrate they

have paid a carbon price domestically.

While this is a

contentious application of carbon pricing to international

trade, we would expect that, over time, it will encourage

tighter climate policy within exporting countries.

Manager’s

Report

Bruce Jenkyn-Jones

4 https://www.iea.org/news/renewable-power-s-growth-is-being-turbocharged-as-countries-seek-to-strengthen-energy-security

5 https://www.consilium.europa.eu/en/policies/green-deal/fit-for-55-the-eu-plan-for-a-green-transition/

6 https://taxation-customs.ec.europa.eu/green-taxation-0/carbon-border-adjustment-mechanism_en

6 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Across the Atlantic, the US Inflation Reduction

Act – so named to win the crucial casting vote of

conservative Democratic Senator Joe Manchin –

provided an unexpected boost to the clean energy

agenda. Manchin’s support revived a version of

President Biden’s Build Back Better legislation which,

while considerably smaller in dollar terms than the

original proposal, still represents the largest financial

commitment to addressing climate change in any

individual policy yet crafted. It provides US$369 billion

in a balanced package of clean energy, electric vehicle

and clean technology tax incentives and subsidies,

including support for domestic manufacturing. These

measures will get the US close to the 40% reduction

in greenhouse gas emissions by 2030

that the Biden

administration committed to when it re-joined the

Paris Agreement. Asfar as IEM is concerned, it will

provide a material boost in earnings to a range of

our holdings with material US exposure (44% of the

portfolio has end market exposure to the US), including

SolarEdge (SolarEnergy Generation Equipment, US),

Ormat (Renewable Energy Developers & IPPs, US) and

EDP Renovaveis (Renewable Energy Developers &

IPPs, Portugal).

Despite these positive developments, the world is still on

course to exceed the Paris Agreement’s less-ambitious

goal of holding warming below 2°C – let alone stay

below the preferred 1.5°C threshold. Current policies

around the world would lead to a range of 2.2°C to

3.4°C of warming by the end of the century, according

to Climate Action Tracker.

While this is a sobering

observation, the implication that governments are likely

to take further policy action to promote the transition

to net zero should support our investments that are

exposed to this theme. More investment will also be

needed in adaptation to the effects of climate change.

IEM invests in climate adaptation in Water Distribution

& Infrastructure (Advanced Drainage Systems and Zurn

Elkay Water Solutions, both US) and Water Treatment

(Amiad Water Systems, Israel and Pentair, US), as well as

backup power solutions and power storage, as provided

by Generac (Power Storage & UPS, US). A breakdown of

IEM’s portfolio by environmental markets classification is

given on page 9.

Within climate and energy, we favour energy efficiency

names rather than renewable energy generators. The

latter continue to face obstacles to growth, particularly

around planning and permitting, and the sub-sector

continues to face uncertainties around the exact shape

of regulatory intervention in energy markets. Energy

efficiency, however, tends to be a more straightforward

investment proposition driven, as it is, by simple

economics. These become much more compelling when

energy prices are high, benefitting amongst others

industrial steam specialist Spirax Sarco Engineering

(UK), heat pump supplier Nibe (Sweden) and efficient

lighting company Signify (Netherlands).

Biodiversity and sustainable food production

While the UN climate talks may have underwhelmed

in 2022, a breakthrough international agreement was

reached on biodiversity at the end of the year. At COP15

of the Convention on Biological Diversity in Montreal,

a Global Biodiversity Framework (“GBF”) was agreed,

setting important targets for the protection of nature

by 2030 and pledges for US$30 billion/year in financing

for biodiversity protection in poor countries by that

date.

Important targets in the GBF include a goal of

protecting 30% of land and oceans, cutting nutrient

pollution and overall risks from pesticides and toxic

chemicals by half by 2030.

Agreement on an ambitious GBF, which hung in the

balance over two years of negotiations, coincides with

growing concerns about biodiversity loss and rising

interest among companies and investors in reducing

their impacts and dependencies on nature.

Many of the themes pursued by IEM help to reduce

pressures on biodiversity, caused by drivers such as

land-use change, overexploitation of organisms, climate

change, pollution and invasive non-native species.

For example, solutions around food waste reduction,

plant-based proteins, alternative feeds to soy, resource

efficiency and circularity help to reduce pressures on

tropical forests. Alternative animal feeds and sustainable

aquaculture can help to address overexploitation of

species, while our clean energy and energy efficiency

picks help to address climate change, which puts stress

on biodiversity.

The Company’s investments in water treatment,

pollution control and testing all contribute to efforts

to reduce run-off and pollutants that harm nature,

while its investments in companies which recycle and

treat plastics can help reduce pressures on marine

biodiversity, in particular. IEM also invests in Amiad

Water Systems (Water Treatment, Israel) that treats

ballast water transported around the world by shipping

companies, which helps to address the spread of

non-native invasive species.

IEM has published its Policy on Nature, Biodiversity,

and Deforestation on the website and a section on

biodiversity features in this report on pages 25 to 29.

Biodiversity loss, climate change and food production

are intimately linked, and the three themes were

prominently addressed at COP27. At the climate talks,

food security was “a fundamental priority”, highlighted

on the summit’s cover decision for the first time,

alongside protecting nature and water. At the talks, the

UN Food and Agricultural Organization committed to

developing a net-zero, nature positive roadmap for the

sector, which accounts for around one-fifth of global

emissions. IEM’s investments in sustainable food and

agriculture are well-positioned to help deliver against

such a roadmap.

7 https://www.science.org/content/article/surprise-climate-bill-will-meet-ambitious-goal-40-cut-us-emissions-energy-models#:~:text=The%20

backers%E2%80%94Senate%20Majority%20Leader,by%202030%2C%20compared%20with%202005.

8 https://climateactiontracker.org/

9 https://www.unep.org/news-and-stories/story/cop15-ends-landmark-biodiversity-agreement

Manager’s Report continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 7

Strategic report

ABSOLUTE PERFORMANCE CONTRIBUTORS

AND DETRACTORS

Contributors

The themes highlighted in the Interim Report remain

relevant for the year as a whole.

Renewable energy holdings continued to deliver solid

performance, benefitting from supportive policy

momentum, elevated power prices and a normalisation

of supply chains. The strength was across both project

developers such as Terna Energy (Greece), Ormat (US)

and Northland Power (Canada), and renewable energy

equipment manufacturers like SolarEdge Technologies

(Solar Energy Generation Equipment, US) and Vestas

(Wind Power Generation Equipment, Denmark).

After a reset in valuations, M&A activity in environmental

markets has picked up. Those companies in the

portfolio targeted for merger or acquisition performed

well. Switch (Cloud Computing, US) has been taken

private at an attractive premium – from the initial

indication of a likely takeover in August 2021, to the

deal announcement in May 2022, the share price of the

company appreciated 62%. For 2022, Switch positively

contributed 0.53% to the portfolio's performance. Terna

Energy (Renewable Energy Developers & IPPs, Greece)

also benefitted from takeover interest, contributing

0.64% to performance, with the company being viewed

as a potential takeout target, while Brambles (Resource

Circularity & Efficiency, Australia) contributed 0.44% to

performance as the company attracted interest from

private equity buyers.

Another cluster of strength during the year was

companies with a ‘value’ orientation, with CIA

Saneamento Basico (Water Utilities, Brazil) and Graphic

Packaging (Food Safety & Packaging, US) standing

out. The former is a regulated water utility in Sao Paolo,

Brazil and during the year rose on expectations of

more favourable regulatory conditions that could lead

to an eventual privatisation of the company. Graphic

Packaging, a packaging company with a high recycled

inputs content, performed well, supported by resilient

consumer end-markets and an improving price /

cost environment.

Finally, earnings delivery has been solid overall during

the year with holdings navigating this challenging

market and exhibiting pricing power in the current

inflationary environment. Clean Harbors (Hazardous

Waste Management, US) delivered very good results,

reflecting its dominant market position in a supply

constrained market. PTC (Efficient IT, US) benefitted

from a subscription-based business model and a

resilient growth profile.

Detractors

The market rotation from ‘growth’ towards ‘value’

companies continued throughout the year and has

led to a material de-rating of holdings exposed to

these style factors. These companies' share prices

dropped as investors took into account rising interest

rates when assessing future cashflows, resulting in

lower valuations today. Names most impacted include

Cryoport (Resource Circularity & Efficiency, US), Spirax

Sarco Engineering (Industrial Energy Efficiency, UK),

Eurofins (Environmental Testing & Monitoring, France),

Croda (Recycled, Recyclable Products, UK) and Nibe

(Buildings Energy Efficiency, Sweden).

Against the backdrop of rising interest rates and

increased likelihood of a recession, companies

exposed to cyclical end-markets suffered during the

year. Holdings exposed to construction activity have

been particularly weak, with water infrastructure and

treatment companies like Aalberts (Netherlands),

Advanced Drainage (US), Zurn Elkay Water Solutions

(US), and Pentair (US) standing out. Similarly, Lenzing

(Resource Circularity & Efficiency, Austria) fell following

weakness in textile markets and rising energy costs.

Finally, Generac (Power Storage & UPS, US) suffered

during the year due to supply chain constraints and

on the back of concerns around the company’s sales

outlook for 2023 after two years of strong growth.

RoyalDSM (Sustainable Agriculture, Netherlands)

struggled with rising input costs (namely energy) and

concerns around the resilience of the nutrition business

in a recessionary environment.

We remain positive on the long-term prospects for the

holdings discussed in this section and made selective

additions to our holdings over the year.

RELATIVE PERFORMANCE ANALYSIS

Performance relative to MSCI ACWI

12 Months ended

31 December 2022

NAV total return (15.0)

MSCI ACWI total return (8.1)

Relative performance (6.9)

Analysis of relative performance

Portfolio total return (13.5)

MSCI ACWI total return (8.1)

Portfolio underperformance (5.4)

Borrowing:

Gearing effect (0.4)

Finance costs (0.1)

Management fee (0.7)

Other expenses (0.1)

Trading Costs (0.1)

Share transactions:

Issues 0.1

Buy-backs –

Tax (0.2)

Total relative NAV performance (6.9)

8 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Performance relative to FTSE ET100

12 Months ended

31 December 2022

NAV total return (15.0)

FTSE ET100 total return (20.1)

Relative performance 5.1

Analysis of relative performance

Portfolio total return (13.5)

FTSE ET100 total return (20.1)

Portfolio outperformance 6.6

Borrowing:

Gearing effect (0.4)

Finance costs (0.1)

Management fee (0.7)

Other expenses (0.1)

Trading Costs (0.1)

Share transactions:

Issues 0.1

Buy-backs –

Tax (0.2)

Total relative NAV performance 5.1

PORTFOLIO POSITIONING, ACTIVITY,

VALUATION ANDRISK

At the end of the year, IEM’s portfolio comprised 58 listed

holdings with no active unlisted investments following

the write down to zero in December of the legacy

unlisted position (previously 0.05%) in Ensyn. Portfolio

detail is provided on pages 12 to 13 and positioning by

sector and region is set out on page 9. Positioning is

consistent with that presented in the interim report. The

portfolio maintains a balance of high-quality cyclical and

defensive names across a broad range of environmental

markets and, whilst maintaining a high exposure to more

economically defensive business models, activity is

progressively shifting to cyclical and growth names with

beaten down valuations and strong balance sheets.

Activity in the second half of the year saw further

consolidation of holdings with the sale of Itron (Smart

& Efficient Grids, US) following ongoing execution

challenges and Salmar (Sustainable Aquaculture,

Norway) following the announcement by the Norwegian

government of a proposed 40% resource tax for salmon

farmers, negatively impacting industry economics and

growth prospects.

Rational (Technology & Logistics, Germany), a leading

supplier of high efficiency ovens into restaurants, fast

food outlets and institutional markets (schools, hospitals,

etc), was added back into the portfolio following a share

price collapse prompted by recession fears and the

impact on its customer base. With best-in-class margins

and returns on capital, and a strong ‘net cash’ balance

sheet, this company is well positioned to weather

the current challenges and provides exposure to a

compelling growth story as restaurants aim to reduce

food waste, improve efficiency and simultaneously cope

with ongoing labour shortages.

DS Smith (Food Safety & Packaging, UK) was exited

in favour of Smurfit Kappa Group (Food Safety &

Packaging, Ireland), a market leading fibre-based

packaging company with a consistent track record

of organic growth, compelling positioning in growth

markets in Latin America and attractive financial metrics.

Switch (Cloud Computing, US) was exited on the

completion of the recent M&A which resulted in the

company being taken private.

Regarding valuation, the portfolio experienced a

significant fall or ‘de-rating’ in its next 12 months’ (or

forward) price-to-earnings ratio, from an undoubtedly

high level of 24.6x, as flagged in the last annual

report, to 18.4x at the end of the year. This forward

price-to-earnings ratio is in line with long-term average

levels, despite an investment case that is considered

stronger given drivers including the recent policy push

towards net-zero emissions and actions to address

energy security issues.

OUTLOOK

Equity markets have had a volatile start to 2023, with

early strength reversed in March by the sudden collapse

of Silicon Valley Bank in the US and forced takeover of

Credit Suisse by UBS in Europe. Fears of a new credit

crisis have driven material underperformance of small

and mid-cap markets in which IEM invests vs MSCI ACWI

overall. With this backdrop, the recent focus has been on

economically defensive sectors and business models and

on companies with strong balance sheets, which are well

placed to weather these near-term challenges.

Notwithstanding the above, with a medium-

term perspective we believe that the investment

case underpinning IEM remains compelling, and

that companies providing innovative solutions to

environmental challenges will continue to thrive and

experience superior growth relative to the global

economy. Continued strong policy support, energy

price volatility and a renewed focus on energy security

are supportive of opportunities across a wide range

of environmental markets. Recent volatility leaves the

portfolio valuation in line with long term average levels,

which is considered attractive given the strengthening

underlying investment case.

Investment Managers

Bruce Jenkyn-Jones

Jon Forster

Fotis Chatzimichalakis

31 March 2023

Manager’s Report continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 9

Strategic report

Structure of the Portfolio

As at 31 December 2022

Breakdown by environmental sector

IEM FTSE ET100 Index

Breakdown

by region

North America, 50%

Europe, 36%

Asia Pacific, 12%

Rest of World, 2%

Breakdown by

company profitability

Profitable, 97%

Unprofitable, 3%

Breakdown by

market capitalisation

Large Cap

(US$20bn to US$200bn), 8%

Mid Cap (US$5bn to

US$20bn), 53%

Small Cap

(US$0.5bn to US$5bn), 37%

Micro Cap

(less than US$0.5bn), 2%

14%

19%

10%

12%

14%

30%

24%

10%

12%

18%

15%

Alternative Energy¹

Water Infrastructure &

Technologies

Digital

Infrastructure¹,²

Energy Management &

Efficiency¹

Environmental

Services & Resources

2,3

Resource Efficiency &

Waste Management²

Sustainable Food &

Agriculture²

Transport Solutions

1,3

Investment policy classification

1. Alternative Energy and Energy Efficiency.

2. Waste Technologies and Resource Management.

3. Water Treatment and Pollution Control.

10 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Ten Largest Investments

As at 31 December 2022

CLEAN HARBORS INC - United States www.cleanharbors.com

Environmental services such as waste disposal, hazardous waste clean-up, recycling services and

emergency clean-up are an important component of environmental solutions for a broad range of

industries. Clean Harbors provides collection, transportation, recycling, treatment, and disposal services

and holds dominant positions in incinerators and landfills, where new permits are becoming exceedingly

rare. Importantly, Clean Harbors is a market leader in its core business – the US hazardous waste sector

– with a strong market position and pricing power in a sector with high barriers to entry. With economic

recovery, this part of the business has seen positive momentum while also benefitting from consolidation

as industrial players are closing captive operations due to tighter environmental regulations and rising

energy costs. The company is also a leading responder to emergency clean-ups, such as after hurricanes

or floods, but also active in medical waste disposal and disinfection solutions. The company has well

established operations with end markets that are well diversified, from general manufacturing to the

automotive and chemical industries. Clean Harbors has some exposure to waste oil re-refining for the oil

and gas industry which is currently seeing a recovery given higher oil prices.

2.9%

of net assets

(2021: 2.8%)

EUROFINS SCIENTIFIC - France www.eurofins.com

Eurofins Scientific is a life sciences company that is a world leader in food testing, with related business

lines in feed and environmental testing, as well as agriscience and pharma. Eurofins Scientific’s business

model taps into strong growth in the demand for testing globally, particularly as regulations continue

to tighten to address climate change, pollution and evolving healthcare challenges. Eurofins can deliver

increasingly sophisticated and differentiated solutions to a variety of end markets. This mid-sized

European company has a presence in 44 countries and has grown significantly through acquisitions,

focusing on long term value creation.

2.8%

of net assets

(2021: 1.8%)

BUCHER INDUSTRIES - Switzerland www.bucherindustries.com

Bucher is an industrial conglomerate with a primary focus on manufacturing specialised agricultural

machinery for tillage, seeding, fertilisation, hay and forage harvesting. Global population growth and

rising food demand is creating long-term resource scarcity issues. Bucher provides precision agriculture

solutions that enhance crop yields while reducing the use of fuel, seed and fertilizer, leading to improving

food supply chain efficiency. The company also offers other products through different divisions, such

as municipal vehicles for cleaning and clearing snow, advanced hydraulic systems, and technologies

for manufacturing and inspecting glass containers. The company has a long-term industrial focus on

product innovation which enables competitive advantages and strong market share across all divisions.

Bucher has a solid track record as a technological leader with good cost management and a wide global

service network.

2.8%

of net assets

(2021: 1.8%)

ROYAL DSM NV - Netherlands www.dsm.com

DSM supplies nutritional ingredients like vitamins and nutraceuticals into the animal feed, food and

personal care industries. These products help improve livestock health and efficacy of feed, which

serves to reduce waste and emissions. DSM’s transition from a diversified chemicals producer to a

business focused on a more stable, and fast growing, nutrition industry is driving higher returns on

capital, improved free cashflow generation and reduced earnings volatility. In addition, DSM is driving

its end–market stakeholders towards more sustainable production methods. The company has a strong

focus on sustainability, implemented by a solid management team and led by an internal Sustainability

Leadership Team.

2.7%

of net assets

(2021: 2.3%)

PTC INC - United States www.ptc.com

PTC provides software solutions that are deployed in industrial design and manufacturing.

Thecompany’s software is used to design products (computer–aided design, “CAD”), monitor how they

are being manufactured and manage them throughout their lifetime (product lifecycle management –

PLM). Importantly, PTC’s industrial connectivity platform allows customers to connect ‘smart’ devices

and analyse associated data enabling applications like remote monitoring and predictive maintenance.

Thesesolutions help to increase resource efficiency and eliminate waste in industrial processes.

Operating in a market with high barriers to entry and low customer turnover, using its established

market position, PTC is emerging as a leader in industrial ‘Internet of Things’ and benefitting from high

recurring revenues.

2.8%

of net assets

(2021: 2.7%)

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 11

Strategic report

BRAMBLES - Australia www.brambles.com

Brambles is a global support services group which provides pallet and plastic container recycling

and pooling services, predominantly for supermarket and food supply chains. Pallets, used broadly in

shipping and supply chains around the world, are collected, cleaned, repaired and reused by Brambles,

aligning well with the concept of a ‘circular economy’. The company also enables pallet and container

pooling, which increases efficiency and decreases pallet waste. When required, Brambles makes

new pallets from wood sourced from certified sustainable plantations. As the leader in the industry,

Brambles' client base is stable and diversified, with many in food and daily necessities.

2.6%

of net assets

(2021: 2.1%)

STERICYCLE - United States www.stericycle.com

Stericycle provides regulated medical waste management services, offering waste collection,

transportation, treatment, and disposal to healthcare organisations and commercial businesses

worldwide. As the US market share leader of Medical Waste, Stericycle operates a strong margin

business with stable, recurring revenues in a highly regulated industry, one with high barriers to entry

where waste must be disposed of to the greatest technical standards to avoid health and environmental

risks. The company is also a meaningful player in the disposal of confidential documents, providing

shredding services which ensure high recycling and less incineration. The US secure information

destruction market is large, fragmented, and increasingly highly regulated, with potential for further

consolidation. With new management in place since 2019, the company has made substantial progress

turning the business around to refocus on core US medical waste and secure information destruction

services, which should drive margin expansion and deleveraging.

2.6%

of net assets

(2021: 1.8%)

SPIRAX-SARCO ENGINEERING - United Kingdom www.spiraxsarco.com

Spirax-Sarco Engineering is a world leader in the control and efficient use of steam, electrical thermal

energy solutions and peristaltic pumping and associated fluid path technologies. Its Steam Specialties

and Electric Thermal Solutions businesses provide products and expertise that improve production

efficiency and help customers meet their environmental sustainability targets. Its diverse end markets

and broad customer base underpin its resilience. 50% of Group revenue is derived from defensive,

less cyclical, end markets such as food, pharmaceuticals and water & wastewater, and 85% of Group

revenue is derived from annual maintenance and operating budgets, rather than large projects from

capex budgets.

2.5%

of net assets

(2021: 2.1%)

PENTAIR - United States www.pentair.com

Pentair split into two separate businesses in 2018, this part of the company now purely focuses on

the water treatment space – comprised of the pool business plus filtration and flow technologies.

Pentair has products which address a range of residential, commercial, industrial, infrastructure and

agricultural end-markets. Its sales are focused on providing more energy and water efficient systems

including variable speed, intelligent pumps for pools and biological commercial filter equipment for

fish farming. Pentair has a history of strong operational margins. The company’s new management,

assembled following the split of the businesses, is focused on improving growth. A new business model

will also focus on equipment replacements, which should provide increased stability to its revenue

profile and better earnings visibility. Pentair should benefit from a continuing global drive, from both an

environmental and economic perspective, to implement smart and sustainable water solutions across a

wide range of end markets.

2.4%

(2021: 2.0%)

GRAPHIC PACKAGING - United States www.graphicpkg.com

Graphic Packaging is a provider of paperboard, and integrated paperboard, packaging to multinational

beverage and consumer products companies. It is increasingly contributing to the displacement

of single-use plastic packaging and tableware, via its fibre-based packaging products. Some of its

packaging inputs are drawn from over 50% recycled material. Graphic is poised to benefit as the US

packaging sector consolidates, which is improving industry returns. Graphic will benefit in the long term

from trends away from singe use plastic packaging and towards the greater use of recyclable materials.

2.4%

of net assets

(2021: 1.8%)

12 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Details of Individual Holdings

As at 31 December 2022

Company Sector Country of main listing

Market value

£’000

% of

net

assets

Clean Harbors Resource Efficiency & Waste Management United States 36,418 2.9

Eurofins Scientific Environmental Services & Resources France 35,799 2.8

Bucher Industries Ag-Reg Sustainable Food & Agriculture Switzerland 35,707 2.8

PTC Digital Infrastructure United States 35,630 2.8

Royal DSM Sustainable Food & Agriculture Netherlands 34,117 2.7

Brambles Resource Efficiency & Waste Management Australia 33,347 2.6

Stericycle Resource Efficiency & Waste Management United States 33,081 2.6

Spirax-Sarco Engineering Energy Management & Efficiency United Kingdom 32,293 2.5

Pentair Water Infrastructure & Technologies United States 30,058 2.4

Graphic Packaging Resource Efficiency & Waste Management United States 30,052 2.4

Top ten holdings

336,502 26.5

Northland Power Alternative Energy Canada 29,563 2.3

Croda International Resource Efficiency & Waste Management United Kingdom 28,914 2.3

Donaldson Transport Solutions United States 28,701 2.2

Aalberts Water Infrastructure & Technologies Netherlands 28,040 2.2

Vestas Wind Systems Alternative Energy Denmark 27,769 2.2

American Water Works Water Infrastructure & Technologies United States 27,359 2.1

Darling Ingredients Resource Efficiency & Waste Management United States 27,115 2.1

Littelfuse Transport Solutions United States 26,740 2.1

Corbion Sustainable Food & Agriculture Netherlands 26,147 2.0

Ormat Technologies Alternative Energy United States 24,239 1.9

Top twenty holdings

274,587 21.4

Descartes Systems Digital Infrastructure Canada 24,060 1.9

Smurfit Kappa Sustainable Food & Agriculture Ireland 23,857 1.9

HERC Resource Efficiency & Waste Management United States 23,632 1.9

Signify Energy Management & Efficiency Netherlands

23,447 1.8

Trimble Digital Infrastructure United States

23,413 1.8

Borregaard Resource Efficiency & Waste Management Norway

23,356 1.8

Repligen Resource Efficiency & Waste Management United States

23,239 1.8

Rayonier Sustainable Food & Agriculture United States

23,120 1.8

Airtac International Energy Management & Efficiency Taiwan

23,100 1.8

Indraprastha Gas Alternative Energy India

23,074 1.8

Top thirty holdings

234,298 18.3

Monolithic Power System Digital Infrastructure United States

22,610 1.8

Lennox International Energy Management & Efficiency United States

22,238 1.7

Advantech Energy Management & Efficiency Taiwan

21,897 1.7

Terna Energy Alternative Energy Greece

21,835 1.7

Nibe Industrier Energy Management & Efficiency Sweden

21,346 1.7

EDP Renovaveis Alternative Energy Portugal

21,146 1.7

Altair Engineering Digital Infrastructure United States

20,880 1.6

Lem Holding Energy Management & Efficiency Switzerland

20,843 1.6

Watts Water Technologies Water Infrastructure & Technologies United States

20,226 1.6

Xinyi Solar Alternative Energy Hong Kong

19,548 1.5

Top forty holdings

212,569 16.6

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 13

Strategic report

As at 31 December 2022

Company Sector Country of main listing

Market value

£’000

% of

net

assets

Giant Manufacturing Transport Solutions Taiwan

19,514 1.5

Solaregdge Technologies Alternative Energy United States

18,893 1.5

CIA Saneamento Basico Water Infrastructure & Technologies United States

18,292 1.5

Generac Energy Management & Efficiency United States

18,241 1.4

Azek Resource Efficiency & Waste Management United States

18,170 1.4

Badger Meter Water Infrastructure & Technologies United States

18,096 1.4

Advanced Drainage Systems Water Infrastructure & Technologies United States

18,084 1.4

Zurn Water Solutions Water Infrastructure & Technologies United States

17,719 1.4

Rational Sustainable Food & Agriculture Germany

15,405 1.2

Coway Resource Efficiency & Waste Management South Korea

14,856 1.2

Top fifty holdings

177,270 13.9

Discoverie Transport Solutions United Kingdom

14,836 1.2

Lenzing Resource Efficiency & Waste Management Austria

11,385 0.9

Norma Water Infrastructure & Technologies Germany

11,193 0.9

Cryoport Resource Efficiency & Waste Management United States

10,137 0.8

Porvair Environmental Services & Resources United Kingdom

10,085 0.8

Amiad Water System Water Infrastructure & Technologies Israel

4,608 0.4

Dialight Energy Management & Efficiency United Kingdom

2,857 0.2

Blackline Safety Environmental Services & Resources Canada

2,278 0.2

Total quoted equities 1,302,605 102.1

Unquoted holding - Ensyn Renewable and Alternative Energy United States

– –

Portfolio total

1,302,605 102.1

Cash 26,327 2.1

Other net liabilities (52,371) (4.2)

Total net assets 1,275,938 100.0

14 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

IMPAX'S ENVIRONMENTAL MARKETS CLASSIFICATION SYSTEM

The investment objective of IEM is to enable investors to benefit from growth in the markets for cleaner or more

efficient delivery of basic services of energy, water and waste. Investments are made predominantly in quoted

companies which provide, utilise, implement or advise upon technology-based systems, products or services in

environmental markets, particularly those of alternative energy and energy efficiency, water treatment and pollution

control, and waste technology and resource management (which includes sustainable food, agriculture and forestry).

Well-defined classification systems, or taxonomies, play an important role for investors like IEM and its

shareholders who are seeking to navigate environmental risk and/or increase their exposure to rapidly expanding

environmental markets.

Impax Asset Management (AIFM) Limited (“Impax”) acts as investment manager to IEM and set out below is the

Environmental Markets classification system developed by Impax to define the investment opportunity set to meet

IEM’s investment objective.

In the 21 years since IEM was listed, the investment opportunity set within Environmental Markets has grown

substantially. Despite the emergence of competing alternative classification systems, Impax continues to approach

investing in Environmental Markets using its own distinct taxonomy, which has evolved over time with the progression

of new technologies and business models, market demand and the policy environment. IEM portfolio's exposure to

these environmental sectors can be found on page 9.

Environmental Markets

Energy Clean and efficient transport

Sustainable food

Water

Circular economy

Smart environment

Alternative Energy

•Developers & independent

power producers

• Biofuels

•Hydrogen

• Solar

•Wind

Energy Management & Efficiency

•Smart grids

• Industrial, consumer & buildings efficiency

•Power storage & uninterruptible

power supply

• Lighting

Transport Solutions

•Advanced aviation

•Advanced shipping

• Railways

• E-bikes & bicycles

• Buses & coaches

•Road vehicles & devices

•Pollution reduction

• Shared mobility

Sustainable Food &

Agriculture

•Organic & alternative

•Technology & logistics

• Safety & packaging

•Agri- & Aquaculture

•Forestry

Water Infrastructure &

Technologies

• Distribution & infrastructure

•Treatment

• Efficiency

• Utilities

Resource Efficiency &

Waste Management

• General & hazardous

waste management

•Recycled, recyclable products

& biomaterials

•Resource circularity & efficiency

•Technologies

Environmental Services

& Resources

• R&D & consultancies

• Finance & investment

•Testing & monitoring

•Pollution control

•Environmental resources

Digital Infrastructure

• Efficient IT

• Cloud computing

• Digital collaboration solutions

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 15

Strategic report

THE IMPAX INVESTMENT PROCESS

Impax believes that Environmental Markets offer investors a compelling long-term investment opportunity to tap into

superior growth, seeking superior risk-adjusted returns over the medium to long-term.

Impax seeks out mis-priced companies that are set to benefit from the long-term macro-economic themes of growing

global populations, rising living standards, increasing urbanisation, rising consumption, and depletion of limited

natural resources. Investment is focused on a small number of deeply researched global equities across the following

environmental sectors (as detailed above on page 9): Alternative Energy; Energy Management & Efficiency; Transport

Solutions; Sustainable Food & Agriculture; Water Infrastructure & Technologies; Resource Efficiency & Waste

Management; Environmental Services & Resources; and Digital Infrastructure.

Investments are made in 'pure-play' small and mid-cap companies which have >50% of their underlying revenue

generated by sales of products or services in the environmental markets above. At 31 December 2022, the IEM

portfolio's weighted average revenue exposure to environmental markets was approximately 81%.

Once a company is identified as being of potential interest, Impax researches the company’s financial performance

and earnings, and undertakes in-depth Environmental, Social and Governance (“ESG”) analysis, in accordance with

IEM’s ESG Policy (found on the website www.impaxenvironmentalmarkets.co.uk).

ESG Policy

The existing three pillars of the ESG analysis – Governance; Material Environmental,

Social & Other Risks; and Controversies – have been expanded during the year to five

pillars with the inclusion of Climate Change, and Human Capital Management & Equity

(Equality), Diversity & Inclusion (E, D&I). Whilst these areas have always been included

within the analysis, these fields have become increasingly relevant and therefore all

companies are now specifically scored on these.

Impax works on ESG engagement collaborations with clients, partners and industry organisations to promote

sustainable investing and ESG considerations across the globe. Impax is a member of, or signatory to, associations and

initiatives contributing to the development of a sustainable financial system. These are listed in IEM's ESG Policy.

The investment process is focused on a comprehensive understanding of the character and quality of the investee

companies, including material ESG issues, as well as areas of potential improvement. Impax identifies higher quality

companies with strong business models that demonstrate sound management of risk for investment.

Each investee company is continually monitored within the context of a live 'valuation range' which incorporates worst

and best-case assumptions. Sell discipline is based on company valuations, portfolio risk metrics, the macro outlook

and engagement outcomes.

Stewardship through active ESG engagement and proxy voting are important parts of the investment process.

They enable effective monitoring of investee companies and aim to further enhance the structures, processes, and

disclosures of investee companies.

Stewardship

Stewardship code

Impax supports the UK Stewardship Code (“the Code”) and complies with its guidelines regarding proxy voting and

engagement. The Code comprises twelve principles with the focus on stewardship policies, but also on outcomes

i.e. what has been achieved through engagement and proxy voting, real change and improvements to governance

structures and material risk management processes in investee companies. Impax is a signatory to the Code and its

statement can be found on the website (www.impaxenvironmentalmarkets.co.uk).

Engagement and exercise of voting powers

Impax is a fundamentally driven, active shareholder with a long-term investment horizon. Impax engages with investee

companies to minimise risks, protect and enhance shareholder value, promote greater transparency on ESG issues,

and encourage companies and issuers to develop and become more resilient over time. Most companies welcome

dialogue on these areas.

In 2022, as well as corporate governance and human capital issues such as diversity, inclusion, and health and safety,

Impax's strategic areas of focus included climate change, environmental issues such as pollution and resource

depletion, and environmental justice.

This stewardship and engagement work can be divided into the following types:

ESG/Sustainability Advisory – Promoting improved practices and transparency on ESG issues. The focus of

engagement with companies is to strengthen governance structures and introduce sustainability policies, processes

and disclosures, as applicable, to manage their most material ESG risks.

Environmental Markets

16 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Bottom-Up Company Specific ESG Analysis - Impax identifies company-specific matters and risks and actively

engages with companies regarding these matters, as part of monitoring and managing risks.

Top-Down Strategic Issues - Impax assesses and outlines engagement priorities, based on market developments,

and emerging ESG and sustainability issues that are relevant and material for our companies. Impax then identifies

the companies most exposed to the topics in question and focuses engagement on those companies.

Proxy Voting - This is predominantly related to governance issues such as the election of directors, board structures

and management remuneration. When practicable, Impax seeks to engage with the investee company before voting

against management’s recommendations.

Proxy voting is a key activity in the ongoing dialogue with investee companies and Impax is committed to ensuring

the consistent exercise of voting rights associated with shares held in the IEM portfolio.

The Board reports on engagement activity with IEM's investee companies on pages 30 and 31, and IEM's proxy voting

activity is shown on page 30.

Environmental Markets continued

EXAMPLE OF A COLLABORATIVE ENGAGEMENT

BY IMPAX

Farm Animal Investment Risk & Return (FAIRR) Sustainable

Proteins initiative - this is a collaborative investor engagement

coordinated by FAIRR with shareholders of 25 global food

companies to diversify their protein sources, with a focus on

plant-based proteins, to “drive growth, increase profitability,

reduce risk exposure and improve their ability to compete and

innovate in a resource-constrained world.” There is a significant

focus on mitigation of climate risk.

In 2022, Impax was the lead shareholder in engagements with

one of the companies, a Dutch food retailer, which has made

great progress on the back of the engagement initiative. The

company has established improved, evidence-based consumer

engagement and awareness-raising relating to healthier and

plant-based foods and set new more ambitious, science-based

carbon reduction targets, relating to Scope 1, 2 and 3 emissions,

with improved disclosures on Scope 3 emissions linked to animal

agriculture specifically. The company has also conducted its first

climate scenario analysis.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 17

Strategic report

1 Impact of £10m invested in the strategy for one year. Based on most recently reported annual environmental data for investee companies as at 31 December 2021.

Impax’s impact methodology is based on equity value.

IEM ENVIRONMENTAL IMPACT REPORT

The environmental impacts noted below are the measurable output of IEM’s investment objective implemented using

Impax’s investment process.

The focus of the investment process on companies delivering environmental solutions naturally results in

environmental benefits which Impax quantifies at the end of each year on the basis of the most recent portfolio

company disclosures available.

IN 2021 (THE LATEST YEAR AVAILABLE), THE ENVIRONMENTAL IMPACT OF £10M INVESTED

IN IEM SUPPORTED:

Source: Impax Asset Management

The net CO2 emissions avoided by investee companies’ activities are calculated by looking at the total emissions from

the activities of companies during the year minus the emissions avoided by the use of their products and services for

one year. Leading contributors in the portfolio to such emission reduction include: Lenzing, an Austrian alternative

textile producer; Spirax Sarco Engineering, a British specialist in industrial steam energy efficiency; XinYi Solar, a

Chinese solar module component supplier; and British leader in industrial energy efficient LED lighting technology,

Dialight. The CO

2 emissions avoided are broken down by Scope 1, 2 and 3 emissions on the next page.

The investee companies generated 1,350 MWh renewable electricity in 2021 per £10m invested. EDP Renovaveis, a

Portuguese renewable energy producer was the largest source of clean energy generation. The investee companies

also helped in the provision, saving and treatment of 600 megalitres of water through investments in global water

utilities and in water infrastructure technology companies.

DS Smith, a British firm active in fibre-based packaging (since exited the portfolio), and Australian consumer goods

logistics company Brambles were key to helping the portfolio recover or recycle 290 tonnes of materials per

£10m invested.

18 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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CO2 EMISSIONS AVOIDED PER £10M INVESTED IN IEM

The focus on investments in environmental solutions and sustainable companies has informed the approach

to measuring the carbon profile of our investment activities. Impax believes that looking at the net carbon

impact – including both direct and indirect carbon emissions, but also carbon avoidance at investee company and

overall portfolio levels – provides a more relevant and complete picture.

-4,000

-3,000

-2,000

-1,000

1,000

2,000

4,000

3,000

(tCO

)

Global economy

1,500

Scope 1 & 2 CO

emitted

Scope 3 CO

emitted

avoided

-1,800

Net CO

Impact

IEM

Scope 1 & 2 CO2 emitted includes direct emissions and direct energy used by investee companies

Scope 3 CO2 emitted includes emissions from investee companies’ supply chains

CO2 avoided over one year’s use of companies’ products and services

Net CO2 impact = emitted - avoided (tCO

)

ENVIRONMENTAL IMPACT - COMPANY EXAMPLE

Graphic Packaging (US, Recycled, Recyclable Products & Biomaterials)

Graphic Packaging is a leading provider of paperboard packaging and

folding cartons to multinational beverage and consumer products

companies. The company is active in resource efficiency via a product

portfolio that emphasises renewable and recycled materials - these

contribute to the displacement of single-use plastic packaging and tableware

via its fibre-based packaging products.

Virtually all of Graphic Packaging's paperboard products are recyclable. At

the company level, all wood that arrives at the company’s virgin paperboard

mills is fully utilised – either to manufacture paperboard, or residuals produce

power for the company’s operations through biomass using heat and power

or cogeneration systems. The company recycles between 90% and 100% of

manufacturing waste. All facilities globally are compliant with forest or fibre

certifications.

Diversion from paper landfills translates into substantial emissions savings

because manufacturing recycled paper emits approximately 38% less CO

than paper produced from virgin fibres.

Thus in 2021 Graphic Packaging

avoided approximately 3 million tCO2 through reused paper for paperboard

manufacture and recovered just shy of 1 million tonnes of material.

2 https://recycled-papers.co.uk/green-matters/why-use-recycled-papers/co2-and-greenhouse-gases

3 Source: Most recently available global GHG emissions (https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions, https://edgar.jrc.ec.europa.eu/

report_2021), adjusted to 2021 using the IEA CO2 emissions growth rate 2018-2021 (https://www.iea.org/reports/globalenergy-review-co2-emissions-in-2021-2).

Global AUM as at 2021 as provided by FSB (https://www.fsb.org/2021/12/global-monitoringreport-on-non-bank-financial-intermediation-2021)

4 Source: Impax Asset Management analysis as at 31 December 2021. Impax’s impact methodology is based on equity value

Environmental Markets continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 19

Strategic report

UN SUSTAINABLE DEVELOPMENT GOALS ALIGNMENT

There is an intrinsic link between Impax’s investment process with its focus on environmental markets and the delivery

of environmental benefit, which is central for investors seeking to understand returns on their investment, beyond the

financial outcome.

The UN’s Sustainable Development Goals (“SDGs”), agreed in 2015, comprise a series of 17 sets of targets to be met

by 2030. These goals are increasingly being referenced by investors and are helpful in comparing funds’ relative

impact outcomes.

IEM PORTFOLIO MAPPED TO UN SUSTAINABLE DEVELOPMENT GOALS

13%

21%

Total 81%

24%

The above bar chart shows the mapping of the IEM portfolio's revenue exposure to environmental markets

at 31 December 2022 of 81% (as discussed on page 15) to UN Sustainable Development Goal's. IEM’s greatest

linkage is to:

•

Goal 12, Responsible Consumption & Production, which relates to holdings in sustainable and efficient agriculture,

and recycling and value-added waste processing;

•

Goal 9, Industry Innovation & Infrastructure, which relates to holdings in industrial energy efficiency; and

•

Goal 6, Clean Water & Sanitation, which relates to holdings in water utilities and infrastructure.

IMPAX CLIMATE CHANGE INVESTMENT, PROCESS AND REPORTING

Climate change – in particular climate change adaptation and climate change mitigation – is an interlinked subset of

the broad Environmental Markets. Impax incorporates climate change considerations across Environmental Market

sectors and through integrated ESG analysis in the investment process. Impax believes that investee companies have

resilient business models which will benefit from the transition to a less carbon intensive and lower polluting economy.

As an investment manager specialising in the transition to a more sustainable economy, Impax has dedicated

climate-related resources and working groups, led by members throughout its organisation with sustainability and

climate expertise, as well as having trained climate scientists on its investment team. These working groups develop

analysis and understanding from an investment perspective, of the emerging products, technologies and services

which provide solutions to mitigate or adapt to climate change in environmental markets.

5 Source: Impax Asset Management. Data as at 31 December 2022. Figures are based on Impax internal data. Impax’s investment process does not identify

alignment with SDGs as a specific objective. Instead, the nature of Impax’s investment philosophy results in some meaningful revenue exposure within IEM.

Numbers may not sum up due to rounding. For further information, please visit http://www.un.org/sustainabledevelopment/sustainable-development-goals

20 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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Impax therefore understands, top-down and bottom-up, the risks and opportunities across the investment

lifecycle arising from climate change from a financial point of view, and therefore the potential financial impacts on

investee companies.

Impax integrates climate change considerations at three stages during the investment process:

1. Investment universe formation and portfolio construction – Impax seeks out companies with material (>50%)

revenues from environmental markets, which includes climate adaptation and mitigation solutions. For each

new company added to the portfolio, Impax details the climate opportunity and alignment of revenue with

climate solutions.

2. Fundamental company analysis – carbon emission and abatement costs as well as physical climate risks are

assessed through integrated company-level analysis. As one of the leaders in this field, Impax has developed a

proprietary model to assess investee companies' localised and asset-level physical climate risks.

3. Company engagement – Impax also actively engages with our investee companies to encourage improved

climate risk management, processes, and disclosures. Climate change has been and continues to be a strategic

engagement priority of Impax.

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)

Reporting standards continually advance, broadening and deepening the information that is available for

shareholders and other stakeholders. Impax is an advocate of this shift in our industry and therefore welcome the

reporting recommendations presented by the TCFD, which is becoming a global standard for reporting climate risks

and opportunities.

Impax has published its TCFD Report on its website (www.impaxam.com). As a result, Impax has compiled and

assessed increased climate metrics for investment companies. The increased granularity of this improves the climate

reporting available for clients, including IEM. In addition to CO

2 emissions avoided, the Board can now provide IEM’s

percentage of the portfolio invested in climate solutions; the weighted average carbon intensity of the portfolio; and

transition alignment of IEM’s investee companies. This is provided by the Board on pages 23 to 24.

Investment-related targets as part of TCFD

The Net Zero Asset Managers ("NZAM") initiative,

which Impax joined in October 2021 reflects a formal commitment

by signatories to support the goal of net-zero GHG emissions by 2050 or sooner, in line with global efforts to limit

warming to 1.5°C.

As an NZAM initiative signatory Impax is aiming for 100% of committed assets under management, which includes

IEM’s assets, to be categorised as ‘transition aligned’ or ‘transition aligning’, related to climate management and

processes, by 2030. This is covered in further detail on page 23.

In line with this net-zero commitment, an active stewardship approach to engage investee companies that are not yet

considered climate resilient, or transition aligned, continues.

6 https://www.netzeroassetmanagers.org/signatories/impax-asset-management/

Environmental Markets continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 21

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IEM Climate Disclosure

INTRODUCTION

The TCFD recommendations (see also page 20 above) provide a framework intended to help investors and others in

the financial community better understand and assess climate-related risks and opportunities. They are structured

around four pillars: (1) Governance, (2) Strategy, (3) Risk Management, and (4) Metrics and Targets.

As an Investment Trust, IEM is not currently subject to the Listing Rule requirement regarding TCFD reporting.

IEM is, however, a keen supporter of the ambitions of both the TCFD and the FRC. This, our second annual Climate

Disclosure, reports what is relevant for IEM under each of the four pillars of TCFD, though not all of the recommended

disclosures with each pillar are addressed. This is because not all recommendations are applicable to investment

companies. In addition, this is a voluntary disclosure for IEM where we have kept to the information which will help

asset owners, including IEM and our shareholders, better assess these risks and support sound investment decisions.

As a company specialising in investing in companies providing solutions to resource challenges in environmental

markets, the greatest contribution IEM can make to achieving the goals of the Paris Climate Agreement is through the

manager’s investment decisions.

(1) GOVERNANCE

Governance and oversight of climate risks and opportunities

The Board of Directors has oversight of climate risks and opportunities. The management and monitoring of IEM’s

climate-related investment activities is delegated to Impax. Impax’s role and processes relating to climate risks and

opportunities in the portfolio are discussed on page 22.

Impax reports to the Board on IEM’s investment activities, which include climate-related risks and opportunities

material to new investments. During the year, the Board set up a Sustainability Reporting Committee to consider and

help the Board to establish the relevance to IEM of the growing body of sustainability issues and to advise the Board

on what should be included as part of its governance and reporting.

The Board also considers the physical climate risks to the operations of its third-party service providers, including

Impax. Physical climate change risk is separately identified on IEM’s risk register and this risk, though not a key risk

after mitigation, is reported on page 37.

(2) STRATEGY

Climate risks and opportunities as part of our strategy

Environmental, including climate, risks and opportunities have been at the core of IEM’s investment strategy for two

decades. All of IEM’s investments are in environmental solutions. (Please see page 14 for more information on the

environmental sectors that constitute the portfolio.) The majority of the environmental solutions offered by IEM’s

investee companies are to climate-related challenges, like climate mitigation solutions and climate adaption solutions.

At 31 December 2022, 88% of the portfolio (52 companies) was invested in companies that Impax assesses to be

providing ‘climate solutions’.

The strategy is not only about addressing risks, but also about identifying opportunities. Impax’s work in this area is

described on page 21, and also within Impax’s own TCFD report. The near- and longer-term risks and opportunities for

environmental investing, as they relate to IEM, are discussed in the Chairman’s Statement and Manager’s Report.

The Board assesses the impact and resilience of IEM’s investments and their operations, as well as the operations of

IEM's key service providers, and uses these to shape strategy to ensure the potential risk impact and likelihood are

within IEM’s risk appetite.

22 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

ENGAGEMENT WITH CRYOPORT, US -

CLIMATE RISK NET ZERO TRANSITION

Impax began engaging with this company in 2021, to encourage

the company to start collecting GHG emissions data and prepare

to make disclosures to the CDP Climate Change questionnaire.

Impax views CDP’s questionnaires as important sources of

decision useful and comparable climate data. Cryoport submitted

its first CDP response in 2022, as well as publicly reported its

GHG emissions in the annual report, established a sustainability

framework and reported in line with the TCFD framework.

OUTCOMES

Milestone achieved – since our initial engagement with Cryoport

on climate risk in 2021 due to lack of disclosure, we have

seen significant improvements in the company's climate risk

management framework, GHG disclosures and reporting in 2022.

Target-setting is underway and expected in 2023.

(3) RISK MANAGEMENT

Management of climate risks

Climate-related investment risks relate to a broad range of interconnected risks including physical and transition

risks. IEM’s primary climate exposure is through the investments it makes, where a failure to manage risks within

the portfolio could negatively affect investment performance and IEM’s reputation as an environmental-focused

investment company.

Engagement as a tool for climate risk management

Impax actively engages with the investee companies to encourage improved climate risk management, processes and

disclosures. Engagement is covered in more detail on page 30.

Physical climate risk

Impax has assessed the physical climate risks to its London offices and concluded that these risks are relatively low.

(4) METRICS & TARGETS

This year, we are improving the reporting of climate metrics and targets relating to IEM by presenting additional

climate metrics and targets. The Board provides below IEM’s percentage of the portfolio invested in climate solutions;

the weighted average carbon intensity of the portfolio; and transition alignment of IEM’s investee companies, in

addition to the net CO

2 emissions avoided, which the IEM has reported since IEM’s Annual Report 2015 (see page 17).

The impact of IEM’s investments on climate change is considered in two categories: Financing the Transition and

Financed Emissions. Financing the Transition shows how IEM is invested in companies providing climate solutions and

helps avoid CO

2 emissions, as the economy transitions towards net-zero. Financed Emissions shows the emissions and

carbon-intensive activities of IEM’s investee companies.

IEM Climate Disclosure continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 23

Strategic report

FINANCING THE TRANSITION

Exposure to climate solutions

At as 31 December 2022, 88% of the portfolio was invested in companies providing climate solutions, with 100%

invested in environmental solutions more broadly.

CO2 emissions avoided

CO2 emissions avoided has been reported by IEM since the 2015 annual report and is shown in the Environmental

Report on page 17. This shows that emissions avoided materially exceed those emitted, resulting in net emissions

avoided of 1,800 tCO

2 per £10m invested.

FINANCED EMISSIONS

Financed GHG emissions have been gathered from all emissions data disclosed by our investee companies, estimating

Scope 1 and Scope 2 emissions where those are not reported. Weighted Average Carbon Intensity (WACI) measures

potential exposure to carbon-intensive activities of IEM investee companies.

Weighted Average Carbon Intensity (WACI) – IEM plc

WACI (Scope 1, 2) tCO2e / US$1m revenue 100.84

WACI (Scope 1, 2, 3) tCO

2e / US$1m revenue 729.28

TARGETS: Investment related targets

As mentioned on page 20, Impax is targeting 100% of assets to be categorised as Transition Aligned or Transition

Aligning by 2030. As a result, 13% of IEM’s investee companies currently categorised as Transition Non-Aligned will be

targeted for active stewardship.

7 See Impax’s TCFD for more information on methodology https://impaxam.com/investment-philosophy/environmental-social-and-governance-risk-management/

8 Source: Impax Asset Management analysis, as at 31 December 2022. Portfolio weights excluding cash. May not sum to 100% due to rounding

9 Source: Impax Asset Management analysis, as at 31 December 2022. Excludes cash

10 Source: Impact Asset Management analysis, as at 31 December 2021 (latest available)

11 Source: MSCI Sustainalytics, as at 31 December 2022

TRANSITION ALIGNMENT OF IEM’S PORTFOLIO

As discussed on page 20, as part of Impax's commitments as a signatory to the Net Zero Asset Managers

initiative, Impax has assessed the alignment of IEM's portfolio with the transition to a net-zero economy.

Impax

has defined three categories of companies’ climate management and processes:

•

‘Transition aligned’ climate management processes of investee companies include appropriate climate risk

pricing, robust climate target-setting (for example, approved the SBTi targets) and TCFD-aligned climate

reporting. These processes align with the highest scoring tiers for climate as part of IEM’s ESG analysis.

•

‘Transition aligning’ are companies with moderate climate resilience and climate transition management and

processes that have been committed to or initiated but have not been fully developed. This aligns with the

middle scoring tier for climate as part of the ESG analysis.

•

‘Transition non-aligned’ companies have weaker climate resilience and weak or non-existent climate

transition management processes. This aligns with the lower scoring tiers for climate.

IEM’s portfolio in these categories, as of 31 December 2022, stood at:

Transition Aligned 28%

Transition Aligning 60%

Transition Non-Aligned 13%

24 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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IEM Climate Disclosure continued

METRICS: Operation related climate and carbon metrics

IEM has no Scope 1 (direct emissions) or Scope 2 (emissions related to electricity consumption) emissions. However,

in the course of operating its business, its key service providers have Scope 1 and 2 emissions. As such, the Board has

set out below the Scope 1 and 2 emissions attributable to its main service provider, Impax. This attribution apportions

Impax’s London office emissions to IEM, based on IEM’s net asset value as a percentage of Impax’s London-managed

assets. No scope 3 emissions were attributable from Impax because it hosts all board meetings at its offices.

Impax Asset Management CO

2 Emissions

2022 attributable

to IEM plc

KgCO

2021 attributable

to IEM plc

KgCO2e

Scope 1&2 77 86

Scope 3 0 0

TOTAL

77 86

IEM has Scope 3 (business travel) emissions, for attendance of Directors at Board meetings. In 2021 travel and

lockdown restrictions as a result of the Covid-19 pandemic meant that travel was minimal in the first half of that year,

with Board meetings being conducted by videoconference. Scope 3 emissions for 2022 were higher as all 2022

meetings were held, as they normally are, in person.

IEM CO

2 Emissions

2022

Kg CO2e

2021

Kg CO2e

Scope 1&2 0 0

Scope 3 842 348

TOTAL 842 348

TARGETS: Operations related targets

The Board is pleased that Impax’s London office is a certified ‘green’ building (rated ‘excellent’ by BREEAM (Building

Research Establishment Environmental Assessment Method) and managed by an ISO 14001 aligned Building

Management System.

The Board expects other key service providers to begin to report on their Scope 1 and 2 emissions at least annually, together

with any steps taken to reduce emissions. This will enhance IEM’s reporting of operations related climate and carbon

metrics in future.

Details of the methodology used

Reporting according to the GHG Protocol: Scope 2 emissions figure stated above follows the market-based accounting

methodology. Source of emission factors applied to calculate emissions from electricity consumption is IEA (2021) UK

electricity grid mix emission factor. Scope 3 (travel) emissions figure stated above follows the distance-based methodology.

Source of emission factors applied to calculate emissions of travel is the UK Government Greenhouse Gas Reporting:

Conversion Factors 2022.

12 Source: Impax Asset Management

13 Source: Impax Asset Management

14 https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2022

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 25

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The Investment Case for Addressing Biodiversity Loss

Given nature’s vital role in underpinning our health and prosperity, there is no time to waste in reversing its

destruction. Biodiversity loss is critically important for investors to consider, given our dependence on nature, and

investment opportunities are arising from reducing pressure on the natural world.

As a specialist investor in the transition to a more sustainable economy, Impax has taken the issue of biodiversity loss

into account in its investment approach for many years. However, biodiversity’s importance has risen with growing

awareness of the impacts and dependencies of economic activities on nature. For example, 13 of the 18 sectors that

comprise the FTSE 100 Index are associated with production processes with high or very high material dependence

on nature.

One-third of global crop production depends on animal pollinators and three-quarters of crops are

partially dependent on them.

Roughly 60% of medicines are based on natural organisms.

A big part of the problem is that, as the Dasgupta Review of the Economics of Biodiversity for the UK government

observed, nature and its processes are in large measure silent and invisible. This makes it hard to assess our

dependence on nature for our economic prosperity, as well as how to trace our impacts on the natural world. In

comparison with the climate emergency, we are late to acknowledge and understand the challenges that nature faces.

Impax has seen a significant increase in policy activity over the last year or so, as reflected in the Taskforce for Nature-

related Financial Disclosure ("TNFD"), the nature-related pledges made at United Nations Climate Change Conference

(COP26) in 2021 recognising the linkages with climate action and interest in the UN Convention on Biological Diversity

summit (COP15), held in December 2022.

All this means that nature is one of the top three themes Impax is focusing on from both an advocacy and engagement

perspective, of which IEM is supportive and has recognised in the new Policy on Nature, Biodiversity and Deforestation

(published on the Company's website (www.impaxenvironmentalmarkets.co.uk).

Integration of biodiversity into the investment process

Impax uses an analysis called the Sustainability Lens (the "Lens") to integrate biodiversity and nature into the

investment process. The Lens is used to assess how the 169 GICS sub-sectors are exposed to particular sustainability

issues, in this case their impacts and dependencies on nature and biodiversity. In simpler terms, the Lens is used as a

sectoral materiality map, helping inform Impax’s proprietary company-specific ESG analysis.

The whole discipline of biodiversity risk analysis is quite new, and data or metrics are still very scarce. So, if it has been

determined that biodiversity is a material risk to a company, Impax looks at whether the company has processes in

place to analyse exposures to biodiversity hotspots - for example whether there are procedures in place to manage

and mitigate these exposures. The company is then given a score on its preparedness. Impax is engaging with

exposed companies, focusing on several topics. These include whether companies have governance and oversight

policies in place; how much transparency they have over their supply chains; and the extent that they measure and

report the location-specific nature of their exposure, as well as plans for mitigating these risks and exposures.

Impax sees a lot of merit in the TNFD’s ‘LEAP’ approach, which encourages companies to Locate, Evaluate, Assess

and Prepare or report on the biodiversity risks they face. It is very well aligned with the approach of Impax, as outlined

in IEM’s Policy on Nature, Biodiversity, and Deforestation.

IEM has been investing in environmental solutions for more than two decades, and many of those themes help to

reduce pressures on biodiversity. It is not possible to solve climate change without solving biodiversity challenges,

and vice versa, hence the linkages between their solutions are strongly aligned. Impax finds it useful to think

about addressing nature loss through the Intergovernmental Platform on Biodiversity and Ecosystem Services

("IPBES") framework, which sets out the five most significant direct drivers of biodiversity loss: land-use change;

overexploitation of organisms; climate change; pollution; and invasive non-native species.

15 EY, 2021: Waking up to nature – the biodiversity imperative in financial services

16 Our World in Data, 2021: How much of the world’s food production is dependent on pollinators?

17 Sunil Mathur and Clare Hoskins, 2017. Drug development: Lessons from nature (Review)

18 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBE)

Biodiversity and Nature

26 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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Biodiversity and Nature continued

For land-use change, solutions around food waste reduction, plant-based proteins, alternative feeds to soy, resource

efficiency and circularity are all extremely relevant to addressing deforestation.

On overexploitation, a solution could be sustainable aquaculture, although it is important to be extremely selective in

identifying companies that are truly sustainable. Alternative animal feeds can also be a good solution here.

On climate change, obviously there is considerable overlap with IEM’s environmental and climate solutions, with

sub-sectors like renewable energy or energy efficiency.

When it comes to pollution, one of the biggest solutions concerns water treatment, but testing is also viewed as

incredibly important – it begins with testing to understand where pollution is taking place. Plastic pollution is a big

issue for marine biodiversity, though there are trade-offs - reducing single-use plastic can mean you use more virgin

fibres instead, potentially further accelerating deforestation.

Approximately 90% of global trade is conducted through shipping and it is responsible for enormous problems with

invasive species, such as zebra mussels, in many regions of the world. Companies providing ballast water treatment

provide an important example of an investible solution.

Impax is aware that almost all of the investible solutions identified to date focus on reducing pressure on

biodiversity. While this is a crucial first step, there are comparatively few examples of commercially investing in the

restoration of nature.

Failure to address

biodiversity loss carries

risks to investors

Complex challenge due to

diverse drivers and

limit

ed understanding of

natural processes

Break down into

specific

Biodiversity

Imperatives

Use tailored

solutions

based on

'multi-local' approach

Investors can contribute to

solutions and benefit from

new opportunities

Lessons learned from

other environmental issues,

including climate change

Impax already integrates natural capital issues into the investment process at three

levels: in the development of the investment universe; in company–level ESG analysis;

and in engagement with investee companies.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 27

Strategic report

To negate this challenge, Impax has been working with Imperial College London to find case studies where companies

are investing in activities that restore nature in order to reduce risks and generate commercial benefits, such as supply

chain resilience, cost reductions, revenue creation and commercial advantage. While it is difficult to find cases where

biodiversity is the main investment driver, investing in things like climate mitigation and clean water can, and often

do, bring substantial benefits to the preservation of natural biodiversity, and in a few cases help restore it. Byshining

a light on these examples, the hope is to identify actions that industry and governments can take to facilitate

nature-positive investments.

Addressing biodiversity loss is intrinsically difficult due to limitations in our understanding of nature, the number

of drivers of biodiversity loss and the lack of common definitions and metrics. To unpack these challenges, Impax

has decided to focus initial efforts on deforestation, not least because of the clear links to climate action. Impax has

committed to eliminate potential exposure to agricultural commodity-driven deforestation in its investment portfolios,

including IEM, by 2025.

‘Forest-risks’ within the investable universe stem primarily from activities such as agriculture and food production, as

well as paper and packaging sectors. Please see below two case studies in each of these sectors.

28 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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Changing use

of sea and land

(e.g. deforestation)

Direct exploitation

of organisms

(e.g. over-fishing)

Climate change

(GHG emissions)

Pollution

(to air, soil, water,

inc plastic waste)

Invasive non-

native species

(from trade, travel)

Biodiversity and Nature continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 29

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19 https://www.smurfitkappa.com/-/m/files/publications---global/sustainability-reports/smurfit_kappa_sustainable_development_report_2021.

pdf?rev=1cd32d4fdadd42b2ac053fad974b5fc9

20 https://www.smurfitkappa.com/sustainability/planet/waste

21 https://www.corbion.com/-/media/Corbion/Files/Sustainability-Report/Sustainability-Brochure-update-2022_11.pdf

Direct driver of biodiversity loss (by IPBES) – Direct

exploitation of organisms

Environmental solutions to biodiversity loss –

Sustainable

aquaculture, alternative human proteins, and animal feeds.

Main positive impact are alternative / sustainable proteins

and substitutes.

CORBION – (SUSTAINABLE

AGRICULTURE, NETHERLANDS)

Corbion creates biobased products made from renewable

resources to deliver sustainable solutions for food

preservation and production. The company's key products

include algae-based animal feeds, lactic acid, and

functional blends containing enzymes, emulsifiers, minerals,

and vitamins.

Investment opportunity

Consumer demand for natural food ingredients as an

alternative to chemical or petrochemical preservatives

is a central part of the investment opportunity. This is

a high margin business, with customers across several

food sub-categories (meat, bakery, confectionery) and

geographies. Corbion’s technically led business has good

growth prospects, underpinned by secular increase in higher

food safety standards.

Additionally, Corbion’s recyclable and compostable plastic

packaging, derived from renewable resources also has

new impetus under pressure from government regulation

and consumer preference – the demand for bioplastics is

forecast to grow.

Environmental benefit

Biobased ingredients and packaging play a vital role as an

environmental solution to biodiversity loss. Corbion’s natural

preservatives are contributing to the reduction of food

waste at home and throughout the food chain, which in turn

reduces the burden on the environment and biodiversity for

food production. Corbion has a meat preservation process

that extends product shelf life, which, in turn, prevents waste.

If global meat waste was reduced by only 25% it would be the

equivalent of taking 33 million cars off the roads.

Bio-based ingredients for animal feed, such as algal oils

for use in aquaculture instead of fishmeal and fish oil. This

enhances the nutritional value of food preventing the

depletion of wild caught fish stocks.

Plant-based plastics for packaging as part of a circular

economy limit the impact of waste on the environment,

biodiversity, and greenhouse gas emissions.

Impact achieved

With regards to food, Corbion’s solutions for meat

preservation provide extended shelf life and food safety,

which can help to reduce food waste. In 2021, Corbion

products were used to preserve 5,400,000 tons of meat

globally.

In addition, Corbion’s clean and sustainable source

of long chain omega-3s from algae helps to enhance the

nutritional value of seafood. One serving of salmon exceeds

the recommended weekly intake of omega 3s.

Contaminants, including personal care and household

cleaning products, are increasingly detected in surface

water, and there is concern about the impact on aquatic

life. Corbion's solutions for home and personal care are

biodegradable, and safe for the user and the environment.

Preserving natural resources with biodegradable alternatives.

Direct driver of biodiversity loss (by IPBES) –

Changing use of sea and land e.g. deforestation

Environmental solutions to biodiversity loss – positive

impacts from avoiding land use / deforestation via alternative

proteins and circularity (recycled packaging, rental models,

materials use optimisation via software)

SMURFIT KAPPA – (FOOD SAFETY &

PACKAGING, IRELAND)

Smurfit Kappa manufactures fibre-based packaging.

Investment opportunity

The company is a market leading fibre recycling company,

a compelling business with the increasing displacement

of plastic packaging by fibre-based packaging. Smurfit

Kappa Group provides the opportunity to invest in a

company with an established track record of organic growth

and financial metrics. The company has a strongly cash-

generative business model trading on its leading position

in European carton packaging, a well-established footprint

in Latin America, and a growing quotient of the more

disciplined US industry.

Environmental benefit

The circular economy – which maximises recycling and

recovery rates, keeps products and materials in use for as

long as possible and, ideally, prevents waste through better

design and closed loop business models - is at the core

of the business. This starts with Smurfit Kappa using only

100% renewable and sustainable raw materials – essential

for preventing deforestation. For any unusable materials,

such as metal and plastics, created during production,

the company collaborates with local organisations to find

alternative uses. To close the circle, the company also plays

a part in ensuring that at their end-of-life, the products are

recycled. All of this is essential for minimising the impact on

the environment and biodiversity.

Impact achieved

The re-usability of paper fibres contributes to the

sustainability of Smurfit Kappa products, and recycled fibres

make up 76% of the fibre content of Smurfit Kappa products

– the company used 7.4m tonnes of recovered materials

in 2021,

avoiding the use of virgin fibres and preventing

deforestation.

Made from 100% renewable and recyclable materials,

packaging can be recycled six to eight times, and once fibres

are depleted, they are typically used for energy generation or

in agriculture.

30 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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ENGAGEMENT

In 2022, Impax conducted thirty-nine engagements with thirty companies in the portfolio. With seven companies,

there were two or more engagements, on different topics and at separate times.

IEM Stewardship – engagement and proxy voting

Governance

31%

Top-down

strategic theme

41%

Bottom-up

company

specific

44%

Asia Pacific

15%

Proxy voting related

10%

Europe

26%

Rest of World

ESG advisory

North America

56%

Social

24%

Environment

45%

Engagement

focus

Engagement

type

Engagement

region

PROXY VOTING

Impax, on behalf of IEM, voted at all meetings where they were able to exercise the IEM's vote, voting 731 management

resolutions and 5 shareholder resolutions. The Board regularly reviews the voting decisions made by Impax on

IEM’s behalf.

Summary statistics 2022

Total number of meetings 68

Number of meetings in which Impax voted 68

Number of meetings in which Impax voted (as a percentage) 100%

Number of management resolutions in which Impax voted 731

Number of management resolutions in which Impax voted against and/or abstained 80

Number of management resolutions in which Impax voted against and/or abstained (as a percentage of

management resolutions voted) 10.9%

Number of shareholder resolutions in which Impax voted 5

Number of shareholder resolutions in which Impax voted against and/or abstained 0

Number of shareholder resolutions in which Impax voted against and/or abstained (as a percentage of

shareholder resolutions voted) 0%

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 31

Strategic report

Engagement examples in 2022

SUSTAINABILITY ADVISORY

REPLIGEN, UNITED STATES

Topic: Sustainability processes, governance

and disclosures

Objectives:

1. Initially educational; materiality, reporting

frameworks, investor-useful data

(achieved, 2020)

2. Governance of Sustainability: NomCom

has ultimate oversight of ESG matters

and practices (ongoing rededicated

resource) & Sustainability-based

compensation performance goals (ongoing,

company committed)

3. First Sustainability report published

(achieved, 2021)

4. Reporting Sustainability data including

operational efficiency & material data

(partially achieved, company committed)

5. Target-setting (partially achieved, company

committed in 2022)

OUTCOMES

Significant milestones have been achieved, with

continued dialogue during 2022. Next steps

include continuing progress with the company's

reporting to include quantative sustainability data

and reporting on progress against targets, with

further links to executive compensation.

DIVERSITY

XINYI SOLAR, CHINA

Topic: Board gender diversity

Objectives:

1. Raise awareness of the benefits of improved

board diversity (achieved 2020)

2. Communicate our voting guidelines in

relation to no female directors on the Board,

2020 & 2021. Opened dialogue with the

company (achieved)

3. Improve board diversity across multiple

aspects of diversity, including gender,

nationality, skills/expertise (ongoing, first

female director appointed in 2022)

OUTCOMES

Milestones achieved in 2022: Following multiple

years of engagement and votes against the

company, the board appointed their first female

director in 2022. A small but important step in the

right direction towards improving board diversity.

32 | Impax Environmental Markets plc | Annual Report and Accounts 2022

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Investment Policy, Results and Other Information

COMPANY PURPOSE AND VALUES

The Company’s core values are integrity, accountability

and transparency. These values are the cornerstone

of creating and preserving shareholder value through

investing in companies delivering solutions to

environmental challenges.

STRATEGY AND BUSINESS MODEL

Impax Environmental Markets plc is an investment

company and its investment objective and policy are set

out below. Any material change to the investment policy

requires shareholder approval.

The Company is governed by a Board of Directors (the

“Board”), all of whom are non-executive, and it has no

employees. The business model adopted by the Board

to achieve the Company’s objective has been to contract

the services of Impax Asset Management (AIFM) Limited

(the “Manager”, or “Impax”) as its alternative investment

fund manager to manage the portfolio in accordance

with the Board’s strategy and under its oversight. The

investment managers responsible for the day-to-day

management of the portfolio are Jon Forster, Bruce

Jenkyn-Jones and Fotis Chatzimichalakis. The Board

monitors adherence to the Company’s investment policy

and regularly reviews the Company’s performance in

meeting its investment objective.

All administrative support is provided by third parties

under the oversight of the Board. Company secretarial

and administration services have been delegated to

Apex Listed Companies Services (UK) Limited (formerly

Sanne Fund Services (UK) Limited) (“Apex” or the

"Administrator"); depositary and custody services

to BNP Paribas Securities Services (“BNP Paribas”);

registrar services to Link Group (“Link”); and the

Company’s broker is Investec Bank plc.

The Board reviews the performance of the Manager and

its other key service providers on an ongoing basis.

INVESTMENT POLICY

(i) Objective and policy

The Company’s objective is to enable investors to

benefit from growth in the markets for cleaner or more

efficient delivery of basic services of energy, water and

waste. Investments are made predominantly in quoted

companies which provide, utilise, implement or advise

upon technology-based systems, products or services in

environmental markets, particularly those of alternative

energy and energy efficiency, water treatment and

pollution control, and waste technology and resource

management (which includes sustainable food,

agriculture and forestry).

(ii) Asset allocation

Investments are selected on an individual basis, but

each investment is categorised according to three

primary environmental markets that are the focus of the

Company’s investment policy.

Alternative energy and energy efficiency

In the alternative energy and energy efficiency

sector, the Company may invest in businesses that

are principally, but not exclusively, exposed to the

following areas:

•

wind turbine manufacturing;

•

solar panel manufacturing and integration;

•

renewable energy developers and independent

power producers;

•

biofuels;

•

meters, utility software and demand side

management;

•

industrial energy efficiency;

•

buildings energy efficiency;

•

transport energy efficiency;

•

businesses relating to the trading of carbon and other

environmental assets; and

•

fuel cells, flywheels, superconductors,

supercapacitors and other new energy technologies.

Waste technologies and resource management

In the waste technologies and resource management

sector, the Company may invest in businesses that

are principally, but not exclusively, exposed to the

following areas:

•

recycling equipment and systems;

•

recycling of commodities including metals, plastics,

oils, paper and vehicles;

•

integrated waste management;

•

hazardous waste management;

•

sustainable food, agriculture and forestry; and

•

environmental consultancy.

Water treatment and pollution control

In the water treatment and pollution control sector, the

Company may invest in businesses that are principally,

but not exclusively, exposed to the following areas:

•

water treatment technologies involved in filtration,

purification and separation;

•

water infrastructure including pumps, valves and

actuators;

•

environmental sensing, testing and monitoring; and

•

air pollution control technologies.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 33

Strategic report

(iii) Risk diversification

The Company has the following maximum exposures

in place in order to ensure that there is a reasonable

diversification of risk in the Company’s portfolio:

(a) not more than 10% of the Company’s net assets

will be invested in any one company at the time of

investment; and

(b) the Company will not make an investment if as a

consequence of that investment individual holdings

of 5% or more would in aggregate represent more

than 40% of net assets.

The Company does not have prescriptive limits on

the maximum amounts that can be invested in the

sub-sectors listed above. The Directors believe that

the imposition of such limits could impact on efficient

portfolio management.

(iv) Gearing

The Board has authorised the Manager to utilise short-

term borrowings of up to 10% of net assets in order to

provide liquidity for efficient portfolio management

where the Manager sees fit. The Company has the

flexibility to enable it to take out long-term borrowings

in appropriate circumstances. Any long-term borrowings

and any borrowings in excess of 10% of net assets

require the separate authorisation of the Board.

The borrowings of the Company shall not at any time,

without the previous sanction of an ordinary resolution

of the Company, exceed an amount equal to one third of

the aggregate of:

(a) the amount paid up on the share capital of the

Company; and

(b) the total of the capital and revenue reserves of the

Company, including any share premium account,

capital redemption reserve and credit balance on

the profit loss account as shown in the latest audited

balance sheet and income statement of the Company

subject to certain adjustments detailed in the

Company’s Articles of Association.

ASSET ALLOCATION AT YEAR END

The breakdown of the structure of the portfolio at the

Company’s year end is shown on page 9.

DIVIDEND POLICY AND DIVIDENDS

Dividend policy

The Directors typically expect the Company to generate

returns in the form of capital gains rather than revenue.

It is the Company’s policy to pay out substantially

all earnings by way of dividend for each year, with

dividends mainly financed from current year net income

and, since 2020, to declare two dividends each year.

In accordance with regulation 19 of the Investment

Trust (Approved Company) (Tax) Regulations 2011, the

Company will not (except to the extent permitted by

those regulations) retain more than 15% of its income

(as calculated for UK tax purposes) in respect of an

accounting period.

Dividends declared for the year ended

31December2022

The Board recognises that as the Company issues

and/or buys back shares through the year, this has an

effect on earnings per share if a single dividend is paid

annually, irrespective of timing.

In order to be fair to all shareholders the Board paid an

interim dividend at the half-year stage, and declared

a second interim dividend, in lieu of final, paid shortly

after the year end. This also has the advantage that

shareholders receive their dividends earlier than

when a final dividend is paid after the AGM. It is the

Board’s intention to continue with the declaration of

two dividends each year. Shareholders will be given an

opportunity to vote on the Company’s dividend policy at

the forthcoming AGM. Thevote is advisory and is set out

as ordinary resolution 3 in the Notice of Meeting.

RESULTS AND DIVIDEND

The Company’s revenue return after tax for the year

amounted to £13,272,000 (2021: £9,391,000). During

the year, the Company paid a first interim dividend of

1.5pence per Ordinary Share (2021: 1.3 pence), totalling

£4,568,000. On 1 February 2023, the Directors declared

that the Company would pay on 10 March 2023 a second

interim dividend of 2.5 pence per Ordinary Share (2021:

1.5 pence), totalling £7,604,000 based on the Ordinary

Shares in issue at the record date, 10 February 2023.

The Company made a capital loss after tax of

£237, 542,000 (2021: capital profit of £231,047,000).

Therefore the total return after tax for the Company was

a loss of £224,270,000 (2021: profit of £240,438,000).

KEY PERFORMANCE INDICATORS (“KPIs”)

The Board measures the Company’s success in

attaining its investment objective by reference to the

following KPIs:

(i) Achievement of NAV and share price growth over

the long term

The Board monitors both the absolute and relative

NAV and share price performance and compares the

performance of the Company against the MSCI ACWI

and FTSE ET100 indices on a total return basis. Areview

of performance is undertaken at each quarterly Board

meeting and the reasons for relative under and over

performance against various comparators is discussed.

The Chairman’s statement on pages 2 to 4 incorporates

a review of the highlights during year. The Manager’s

Report on pages 5 to 8 highlights investments

made during the year and how performance has

been achieved.

(ii) Maintenance of a reasonable level of premium or

discount of share price to NAV

The Manager and the Company’s broker monitor the

premium or discount and keep the Board updated as

and when appropriate. At quarterly Board meetings, the

Board reviews the premium or discount in the period

since the previous meeting on both an absolute basis

and in comparison with other investment trusts with a

34 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

similar mandate. The Board has issued a statement on

premium/discount control on pages 3 and 4. The Board

sets parameters under which the Company’s shares

can be sold or bought back and each sale of shares

or buyback is approved by a Board member before

it is conducted. The Company’s shares traded at an

average discount to NAV of 0.4% during the year ended

31 December 2022 and within a range of 14.1% premium

to 6.6% discount. At the year end the shares traded at

NAV (no premium/discount). Since the year end, and to

the last practicable date prior to the publication of this

report, the Company's shares have traded in the range of

1.3% premium and 5.3% discount to the NAV. Details of

Ordinary Shares issued and bought back since the year

end are shown in note 12.

(iii) Maintenance of reasonable level of ongoing

charges

The Board receives monthly management accounts

which contain analysis of expenditure. The Board also

reviews expenditure formally at its quarterly Board

meetings. The Board reviews the fees payable to

the Company’s main service providers on an annual

basis. The Board considers the ongoing charge to be

reasonable in comparison to peers. The Company’s

ongoing charges figure was 0.81% (2021: 0.85%). This is

calculated in accordance with the AIC methodology and

disclosed as an APM on page 85.

INVESTMENT PERFORMANCE TO 31 DECEMBER 2022

1 Year 3 Years 5 Years 10 Years

NAV of the Company

1,2

-15.0% 35.1% 57.5% 263.75%

Share price of the Company

1,2

-22.8% 29.4% 71.2% 346.4%

MSCI ACWI

-8.1% 23.9% 45.1% 191.1%

FTSE ET100/FTSE ET50

2,3

-20.1% 72.0% 100.2% 355.1%

Note: MSCI index is total net return (dividends reinvested net of withholding tax), FTSE index is total return (dividends reinvested gross of

withholding tax), both in sterling terms.

1. These are considered to be APMs.

2. Total return.

3. FTSE ET50 data until 31 December 2013 and then FTSE ET100 thereafter.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board is responsible for the management of risks

faced by the Company and, through delegation to

the Audit Committee, has established procedures to

manage risk, oversee the internal control framework

and determine the nature and extent of the principal

risks the Company is willing to take in order to

achieve its long-term strategic objectives. The Audit

Committee carries out, at least annually, a robust

assessment of the principal risks and uncertainties

and reviews ongoing monitoring of both risks and

controls. Thisensures heightened and emerging risks

are identified outside of the normal cycle of Board and

AuditCommittee meetings.

Risks are documented on a risk register, grouped into

four main categories: Strategic and Business Objective

Risks; Investment Management Risks; Operations –

Service Providers Risks; and Compliance, Regulatory and

Corporate Governance Risks. Risks are then rated before

and after mitigating controls by impact and likelihood

of occurrence, with the assessed ratings charted on risk

matrices. The risk register is reviewed on an ongoing

basis in an attempt to capture all risks and to ensure

appropriate mitigation is in place. Reviews take into

account changing factors including, but not restricted

to, changes to markets (both macro and micro),

stakeholders, operations, regulation and emerging risks.

The top risks identified by this process are set out in the

table which follows, and the Board considers these to be

the principal risks of the Company.

The Board considered the risks posed by global

economic conditions including higher inflation and

interest rates as a result of the war in Ukraine and the

secondary effects of the Covid-19 pandemic, with

updates on market impact and operational resilience

received from the Manager, Administrator and other

key service providers. The Board is satisfied that

the key service providers had, and continue to have,

the ability to continue their operations efficiently

in a remote or virtual working environment, whilst

safeguarding their staff.

The Manager continues to provide regular updates to

the Board on the financial impacts on the portfolio

performance and investee companies, as well as the

long-term effects and opportunities for the sectors in

which the Company invests.

Emerging risks are considered by the Board at its

quarterly meetings and by the Audit Committee as

part of its risk management and internal control review.

Failure to identify emerging risks may cause reactive

actions rather than being proactive and the Company

could be forced to change its structure, objective or

strategy and, in worst case, could cause the Company to

become unviable or otherwise fail.

The experience and knowledge of the Directors is

invaluable in consideration of emerging risks, as are

update papers and advice received from the Board’s

key service providers such as the Company’s Manager,

broker, Company Secretary and auditor. The AIC also

Investment Policy, Results and Other Information continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 35

Strategic report

provides regular updates and draws members’ attention

to forthcoming industry and/or regulatory issues.

TREND: INCREASING NEUTRAL REDUCING

Potential risk Mitigation Trend

Strategic and business objective risks

Economic and market risks

Price movements of the Company’s investments are

highly correlated to the performance of global equities

in general and small and mid-cap equities in particular.

Falls in stock markets are likely to adversely affect the

performance of the Company’s investments.

Changes in general economic and market conditions,

such as currency exchange rates, interest rates, rates

of inflation, industry conditions, tax laws, political

events and trends can substantially and adversely

affect the value of investments. Market risk includes

the potential impact of events which are outside the

Company’s control such as the Russian invasion of

Ukraine.

The Company invests in companies with small market

capitalisations, which are likely to be subject to higher

valuation uncertainties and liquidity risks than larger

capitalisation securities. The Company may also

invest in unquoted securities which generally have

greater valuation uncertainties and liquidity risks than

securities listed or traded on a regulated market.

There are inherent risks involved in stock selection.

The Manager is experienced and employs its expertise

in selecting the stocks in which the Company invests.

The Manager spreads the investment risk over a wide

portfolio of investments in its three main sectors:

energy, water and waste, as well as geographically.

At year end, the Company held investments in

58companies and the largest holding represented

2.9% of net assets.

The Manager will not normally hedge against foreign

currency movements, but the Manager takes account

of the risk when making investment decisions. Further

details on financial risks and risk mitigation are disclosed

in note 16 to the accounts.

The high risk rating remains unchanged; this reflects

continued uncertainty in markets, though for changed

reasons. Covid-19 and Covid -19 secondary effects have

decreased, however, but uncertainty continues due

to inflation, interest rates and cost concerns following

the Ukraine war, added to which are possible negative

consequences arising from the recent tensions being

seen in the financial system.

Environmental markets

The Company invests in companies operating in

environmental markets. Such companies carry risks

that governments may alter the regulatory and financial

support for environmental improvement, costs of

technology may not fall, capital spending by their

customers is reduced or deferred and their products or

services are not adopted.

The Company invests in a broad portfolio of investments

which are spread amongst several environmental

market sectors. The Manager has a rigorous investment

process which takes into account relevant factors prior to

investment decisions taking place. As well as reviews of the

portfolio and relevant industry matters at quarterly Board

meetings, the Board has an annual strategy day at which

the overall strategy of the Company is discussed.

Share price trades at excessive premium to net asset

value

Market demand combined with limited capacity results

in excessive share price premium to NAV and returns

to shareholders may be affected. Excessive premium

may also result in being unable to grow the Company

through share issuance.

Share price trades at excessive discount to net asset

value

It is in the long-term interests of shareholders that

shares do not trade at a significant discount to their net

asset value.

Investor demand for the shares fell with the onset of the

Ukraine war, in tandem with other investment company

shares. This moved the shares from a premium to NAV to

a discount. As explained in the Chairman's Statement, the

Board's intention remains to keep the Company's shares

trading close to NAV. Even so, and especially where

markets are volatile, the discount may increase.

The Board has made a statement on premium/discount

control in normal market conditions as detailed on

pages 3 and 4 in the Chairman’s Statement.

The Company utilises its powers to issue and buy back

shares when circumstances are appropriate, following

consultation with the Manager and the Company’s

broker.

The Board monitors the level of premium/discount

and receives regular shareholder feedback from the

Company’s Manager and broker.

36 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Potential risk Mitigation Trend

Strategic and business objective risks

Financing risk

The Company may borrow money for investment

purposes. If investment markets fall in value, any

borrowing will enhance the level of loss.

Capacity constraints on the availability of desirable

companies for investment may mean the Company is

unable to achieve the level of gearing wanted.

The Board has authorised the Manager to use its

discretion to utilise gearing up to 10% of net assets. Any

borrowing above this level requires Board approval.

Borrowing facilities are renewed on a cost effective and

timely basis.

The Manager keeps under regular review the

opportunities for enhancing returns by the prudent use

of gearing.

The Company's fixed rate loans and revolving credit

facility both expire on 6 September 2023. Higher

interest rates will increase the cost of borrowings for

the Company and borrowings may not be available of

acceptable types, amounts and/or interest rates.

Operations – service providers risks

Failure or breach of Information Technology (IT) -

including cyber- security, and physical security risks

Failure of IT or physical security could potentially lead

to breaches of confidentiality, data records being

compromised and the inability to make investment

decisions. In addition, unauthorised physical access to

buildings could lead to damage or loss of equipment.

The underlying risks primarily exist in the third

party service providers to whom the Company has

outsourced its depositary, registration, administration

and investment management activities.

The Company’s key service providers report periodically

to the Board on their procedures to mitigate cyber

security risks including their alignment with industry

standards, their physical and data security procedures

and their business continuity planning.

The Board also meets with its service providers on a

periodic basis.

Operational risk

The Board has contractually delegated to third party

service providers the management of the investment

portfolio, and services covering: depositary and custody;

registrar; company secretarial and fund accounting. The

security of the Company’s assets, dealing procedures,

accounting records and adherence to regulatory and

legal requirements depend on the effective operation of

the systems of these third party service providers.

Failure by any service provider to carry out its

obligations to the Company could have a material

adverse effect on the Company’s performance.

Disruption to the accounting, payment systems or

custody records (including cyber security risk) could

prevent the accurate reporting and monitoring of the

Company’s financial position.

Due diligence is undertaken before contracts are

entered into with third party service providers, taking

into account the quality and cost of services offered,

including policies and procedures, and risk management

and controls systems in operation in so far as they are

relevant to the Company. Thereafter, the performance

of the provider is subject to regular review and report to

the Board. The Board monitors key persons as part of

this oversight.

The control of risks related to the Company’s business

areas is described in detail in the corporate governance

report on page 52.

The risk rating is increased to reflect the acquisition

during the year of Sanne Fund Services (UK) Limited

("Sanne") by Apex. A transition plan to move and

integrate the two companies was presented to the

Board. This set out a programme to ensure the seamless

move of the fund accounting and company secretarial

services provided by Sanne, with no diminution

of service quality either at or after transition, and

recognised the importance to the Company of IEM-

experienced staff.

Investment Policy, Results and Other Information continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 37

Strategic report

Whilst not being identified as principal risks after mitigation controls are applied, other relevant risks to the Company

include the following:

Potential risk Mitigation Trend

Strategic and business objective risks

Global pandemic risk

The rapid spread of infectious disease may cause

governments to implement policies to restrict the

gathering, interaction or movement of people and take

other measures as deemed appropriate to prevent its

spread, causing disruption to markets generally, investee

companies, the operations of the Company and its key

service providers.

The Manager spreads the investment risk over a

wide portfolio of investments. Risk analysis includes

scenario analysis of possible negative market events.

The Company’s key service providers report

periodically to the Board on their business continuity

plans and procedures. The Board monitors the

adequacy of controls in place at the key service

providers and their planned response to an extended

period of disruption, to ensure that the impact to the

Company is limited.

During times of elevated volatility and market stress,

the Company’s closed-end fund structure protects

it from the liquidity requirements that can arise for

open-ended funds.

Physical climate change risk

While efforts to mitigate climate change continue, the

physical impacts are already emerging in the form of

changing weather patterns. Extreme weather events

can result in flooding, drought, fires and storm damage,

potentially impairing the operations of an investee

company at a certain location, or impacting locations of

companies within their supply chain.

Physical climate change risk is still an emerging topic

for investors as well as for the management teams

of investee companies. It has been a focus area of

research and engagement by the Manager to identify

companies particularly exposed to this risk and to

open a dialogue with them on management options.

Details of engagement with investee companies are

given on pages 30 and 31.

The Company invests in a broad portfolio of

companies which are spread geographically, limiting

the impact of location specific weather events.

Investment management risks

Financial risks

The Company’s investment activities expose it to a

variety of financial risks which include foreign currency

risk, portfolio liquidity risk and interest rate risk.

The Company invests in securities which are not

denominated or quoted in sterling. Movements of

exchange rates between sterling and other currencies

in which the Company’s investments are denominated

may have an unfavourable effect on the return on the

investments made by the Company.

The Company will not normally hedge against foreign

currency movements affecting the value of its

investments, although, the Manager takes account of

this risk when making investment decisions.

The Company invests in range of global listed equities

and the Manager monitors the foreign currency

exposure and liquidity of holdings within the portfolio

and reports on these to the Board at each meeting.

Interest rate risk is limited due to the low level of

gearing.

Further details on financial risks and risk mitigation

are disclosed in note 16 to the accounts.

38 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Potential risk Mitigation Trend

Compliance, regulatory and corporate governance risks

Regulatory risks

Loss of investment trust status would lead to the

Company being subject to tax on any gains on the

disposal of its investments.

Breaches of the FCA’s rules applicable to listed entities

could result in financial penalties or suspension of

trading of the Company’s shares. Breaches of the

Companies Act 2006 could result in financial penalties

or legal proceedings against the Company or its

Directors.

Failure of the Manager to meet its regulatory obligations

could have adverse consequences on the Company.

The Company has contracted out relevant services

to appropriately qualified professionals, who monitor,

and report to the Board on regulatory compliance.

In addition, the Company’s broker, auditor, Company

Secretary and Manager provide the Board with

regulatory updates on a regular basis.

The Manager reports on regulatory matters to

the Board on a quarterly basis. The assessment

of regulatory risks forms part of the Board’s risk

assessment programme.

VIABILITY STATEMENT

The continuation of the Company is subject to the

approval of shareholders every three years. The

continuation of the Company was approved at the

Company's 2022 AGM with 99.99% votes in favour of the

continuation resolution. The next vote will take place at the

Company's 2025 AGM.

The Directors have assessed the viability of the Company

for the period to 31 December 2027 (the "Viability

Period"). The Board believes that the Viability Period,

being approximately five years, is an appropriate time

horizon over which to assess the viability of the Company,

particularly when taking into account the long-term nature

of the Company’s investment strategy, the principal risks

outlined above such as a severe market downturn or

climate change and its gearing. Based on this assessment,

the Directors have a reasonable expectation that the

Company will be able to continue to operate and to meet

its liabilities as they fall due over the Viability Period.

The Board reviewed the Company's income and

expenditure projections and other funding requirements

in normal and worst case market conditions. The level of

the ongoing charges is dependent to a large extent on the

level of net assets, the most significant contributor being

the investment management fee. The Company's income

from investments and cash from the sale of investments

(which are readily realisable) provide substantial cover

to the Company's operating expenses, and any other

expenditure likely to be faced by the Company over the

Viability Period. Such expenditure to include buybacks of

shares in order to operate the Company's discount control

policy and repayment of the Company's borrowings, which

at the date of this report represented less than 4.0% of the

Company's investments.

In its assessment of the prospects of the Company,

the Board considered each of the principal risks

and uncertainties and the liquidity and solvency

of the Company.

Investment Policy, Results and Other Information continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 39

Strategic report

Section 172 of the Companies Act 2006 requires the

Board to act in the way that it considers would most

likely promote the success of the Company for the

benefit of all stakeholders, taking into consideration

the interests of stakeholders in their decision-making

and to share how they have discharged this duty.

The Company's mission is to help its shareholders

benefit from growth in companies operating in

the fast growing Environmental and Resource

Efficiency Markets.

The Company's values – integrity, accountability and

transparency – mean that the Board has always worked

hard to communicate effectively with the Company’s

stakeholders. This is a two-way process and the

feedback received from our stakeholders is highly

valued and factored into our decision making.

The Company has a range of stakeholders and this

section maps out who they are and what the Board

believe their key interests to be, how The Company

enables engagement with stakeholders and highlights

results that have consequently arisen during the year.

SHAREHOLDERS & FINANCIAL ADVISERS

Investment performance (NAV) - Investment

performance is monitored in relation to the Company’s

objective and to the investment policy and strategy

(further information can be found on page 33 describing

the Key Performance Indicators). The Board receives

regular reports from the Manager on the composition,

investment activities and performance of the portfolio

and the wider marketplace in which the Company

operates. The Board discusses the portfolio at each

Board meeting and maintains a constructive dialogue

between meetings as well. A representative of the

Manager additionally attends quarterly Board meetings.

2022 Highlights: The Company's NAV per share on

a total return basis declined by 15.0%, compared to a

fall in the MSCI ACWI of 8.1%. However, the Company's

NAV outperformed its environmental markets

comparator, the FTSE ET100, which fell by 20.1%

over the year.

Share Price, Liquidity & Premium/Discount - The

Board also reviews and discusses detailed reports from

the Manager and other key service providers, including

the broker and financial advisers, in relation to the

Company’s share performance, trading and liquidity as

well as the composition of, and changes to, the register

of shareholders. The Board takes a proactive approach

to managing the premium and discount.

2022 Highlights: The Company's share price total

return fell by 23.6% for the year. Investor demand

for the Company's shares has varied through the

year. The share price traded between a premium of

14.1% and a discount of 6.6% during the year. The

Board has therefore acted to maintain the share price

with shares bought back into treasury coupled with

shares sold from treasury as and when appropriate.

At 31 December 2022 there was no premium or

discount to NAV.

ESG & Sustainability - The Manager conducts

fundamental analysis which incorporates long-term

risks, including Environmental, Social & Governance

(“ESG”) factors. Its reporting to the Board goes

beyond financial returns to include environmental

impact, corporate engagement and stewardship. The

Manager maintains regular dialogue with both investee

and potential investee companies and reports back

on these conversations to the Board. As described on

page 40, the Board and Manager believe engagement

with the investee companies is positive, beneficial

and welcomed and that consistent exercise of voting

rights is a key activity in the dialogue with companies

invested. The Board has oversight of the quality of

the ESG management in its quarterly Board meetings,

along with an annual meeting with the Head of

Sustainability & ESG.

2022 Highlights: The Board has established a

Sustainability Reporting Committee during the year.

Further details on the committee and its activities

are given on page 50. The Board also updated its

ESG Policy and issued its new Biodiversity Policy.

Assetout on page 20, the Company has enhanced its

TCFD reporting.

Strategy - The strategy of the Company is reviewed

by the Board on a continuing basis. Once a year

the Board undertakes a strategy day, inviting

representatives from key service providers, as well as

its PR company, to look ahead and present new ideas

and improvements that the Board can consider. Whilst

feedback from shareholders is sought on a continual

basis, the Board requests the Company’s broker and

investment manager to provide detailed analysis and

feedback from shareholders in order that it can be

addressed during this meeting. The Board’s strategy

and performance is validated by shareholders through

a triennial vote on the continuation of the Company

and the Board encourages shareholders to take part

in this vote.

2022 Highlights: At its strategy day, the Board

discussed with the Manager forthcoming changes to

ESG regulations and the Manager's draft response to

the FCA's consultation on Sustainability Disclosure

Requirements which was subsequently submitted to

the FCA. The continuation vote held at the AGM in

May 2022 passed with 99.99% votes in favour.

Regular Communication - Meetings with financial

advisers and our shareholders help us to understand

their needs and concerns. As described under

Shareholder Relations and Annual General Meeting on

page 45, the Board welcomes direct feedback from

shareholders throughout the year. Additionally, the

Board maintains regular contact with shareholders

through the Manager and broker’s programme of

shareholder and financial adviser meetings, who report

back to the Board on shareholder sentiment, questions,

or concerns for the Board's consideration.

Engaging with our Stakeholders

40 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

Engaging with our Stakeholders continued

The Board believes that shareholders and financial

advisers can make informed decisions only if they have

access to relevant information on a timely basis. To

provide the transparency that the Board seeks with

shareholders, a variety of communication channels and

methods of communication are used.

The Company’s website –

www.impaxenvironmentalmarkets.co.uk is considered

an essential communication channel and information

hub for shareholders. As such, it includes full details of

the investment objective, supporting philosophy and

investment performance along with news, opinions,

disclosures, results and key information documents, as

well as information about the Board, its Committees

and other governance matters.

The annual and interim reports and accounts are

published on the Company’s website and are available

in hard copy on request. The date of the Annual

General Meeting is published in advance (online

and within the annual report). Shareholders are

encouraged to raise questions either at or in advance

of this meeting.

Factsheets, providing performance information,

inclusive of geographic and sector exposure and the

top ten holdings, are published monthly and the full

portfolio holdings are made available quarterly in

arrears; both are available on the Company’s website.

The Company continues to expand and enhance the

content of its engagement and advocacy results, and

on the environmental impact of its investment strategy.

2022 Highlights: The Board was pleased to hold

the AGM in person and shareholders were welcome

to come along, to meet the Board and to ask

any questions.

Board Succession Planning - The composition of

the Board and succession planning is led by the

Nomination Committee with changes managed in

order to provide regular refreshment, good diversity

and a high level of relevant skills as set out in its

report on page 50.

2022 Highlights: The Board welcomed Mr Glen

Suarez as chairman-designate and he will replace Mr

Scott as Chairman with effect from the conclusion

of the 2023 AGM. Mrs Hastings is also retiring at the

conclusion of the 2023 AGM. Mr Hurd stepped down

on 31 December 2022. The Board is currently recruiting

a new director and will provide further details

in due course.

INVESTMENT MANAGER

Partnership - We have developed a strong working

relationship with the Manager, aligned in the mission to

seek to deliver consistent outcomes for our clients and

superior financial returns over the longer term.

2022 Highlights: The Board collaborated with the

Manager to publish its updated ESG Policy and its

inaugural Biodiversity Policy.

Impact on the wider community and environment -

The Board and the Manager support the transition to

a low-carbon economy, primarily through investment

decisions, company engagement and collaboration

with stakeholders.

2022 Highlights: The Environmental Impact of the IEM

portfolio is on pages 23 and the Board has published

its second Climate Impact statement on page 24.

See pages 23 to 24 for the Company's enhanced

TCFD reporting.

INVESTEE COMPANIES

Long-term Investment, Collaboration, Engagement-

The Manager is a long-term investor and develops

strong relationships with many of our investee

companies, including access to key individuals. This

engagement is collaborative, with investee companies

having access to the sustainability expertise of the

Manager’s Head of Sustainability & ESG. The Manager

maintains regular dialogue with both investee and

potential investee companies and reports back on

these conversations to the Board. The Board and

the Manager believe engagement with the investee

companies is positive, beneficial and welcomed, and

that consistent exercise of voting rights is a key activity

in the dialogue with companies invested.

ESG Considerations - The Board has oversight of the

Manager’s ESG management at its quarterly Board

meetings, along with an annual meeting with the Head

of Sustainability & ESG. The Manager engages with

companies to minimise risks, protect shareholder

value, promote greater transparency and encourage

companies to become more resilient over time. The

Manager takes a supportive rather than activist

approach and, as a leader in the field of environmental

impact, often works in collaboration with other asset

managers or organisations.

2022 Highlights: During 2022, the Manager continued

to have regular dialogue with management of investee

and potential investee companies in person, virtually

or a hybrid of both. The engagement, proxy voting and

stewardship activities undertaken, including examples

of outcomes of the Manager's engagement with

investee companies, are published in the Sustainability

and Stewardship section on pages30 to 31.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 41

Strategic report

SERVICE PROVIDERS

Productive and Collaborative Working Relationships -

The Board, either directly or through the Manager,

seeks to develop deep relationships and regularly

engages with our service providers, including ensuring

that they reflect our values around social inclusion,

sustainability, and the environment. The performance

of our key service providers is regularly monitored and

set against KPIs. The Company wants to ensure, and

assesses on a regular basis, that appointments remain

in the best interests of our stakeholders.

Reputation Management - The Board has high

standards and looks to maintain its reputation for

delivering to those standards for its shareholders.

Monitoring and reviews have an integral role in

providing oversight and informing the Board’s decision

making. Reviews include updates in relation to the

provider and their operations, their policies and control

environment, new regulations from the auditor and

company secretary, changes to market sentiment and

practice from the broker and changes to the portfolio

and broader market performance from the Manager.

Communications - Service providers are also

responsible for monitoring the markets in which they

operate and communicating updates to the Board;

for instance, the company secretary will monitor

regulatory changes and make the Board aware of

these. Regular meetings with our service providers,

in particular the Manager, are essential if we are to

monitor and seek feedback from them.

Impact on the wider community and environment-

In line with the Board's intention to report under the

TCFD framework, the Board encouraged its key service

providers to consider and evaluate their environmental

impact, and has reported the Manager's CO

2 emissions

for the second time this year.

2022 Highlights: In addition to the Board’s normal

review of key service providers, the Board concluded

its review of fees for the depositary and custodian as

well as the secretary and administrator, both of which

resulted in a significant reduction. A similar review of

registrar services and associated fee is currently in

progress, and the results from this review this will be in

the next annual report.

42 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Strategic report

MODERN SLAVERY DISCLOSURE

The Company aims to act to the highest standards

and is committed to integrating responsible business

practices throughout its operations. The prevention

of modern slavery is an important part of corporate

good governance.

As an investment trust the Company does not offer

goods or services to consumers and deals predominantly

with professional advisers and service providers in

the financial services industry. As such the Board

considers that the Company is out of scope of the

Modern Slavery Act 2015. A statement by the Manager

under the Act has been published on the website at

www.impaxenvironmentalmarkets.co.uk

ENVIRONMENTAL MATTERS

The Company has no employees, physical assets,

property or operations of its own, does not provide

goods or services and does not have its own customers.

It follows that the Company has little to no direct

environmental impact. Consequently, the Company

consumed less than 40,000 kWh of energy during

the year in respect of which the Directors’ Report is

prepared and therefore is exempt from the disclosures

required under the Streamlined Energy and Carbon

Reporting criteria.

As an investment trust the fundamental environmental

impact the Company makes is indirectly through the

investments in its portfolio. Further details can be found

above under the heading Environmental, Social and

Governance (“ESG”) of investee companies.

SOCIAL, COMMUNITY AND HUMAN RIGHTS

ISSUES

The Manager screens the Company’s investable universe

as part of the Environmental Social and Governance

analysis for any breaches of the principles of the

UN Global Compact, including human rights, labour

rights, environmental breaches and corruption. Any

non-compliant companies are excluded from investment.

ANTI-BRIBERY AND CORRUPTION

It is the Company’s policy to conduct all of its business

in an honest and ethical manner. The Company takes a

zero-tolerance approach to bribery and corruption and

is committed to acting professionally, fairly and with

integrity in all its business dealings and relationships

wherever it operates. The Company’s policy and the

procedures that implement it are designed to support

that commitment.

PREVENTION OF THE FACILITATION OF TAX

EVASION

The Board has a zero-tolerance approach to the criminal

facilitation of tax evasion.

EMPLOYEES

The Company has no employees. As at 31 December 2022,

the Company had five Directors, of whom two are male

and three female.

OUTLOOK

The outlook for the Company is discussed in the

Chairman’s Statement on page 4.

STRATEGIC REPORT

The Strategic Report set out on pages 1 to 42 of this

Annual Report was approved by the Board of Directors

on 31 March 2023.

For and on behalf of the Board

John Scott

Chairman

31 March 2023

Other Information

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 43

Governance

Board of Directors

John Scott

1, 3

Chairman of the Board and Management Engagement

Committee

Appointed 7 February 2013

Mr Scott is a former investment banker

who spent 20 years with Lazard Brothers.

He is the Chairman of both the Guernsey-

based Bluefield Solar Income Fund and JP

Morgan Global Core Real Assets. He was

previously Chairman of Scottish Mortgage Investment

Trust, Jupiter Emerging & Frontier Income Trust, and

Alpha Insurance Analysts.

Mr Scott's contribution is invaluable to the Company

in formulating its short-term and long-term strategic

direction as well as overseeing its development

through the years.

Mr Scott will retire from the Board after the AGM

on 16 May 2023.

Aine Kelly

1, 2, 3

Senior Independent Director and Chairman of the

Nomination Committee

Appointed 15 November 2016

Miss Kelly is an Independent Impact

Investing Consultant. Miss Kelly worked as

Head of Financial Sector and Investor

Engagement at Big Society Capital from

2013-2016, followed by 3 years as a

consultant on The Impact Management Project. She

spent the previous 4 years at Barclays Wealth and prior

to that she worked 16 years in investment banking at

Kleinwort Benson, JP Morgan and Citigroup. Miss Kelly

has a wide experience of introducing new investment

opportunities to investors and has covered UK, European

and Asian equity markets. Miss Kelly has worked in

London, New York and Zurich and is currently

based in Ireland.

Miss Kelly is currently a member of QBE’s Classification

of Social Investment committee and a member of

the External Board of Advisors of Cork University

Business School.

Miss Kelly’s background brings a new approach to the

boardroom with a focus on both the financial integrity of

investment decisions and their long-term impact.

Stephanie Eastment

1, 2, 3

Chairman of the Audit Committee

Appointed 1 July 2019

Mrs Eastment is a chartered accountant

and chartered company secretary with

over 30 years' experience in the financial

services industry. She qualified with

KPMG and worked at Wardley and UBS

in finance and corporate governance before moving to

Invesco, where she worked for 22 years ending as Head

of Accounts and Company Secretariat for Specialist

Funds, which included investment trusts. She retired

from Invesco in 2018 to pursue a non-executive

director career using her wide knowledge and

experience. She is also a member of the AIC's

Technical Committee.

Mrs Eastment is a non-executive director and audit

committee Chairman of Murray Income Trust plc,

Herald Investment Trust plc and Alternative Income

REIT plc and a non-executive director of RBS Collective

Investment Funds Limited.

Mrs Eastment's financial, technical and oversight

experience and knowledge strengthens the Board's

financial and risk oversight not only as a director, but as

the audit committee Chairman.

Victoria (Vicky) Hastings

1, 3

Chairman of the Remuneration Committee

Appointed 21 May 2013

Mrs Hastings has worked for over

30years in the investment management

industry. She has held investment roles

at asset managers including JO Hambro

Capital Management, Merrill Lynch

Private Investors and Kleinwort Benson Investment

Management but latterly has pursued a portfolio

career. Mrs Hastings is currently Chairman of

Henderson European Focus Trust plc, the Senior

Independent Director of The Edinburgh Investment

Trust plc, a non-executive director of Alliance Trust plc

and trustee of Moorfields Eye Charity.

Mrs Hastings's contribution in overseeing and

challenging, where appropriate, investment

management decisions is highly valued by the Board and

her active involvement in the investment trust industry

enables her to positively contribute to the Company’s

long-term sustainable success.

Mrs Hastings will retire from the Board after the AGM

on 16 May 2023.

1 Member of the Audit, Nomination, Remuneration and Management Engagement Committees

2 Member of the Sustainability Reporting Committee

3 Considered independent by the Board

44 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Glen Suarez

1, 2 , 3

Chairman-designate and Chairman of the Sustainability Reporting Committee

Appointed 1 October 2022

Mr Suarez is currently chairman of the

board of Knight Vinke Asset Management,

having previously held the roles of CIO

and Deputy CEO. He is a non-executive

director of BlackRock Throgmorton Trust

plc and a senior adviser to FMAP Limited, a consultancy

founded by Lord Maude which advises governments on

the implementation of public sector reform.

Mr Suarez was chairman of The Edinburgh Investment

Trust plc from 2017 to 2022, having joined the board in

2013. He was a committee member and co-chair of the

Capital Markets Advisory Committee, an independent

body advising on accounting issues and standards

between 2014 and 2020. Before this, he was a Partner in

Soditic Limited for four years and prior to that he

was head of European energy, infrastructure and

utilities investment banking business at Morgan Stanley

for eight years.

He is a Fellow of the Institute of Chartered Accountants

in England and Wales and a member of the Royal

Society of Arts.

Mr Suarez's contribution since his appointment in

October 2022 has proved valuable in providing guidance

and effective challenge on the Company's strategic

direction. On the basis of his 35 years of experience

advising governments, investors, companies and

regulators on climate related matters in the energy and

utilities market, he has been appointed as Chairman of

the Sustainability Reporting Committee.

Bruce Jenkyn-Jones

Chief Investment Officer (CIO), Listed Investments,

ExecutiveDirector

Bruce serves as Impax’s Chief Investment

Officer, Listed Investments. Bruce is one of

Impax Asset Management’s longest-serving

employees. He developed the firm’s listed

equities business and the division’s

investment thesis. He is responsible for overseeing and

enhancing all aspects of the listed investments business,

including monitoring performance, ensuring regulatory

compliance, and spearheading product design. Bruce is a

co-Portfolio Manager of the Specialists and

Climate strategy.

Before joining Impax in 1999, Bruce worked as a utilities

analyst at Bankers Trust and as an environmental consultant

for Environmental Resources Management.

An Oxford graduate with a bachelor’s degree in Chemistry,

Bruce also holds a master’s in Environmental Engineering

Technology, and an MBA from IESE Business School

in Barcelona.

INVESTMENT MANAGERS

Jon Forster

Senior Portfolio Manager, Managing Director

Jon co-manages Impax Asset

Management’s Specialists and Climate

strategies. Specialising in new energy,

water, and waste support services, he

researches stocks globally with a focus on

the industrials and utilities sectors.

He has been part of the Impax team for over twenty

years, having first joined in 2000 from Alchemy Partners

where he had spent two years providing consultancy

work to their portfolio management team. He began

his career in 1994 at HSBC Investment Bank working on

their acquisitions team.

Jon has a bachelor’s degree in German and Management

Studies from Leeds University.

Fotis Chatzimichalakis

Portfolio Manager

Fotis is a member of Impax Asset

Management’s portfolio management

team, where he researches stocks

globally, focusing on the information

technology and industrials sectors.

Fotis originally joined Impax as an intern in 2015, initially

working in the listed equities team. He has held his

current role since 2021. Prior to joining the firm, he had

an internship at Barchester Green Investment.

A CFA Charterholder, Fotis also holds the Investment

Management Certificate. He has master’s degree in Civil

Engineering from the National Technical University of

Athens and a master’s degree in Sustainable Energy

Systems from the University of Edinburgh.

Board of Directors continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 45

Governance

The Directors present their report and accounts for the

year ended 31 December 2022.

STRATEGIC REPORT

The Directors’ Report should be read in conjunction with

the Strategic Report on pages 1 to 42.

CORPORATE GOVERNANCE

The Corporate Governance Statement on pages 49 to 52

forms part of this report.

LEGAL AND TAXATION STATUS

The Company is an investment company within the

meaning of Section 833 of the Companies Act 2006.

The Company conducts its affairs in order to meet

the requirements for approval as an investment trust

under section 1158 of the Corporation Tax Act 2010. The

Company has received initial approval as an investment

trust and the Company must meet eligibility conditions

and ongoing requirements in order for investment trust

status to be maintained. In the opinion of the Directors,

the Company has met the conditions and requirements

for approval as an investment trust for the year ended

31 December 2022.

ALTERNATIVE INVESTMENT FUND

MANAGERS DIRECTIVE (“AIFMD”)

The Company is classified as an Alternative Investment

Fund under AIFMD and is therefore required to have an

Alternative Investment Fund Manager ("AIFM"). Impax

Asset Management (AIFM) Limited is the AIFM of the

Company. The AIFM has received its authorisation to

act as an AIFM from the FCA. The AIFM must ensure

that an annual report containing certain information

on the Company is made available to investors each

financial year. The investment funds sourcebook of the

FCA details the requirements of the annual report. All

the information required by those rules is included in this

Annual Report or will be made available on the AIFM’s

website (www.impaxam.com).

The AIFM is required to make certain disclosures on its

remuneration in respect of the AIFM’s relevant reporting

period which is the year ended 30 September 2022.

These disclosures are available on the AIFM’s website or

are available on request from the AIFM.

LEVERAGE (UNDER AIFMD)

The AIFM is required to set leverage limits as a

percentage of net assets for the Company utilising

methods prescribed under AIFMD (see APMs on

pages85 to 86). These methods are known as the

gross method and the commitment method. A leverage

percentage of 100% equates to nil leverage. The

Company’s leverage under each of these methods at its

year end follows:

Gross

method

Commitment

method

Maximum leverage limit

(setby the AIFM) 130% 130%

Actual leverage at

31December 2022 102% 104%

SHAREHOLDER RELATIONS AND ANNUAL

GENERALMEETING

The Board encourages all shareholders to attend the

AGM and generally seeks to provide twenty one clear

days’ notice of that meeting.

The Notice of AGM sets out the business of the AGM

and any item not of routine nature is explained in the

Directors’ Report. Separate resolutions are proposed for

each substantive issue.

The Manager has a programme of meetings with

shareholders and reports back to the Board on its

findings. The Board also welcomes direct feedback

from shareholders. The Chairman is available to meet

shareholders and may be contacted by email at

chairman@impaxenvironmentalmarkets.co.uk.

This year's AGM will be held at 3.00pm on 16 May 2023

and the Chairman's Statement on page 4 sets out

the arrangements for the meeting. Shareholders are

encouraged to attend the AGM and will have the

opportunity to hear a presentation from the Manager,

and ask questions of the Board and the Manager. The

Manager's presentation will be available to view on the

Company's website after the AGM. All shareholders are

advised to submit their proxy forms in advance of the

AGM. Details of how shareholders can cast their votes

can be found in the Notes to the Notice of Meeting on

pages 89 to 92. Shareholders' questions for either the

Board or the investment managers should be submitted to

clientservices@impaxam.com by midday on 12 May 2023.

SPECIAL BUSINESS OF THE AGM

Authority to issue and purchase own shares

On 22 January 2019, the Board announced that it

remains fully committed to using its powers, including

those to issue and buy back shares, in a proactive

manner with the aim of seeing the shares, in normal

market conditions, trading close to NAV on a consistent

and long-term basis.

The authority to allot shares granted at the last AGM

held on 18 May 2022 will expire at the conclusion of the

forthcoming AGM.

The Board recommends that the Company be

granted a new authority to allot up to a maximum

of 30,344,203Ordinary Shares (representing

approximately 10% of the shares in issue at

27March 2023, the latest practicable date before

publication of this report) and to dis-apply pre-emption

rights when allotting those Ordinary Shares and/or

selling shares from treasury. Ordinary resolution9 and

special resolution 10 will be put to shareholders at the

AGM. Shares will be issued under this authority only at

Directors’ Report

46 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Directors’ Report continued

the Board’s discretion and when it is deemed to be in

the best interests of shareholders as a whole to do so.

The advantages are to lower the Company’s ongoing

charges as expenses are diluted and, in the short term,

to address volatility in the share price. Unless otherwise

authorised by shareholders, new Ordinary Shares will not

be issued at less than NAV and Ordinary Shares held in

treasury will not be sold at less than NAV.

The maximum number of Ordinary Shares which can

be admitted to trading on the London Stock Exchange

without the publication of a prospectus is 20% of the

Ordinary Shares on a rolling previous 12-month basis at

the time of admission of the shares.

The authority for the Company to purchase its own

shares as granted at the AGM held on 18 May 2022

will expire at the conclusion of the forthcoming

AGM. During the year ended 31 December 2022,

3,119,400Ordinary Shares were repurchased into

treasury, and 1,662,900were subsequently re-issued as

the Company's share price moved back to a premium.

Directors recommend that a new authority to purchase

up to 45,485,961Ordinary Shares (subject to the

condition that not more than 14.99% of the Ordinary

Shares in issue at the date of the AGM are purchased)

be granted and special resolution 11 to that effect will

be put to the AGM. Any Ordinary Shares purchased will

either be cancelled or, if the Directors so determine,

held in treasury. Shares are purchased at the discretion

of the Board and when it is deemed to be in the best

interests of shareholders. Shares will be purchased for

cancellation or for treasury only when the shares are

trading at a discount to the Net Asset Value.

The Companies Act 2006 allows companies to hold

shares acquired by way of market purchases as treasury

shares, rather than having to cancel them. This gives

the Company the ability to sell Ordinary Shares quickly

and cost effectively, thereby improving liquidity and

providing the Company with additional flexibility in

the management of its capital base. At the year end

1,456,500 Ordinary Shares were held in treasury and at

27March 2023, being the latest practicable date before

publication of this report, 305,623,539 Ordinary Shares

are in issue of which 2,181,500 are treasury shares.

Notice of general meetings

Special resolution 12 in the notice to the AGM is required

to reflect the requirements of the Shareholder Rights

Directive. The Company is currently able to call General

Meetings, other than an AGM, on 14 clear days’ notice and

would like to preserve this ability. In order to be able to

do so, shareholders must have given their prior approval.

Special resolution 12 seeks such approval, which would

be effective until the Company’s next AGM, when it is

intended that a similar resolution will be proposed.

The Company will ensure that it offers the facility for

shareholders to vote by electronic means, and that this

facility is accessible to all shareholders, if it is to call

general meetings on 14 days’ notice. Short notice of this

kind will be used by the Board only under appropriate

circumstances.

MARKET INFORMATION

The Company’s Ordinary Shares are premium listed

on the London Stock Exchange (“LSE”). The NAV per

Ordinary Share is calculated in sterling for each business

day that the LSE is open for business. The daily NAV

per Ordinary Share is published through a regulatory

information service.

BANK LOANS AND CREDIT FACILITY

The Company has in place a mixture of fixed and floating

rate debt totalling £51.6 million (2021: £49.1 million).

TheCompany entered into two agreements for five

year fixed rate loans of £15 million and US$20 million

with Scotiabank Europe PLC. The interest rates on the

loans are 2.910% and 4.504% per annum, respectively.

The Company also has a £20 million multi–currency

revolving credit facility (“RCF”) with Scotiabank which

is fully drawn down in two currencies: US$12.6 million

and £10 million. Interest is payable on amounts drawn

down under the facility computed at six-month SOFR

and SONIA reference rates respectively plus a margin

of 1.70% per annum. Please see note 11 on page 75 for

further information.

RETAIL DISTRIBUTION OF INVESTMENT

COMPANY SHARES VIA FINANCIAL

ADVISERS AND OTHER THIRD PARTY

PROMOTERS

As a result of the Financial Conduct Authority (“FCA”)

rules determining which investment products can

be promoted to retail investors, certain investment

products are classified as “non-mainstream pooled

investment products” and face restrictions on their

promotion to retail investors.

The Company has concluded that the distribution of

its shares, being shares in an investment trust, is not

restricted as a result of the FCA rules described above.

The Company currently conducts its affairs so that the

shares issued by the Company can be recommended

by financial advisers to retail investors and intends to

continue to do so for the foreseeable future.

MANAGER

Impax Asset Management (AIFM) Limited (“Impax”) has

been appointed as the Company’s Investment Manager

(the “Manager”).

The Manager is appointed under a contract subject to

twelve months’ notice.

The Manager is entitled to remuneration each month at a

rate equivalent to one-twelfth of 0.9% on the Company’s

net assets up to and including the first £475 million and

0.65% on net assets in excess of £475 million.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 47

Governance

The Board confirms that it has reviewed whether to

retain Impax as the Manager of the Company. It has been

concluded that, given the Manager’s depth of knowledge

in the sector and the growth and strong performance

record of the Company, it is in the best long term

interests of shareholders as a whole to continue with

Impax's engagement.

CAPITAL STRUCTURE AND VOTING RIGHTS

At the year end, the Company’s issued share capital

comprised 305,623,539 Ordinary Shares, with 1,456,500

Ordinary Shares held in treasury. Each Ordinary Share

held (excluding those held in treasury) entitles the holder

to one vote. All shares carry equal voting rights and

there are no restrictions on those voting rights.

Voting deadlines are stated in the Notice of Meeting

and Form of Proxy and are in accordance with the

Companies Act 2006.

Since the year end, the Company bought back

into treasury 725,000 Ordinary Shares. This was

in accordance with the Board's previously stated

commitment to using its available issuance and buyback

authorities. At 27March 2023, the latest practicable date

before publication of this report, there were 305,623,539

Ordinary Shares in issue with 2,181,500 Ordinary Shares

held in treasury.

There are no restrictions on the transfer of shares, nor

are there any limitations or special rights associated with

the Ordinary Shares.

NOTIFIABLE INTEREST

As at 31 December 2022 and 27 March 2023, the

Directors have been formally notified of the following

shareholdings comprising 3% or more of the issued share

capital of the Company.

Company

Holding of

ordinary

shares-as at

31 December

2022

% Holding -

as at

31 December

2022

Holding of

ordinary

shares-as at

27 March

2023

% Holding -

as at

27 March

2023

Rathbones Group plc 22,227,053 7.3 22,227,053 7.3

Brewin Dolphin 13,112,066

4.3 13,112,066 4.3

Aegon Asset Management UK PLC 10,626,797 3.5

10,626,797 3.5

Joseph Rowntree Charitable Trust 10,267,260

3.4 10,267,260 3.4

POLITICAL DONATIONS

There were no political donations made during the

financial year to 31 December 2022 (2021: nil).

DISCLOSURE REQUIRED BY LISTING RULE

9.8.4

The above rule requires listed companies to report

certain information in a single identifiable section of

their annual financial reports. The Company confirms

that, other than the allotment of equity securities

for cash (LR 9.8.4(7)) which is detailed in note 12 to

the financial statements, all such reporting applied

only to nonapplicable events for the year ended

31 December 2022.

FINANCIAL INSTRUMENTS

Further information regarding the Company’s financial

instruments and related policies and a consideration of

its liquidity and other financing risks are in Notes 2 and

16 to the financial statements.

FUTURE TRENDS

Details of the main trends and factors likely to affect

the future development, performance and position

of the Company’s business can be found in the

Manager’sReport section of this Strategic Report on

pages 1 to 42. Further details as to the risks affecting

the Company are set out in the ‘Principal Risks and

Uncertainties’ on pages 34 to 38.

DIRECTORS’ INDEMNITIES

Subject to the provisions of the Companies Act 2006

and certain provisions contained in the deeds of

indemnity issued by the Company, the Company has

indemnified each of the Directors against all liabilities

which each director may suffer or incur arising out of or

in connection with any claim made or proceedings taken

against them, or any application made under sections

661(3), 661(4) or 1157 of the Companies Act 2006 by

them, on the grounds of their negligence, default, breach

of duty or breach of trust, in relation to the Company

or any Associated Company. The indemnities would

provide financial support from the Company after the

level of cover provided by the Company’s Directors’ and

Officers’ insurance policy has been fully utilised.

48 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

GOING CONCERN

The Directors have adopted the going concern basis in

preparing the accounts. The following is a summary of

the Directors’ assessment of the going concern status

of the Company.

The Directors have a reasonable expectation that

the Company has adequate resources to continue in

operational existence for at least twelve months from the

date of this document. In reaching this conclusion, the

Directors have considered the liquidity of the Company’s

portfolio of investments as well as its cash position,

income and expense flows. As at 31 December 2022,

the Company held £26.3 million (2021: £28.3 million)

in cash and £1,302.6 million (2021: £1,503.2million)

in quoted investments. The Company’s audited net

assets at 31 December 2022 were £1,275.9million

(2021:£1,479.6 million).

The Board has considered the Company’s debt and

related covenants. The main liability of the Company

is its borrowings of £51.6 million (2021: £49.1 million)

which is covered 24 times (2021: 30 times) by the net

assets, which is well in excess of the level of cover

required by the borrowing covenants of four times (see

note 11 to the financial statements). The Company's

borrowings are expected to be refinanced at their expiry

on 6 September 2023, and the Board is currently in

discussion as to the level and type of borrowings the

Company should have in place. However, if the Board,

in conjunction with the Manager, decided not to put in

place new finance, the portfolio has more than sufficient

liquidity to enable repayment in full.

The total ongoing expenses (excluding taxation and

finance costs) for the year ended 31 December 2022

were £10.7 million (2021: £11.2 million), which represented

approximately 0.81% (2021: 0.85%) of average net assets

during the year. The Board considered the Company's

estimated income in both normal and worst case market

conditions and concluded that the Company had

sufficient liquidity to meet its ongoing expenses. The

Board also considered the liquidity of the Company's

investments and it is estimated that approximately 92%

(2021: 92%) by value of the quoted investments held

at the year end could be realised in one month under

normal market conditions.

At the date of approval of this document, based on the

aggregate of investments and cash held, the Company

has substantial operating expenses cover.

The Directors have considered the impact of higher

inflation and interest rates and possible recession as

well as the war in Ukraine on the Company’s portfolio

of investments and that any future prolonged and deep

market decline would likely lead to falling values in

the Company’s investments and/or reduced dividend

receipts. However, as explained above, the Company

has more than sufficient liquidity available to meet its

expected future obligations. In addition, the Board

believes that the Company and its key third party service

providers have in place appropriate business continuity

plans and will continue to maintain service levels

throughout future pandemics.

The Directors also recognise that the continuation of

the Company is subject to the approval of shareholders

every three years. The continuation vote held at the AGM

in May 2022 passed with 99.99% of votes in favour. The

next continuation vote will take place at the 2025 AGM.

AUDITOR INFORMATION

Each of the Directors at the date of the approval of this

report confirms that:

(i) so far as the Director is aware, there is no relevant

audit information of which the Company’s auditor

is unaware; and

(ii) the Director has taken all steps that he or she

ought to have taken as director to make himself or

herself aware of any relevant information and to

establish that the Company’s auditor is aware of

that information.

This confirmation is given and should be interpreted in

accordance with the provisions of Section 418 of the

Companies Act 2006.

APPOINTMENT OF AUDITOR

In accordance with Section 489 of the Companies

Act 2006, a resolution to re-appoint BDO LLP as

the Company’s auditor will be put forward at the

forthcoming AGM on 16 May 2023.

By order of the Board

Brian Smith

For and on behalf of

Apex Listed Company Services (UK) Limited

Company Secretary

31 March 2023

Directors’ Report continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 49

Governance

Corporate Governance

INTRODUCTION

This Corporate Governance statement forms part of the

Directors’ Report.

The Listing Rules and the Disclosure Guidance and

Transparency Rules of the UK Listing Authority require

listed companies to disclose how they have applied the

principles and complied with the provisions of The UK

Corporate Governance Code 2018 (the “UK Code”), as

issued by the Financial Reporting Council (“FRC”). The

UK Code can be viewed on the FRC’s website.

The Board has considered the principles and provisions

of the AIC Code of Corporate Governance 2019 (the “AIC

Code”) which addresses those set out in the UK Code,

as well as setting out additional provisions on issues

that are of specific relevance to the Company, as an

investment trust.

The Board considers that reporting against the AIC

Code, which has been endorsed by the Financial

Reporting Council, provides more relevant information

to shareholders.

The AIC Code is available on the AIC website

(www. theaic.co.uk). It includes an explanation of how

the AIC Code adapts the Principles and Provisions

set out in the UK Code to make them relevant for

investment companies.

The Company has complied with the AIC Code and

the relevant provisions of the UK Code, except as

set out below.

The UK Code includes provisions relating to:

•

the role of the chief executive (provision 14);

•

the need for an internal audit function (provision 25);

and

•

executive Directors’ remuneration (provision 33).

The Board considers these provisions are not relevant

to the Company, being an externally managed

investment company with no employees. The Company

has therefore not reported further in respect of these

provisions, other than the need for an internal audit

function specific to the Company, which has been

addressed on page 58.

THE BOARD

Composition

At the date of this report the Board consists of five

non-executive directors. The Chairman is John Scott,

and the Directors are Aine Kelly, Stephanie Eastment,

Vicky Hastings and Glen Suarez. Ms Kelly is the Senior

Independent Director and the Nomination Committee

Chairman. Mrs Eastment is the Audit Committee

Chairman, Mrs Hastings is the Remuneration Committee

Chairman and Mr Suarez is the Sustainability Reporting

Committee Chairman.

All the above directors served throughout the year except

for Mr Suarez who was appointed on 1 October 2022.

MrHurd resigned on 31 December 2022.

The Board believes that during the year ended

31 December 2022 its composition was appropriate for

an investment company of the Company’s nature and

size. All of the Directors are independent of the Manager

and are able to allocate sufficient time to the Company

to discharge their responsibilities effectively.

The Directors have a broad range of relevant experience

to meet the Company’s requirements and their

biographies are given on pages 43 and 44.

In line with the AIC Code, the Board has decided that

each Director should be subject to annual re-election

by shareholders, other than Mr Scott and Mrs Hastings

who are retiring at the end of the AGM in May 2023, and

Mr Suarez who will stand for election for the first time

having been appointed during the year.

The Board recommends all the Directors, other than

Mr Scott and Mrs Hastings, for either re- election or

election for the reasons highlighted above and in the

performance appraisal section of this report.

The Directors have appointment letters which do not

provide for any specific term. Copies of the Directors’

appointment letters are available on request from the

Company Secretary. Upon joining the Board, any new

Director will receive an induction and relevant training is

available to Directors on an ongoing basis.

A policy of insurance against Directors’ and Officers’

liabilities is maintained by the Company.

A procedure has been adopted for Directors, in the

furtherance of their duties, to take independent

professional advice at the expense of the Company.

BOARD COMMITTEES

The Board decides which committees it has and

during the year it set up the Sustainability Reporting

Committee, details of which are shown on page 50.

The Board also decides upon the membership and

chairmanship of its committees. Each Committee has

adopted formal terms of reference, which are reviewed

at least annually, and copies of these are available

on the Company’s website or on request from the

Company Secretary.

Audit committee

A report on pages 57 and 58 provides details of the role

and composition of the Audit Committee together with

a description of the work of the Audit Committee in

discharging its responsibilities.

Remuneration committee

All of the Directors are members and Mrs Hastings is

the Chairman. The Remuneration Committee has been

established to meet formally on at least an annual basis

to review the remuneration policy of the Company and

consider the fees of the non-executive directors. No

changes were proposed to the Company's remuneration

policy. Following its review of fees, the Committee

recommended an increase in the Directors’ fees in order

to fairly reflect market remuneration rates. Details of the

review conducted of the fees of non-executive directors

is given on page 54.

50 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Corporate Governance continued

The Directors’ Remuneration Implementation Report is

included on pages 54 to 56.

Management engagement committee ("MEC")

All of the Directors are members and Mr Scott is the

Chairman of the MEC. The MEC has been established to

conduct a formal annual review of the Manager, assessing

investment and other performance, the level and method

of the Manager’s remuneration and the continued

appointment of the Manager as investment manager to

the Company. The MEC met and reviewed the Manager's

performance and remuneration structure. In conclusion

the Committee’s recommendation to the Board was that

it was in the best interests of shareholders as a whole to

continue with the Manager’s engagement and that the

current management fee structure remained appropriate.

(Seepage 46 to 47 for further details).

The Board also conducted a review of the fees for

the depositary and custodian as well as the secretary

and administrator. A reduction in the depositary and

custodian fee rates, backdated to 1 January 2021, was

agreed with the Depositary. A cap on the total fees

payable for Company Secretarial and administration

services was also agreed with the Administrator,

effective 1 January 2022. The Board has also

conducted a review of the fees for the Registrar which

is in the process of being finalised and the Board will

report on this in the next annual report.

Nomination committee

All of the Directors are members and Miss Kelly is the

Chairman, having taken over from Mr Scott during the

year. The Nomination Committee reviews the structure,

size and composition of the Board and it identifies and

puts forward candidates for the office of director of the

Company. The Nomination Committee considers job

specifications and assesses whether candidates have the

necessary skills and time available to devote to the job.

The Board has formulated a succession plan which

is reviewed and maintained through the Nomination

Committee to promote regular refreshment and

diversity, whilst maintaining stability and continuity of

skills and knowledge on the Board.

Miss Kelly led the recruitment process in 2022 to

recruit a new director to replace Mr Scott who retires

at the 2023 AGM. The Board engaged the services

of recruitment specialists Trust Associates. Trust

Associates are independent of both the Company

and individual directors. After an extensive search

and thorough recruitment process, the Committee

recommended Mr Suarez to the Board and he

was appointed as a non-executive director on

1 October 2022 and is the Chairman-designate.

Mr Hurd resigned as a director on 31 December 2022 due

to his expanding commitments elsewhere leaving him

with insufficient time to fulfil his role as a non-executive

director of the Company.

Miss Kelly is currently leading the recruitment process

for a second new director. The Board has engaged the

services of recruitment specialists Tyzack. Tyzack are

independent of both the Company and the individual

directors. This search is ongoing and the Committee will

report on this in due course.

Sustainability reporting committee

The Sustainability Reporting Committee was set up to

consider and help the Board to establish the relevance

to the Company of the growing body of sustainability

issues. The Committee will receive reports from the

Manager regarding its sustainability activities as

they relate to the Company's portfolio, the outcomes

of such activities and its sustainability metrics. The

Committee will review and discuss the relevance of

such activities and metrics in meeting the Company's

sustainability strategy and stakeholders' expectations,

will make recommendations to the Board, and oversee

the Company's regulatory and voluntary sustainability

reporting. Initially the Committee's members

comprised Mr Hurd, Ms Kelly and Mrs Eastment, with

Mr Hurd as Chairman. Subsequently, Mr Suarez became

a member and Chairman.

The Committee met once to approve its terms

of reference, members and Chairman. It also

recommended the updated ESG Policy and new

Biodiversity Policy for adoption by the Board.

Meeting attendance

The following table sets out the scheduled meetings Directors attended in the year to 31 December 2022. In addition

to the meetings shown below, a Board strategy meeting was held and there were also Board and committee ad-hoc

meetings to deal with administrative matters and the formal approval of documents.

Board

Audit

committee

Remuneration

committee

Management

engagement

committee

Nomination

committee

Sustainability

reporting

committee

Number of meetings held 5 4 1 1 2 1

John Scott 5 4 1 1 2 –

Stephanie Eastment 5 4 1 1 2 1

Vicky Hastings 5 4 1 1 2 –

Nick Hurd

5 4 1 1 1 1

Aine Kelly

4 3 1 1 2 1

Glen Suarez

1 1 1 – 1 –

1. Nick Hurd attended all meetings up to his resignation on 31 December 2022, except for the Nomination Committee at which his resignation

was discussed.

2. Aine Kelly was absent from one day of meetings due to a bereavement; however, her comments on Board and Audit Committee items were

communicated beforehand to the applicable Chairmen.

3. Glen Suarez attended all meetings since his appointment on 1 October 2022.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 51

Governance

BOARD DIVERSITY

The Board’s policy on diversity is based on its belief in

the benefits of having a diverse range of experience,

skills, length of service and backgrounds, including

but not limited to gender diversity and ethnicity. The

policy is always to appoint the best person for the job

and there will be no discrimination on the grounds of

gender, race, ethnicity, religion, sexual orientation,

age or physical ability. The overriding aim of the

policy is to ensure that the Board is composed of the

best combination of people for ensuring effective

oversight of the Company and constructive support

and challenge to the Manager. Directors have a range

of business, financial and asset management skills as

well as experience relevant to the direction and control

of the Company.

The Board appraises its collective set of cognitive

and personal strengths, independence and diversity

on an annual basis, and especially during the

recruitment process, so as to ensure it is aligned with

the Company’s strategic priorities. The performance

appraisal process is described below.

The Board believes its composition is appropriate for

the Company's circumstances. In line with the Board's

succession planning and tenure policy, or should

strategic priorities change, the Board will review and, if

required, adjust its composition.

IMPLEMENTATION OF THE BOARD’S DIVERSITY POLICY

The Board has taken note of the new targets set out in the FCA’s Listing Rule 9.8.6R(9)(a) which requires that at least

40% of individuals on the board are women; at least one of the senior board positions is held by a woman; and at

least one individual on the board is from a minority ethnic background. Although the Board is not required to report

against these targets until the 2023 annual report, the Board has resolved to do so on a voluntary basis for the year

ended 31 December 2022.

The Board has resolved that the Company’s year end date is the most appropriate date for disclosure purposes.

The following information has been voluntarily provided by each Director. There have been no changes since

31 December 2022.

Board at 31 December 2022

The FCA defines senior board positions as Chairman, Chief Executive Officer (CEO), Chief Financial Officer (CFO) or

Senior Independent Director. As an investment trust with no executive officers, the Company has no CEO or CFO.

However, due to the nature of the Audit Committee's responsibilities, the Board considers the Audit Chairman to be a

senior position and has reflected this in its diversity tables below.

Number of

Board

members

Percentage

of the Board

Number of

senior

positions on

the Board

Listing

Rules Target

Men 3 50% 1

Women should make up at least 40% of the

Board and hold at least one of the senior

positions

Women 3 50% 2

Number of

Board

members

Percentage

of the Board

Number of

senior

positions on

the Board

Listing

Rules Target

White British or other White

(including minority-white groups)

5 83% 3

At least one member of the board should

be from an ethnic minority background

excluding white ethnic groups (as set

out in categories used by the Office for

National Statistics)

Asian/Asian British 1 17% –

52 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

TENURE POLICY

It is the Board’s policy that all Directors, including the

Chairman, shall normally have tenure limited to nine

years from the date of their election by shareholders

at the AGM following their appointment to the Board,

except that the Board may determine otherwise if it

is considered that the continued participation on the

Board of an individual Director is in the best interests of

the Company and its shareholders. This is also subject

to the Director’s re-election annually by shareholders.

The Board considers that this policy encourages regular

refreshment and is conducive to fostering diversity.

Both Mr Scott and Mrs Hastings were asked to remain

on the board beyond the usual nine year period due to

exceptional circumstances, and their re-appointment

was approved by shareholders at the 2022 AGM.

Mr Scott and MrsHastings will be retiring at the

conclusion of the AGM on 16 May 2023.

PERFORMANCE APPRAISAL

A formal annual performance appraisal process is

performed on the Board, the Committees and individual

Directors. The exercise was managed by an external

provider, Lintstock Limited, which has no other

connection with the Company. A programme consisting

of open and closed ended questions was used as the

basis for the appraisal. The results were reviewed by

the Chairman and discussed with the Board. A separate

appraisal of the Chairman was carried out and the Senior

Independent Director reported back the results to the

Chairman. The results of the most recent performance

evaluation were positive and demonstrated that the

Directors showed the necessary commitment for the

effective fulfilment of their duties.

INTERNAL CONTROL

The Board is responsible for establishing the Company’s

system of internal controls and for monitoring their

effectiveness. The system of internal controls is designed

to manage rather than eliminate the risk of failure

to achieve business objectives. It can provide only

reasonable assurance against material misstatement

or loss. The Board, through the Audit Committee,

regularly reviews the effectiveness of the internal control

systems to identify, evaluate and manage the Company’s

significant risks. If any significant failings or weaknesses

are identified the Board, and where required the Manager,

ensure that necessary action is taken to remedy the

failings. During the year the Board – through the Audit

Committee – undertook a comprehensive review of the

Company's risk management framework and controls.

Risks are documented into four main risk categories

and the top risks schedule together with emerging risks,

are considered at every Board meeting. Following its

review, the Board is not aware of any significant failings or

weaknesses arising in the year under review.

The Board believes that the existing arrangements,

including those set out below, represent an appropriate

framework to meet the internal control requirements.

By these procedures the Directors have kept under

review the effectiveness of the internal control system

throughout the year and up to the date of this report.

FINANCIAL ASPECTS OF INTERNAL

CONTROL

These are detailed in the Report of the Audit Committee.

Other aspects of internal control

The Board holds at least four regular meetings each year,

plus additional meetings as required. Between these

meetings there is regular contact with the Manager, the

Company’s Administrator and the Company Secretary.

The Board has agreed policies with the Manager on key

operational issues. The Manager reports in writing to

the Board on operational and compliance issues, and

otherwise as necessary. The Manager reports direct to

the Audit Committee concerning the internal controls

applicable to the Manager’s dealing, investment and

general office procedures.

The Directors receive and consider monthly reports

from the Administrator, giving details of all holdings

in the portfolio, investment transactions and the

financial position of the Company. The Administrator

reports separately in writing to the Board concerning

risks and internal control matters within its purview,

including internal financial control procedures and

company secretarial matters. Additional ad hoc reports

are received as required and Directors have access at

all times to the advice and services of the Company

Secretary, which is responsible to the Board for ensuring

that Board procedures are followed, and that applicable

rules and regulations are complied with.

The contacts with the Manager and the Administrator

enable the Board to monitor the Company’s progress

towards its objectives and encompasses an analysis of

the risks involved. The effectiveness of the Company’s

risk management and internal controls systems is

monitored regularly and a formal review, utilising a

detailed risk assessment programme, takes place at

least annually. This includes consideration of relevant

service provider internal controls reports. There are no

significant findings to report from the review.

PRINCIPAL RISKS

The Directors confirm that they have carried out a robust

assessment of the Company's emerging and principal

risks, including those that would threaten its business

model, future performance, solvency or liquidity. The

principal risks and how they are being managed are set

out in the Strategic Report.

Corporate Governance continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 53

Governance

Directors’ Remuneration Policy

The remuneration policy (the “Policy”) must be put

forward for shareholder approval at a maximum

interval of three years. The Policy was last approved

by shareholders at the AGM held on 20 May 2021.

Accordingly, the Policy will continue in force until

the AGM to be held in 2024. The provisions set out

in the Policy apply until they are next submitted for

shareholder approval. In the event of any proposed

material variation to the Policy, shareholder approval

will be sought for the proposed new policy prior to its

implementation. The Policy sets out the principles the

Company follows in remunerating Directors and the

result of the shareholder vote on the Policy is binding

on the Company. The Remuneration Committee will

take account of any views expressed by shareholders in

formulating this policy.

All the Directors are non-executive directors and the

Company has no other employees.

Service contracts

The Directors do not have service contracts with the

Company. The Directors have appointment letters and,

following initial election by shareholders, are subject to

annual re-election.

Fees

Directors’ fees are determined by the Board according to

their duties and responsibilities and by reference to the

time commitment required by each Director to carry out

their roles effectively. In setting fees, the Board also has

regard to the need to recruit and retain directors with

appropriate knowledge and experience, the fees paid to

directors of the Company’s peers and industry practice.

Directors’ fees are also subject to the aggregate annual

limit set out in the Company’s Articles of Association

(the “Articles”), which is currently £250,000 following

shareholder approval for an increase from £200,000

at the 2022 AGM. The aggregate limit of Directors’ fees

in the Articles can be amended only by an ordinary

resolution put to shareholders at a general meeting.

Directors are not eligible for bonuses, pension benefits,

share benefits, share options, long-term incentive

schemes or other benefits.

Directors’ fees are paid at fixed annual rates and do not

have any variable elements. Directors are also entitled to

be reimbursed for all reasonable out-of-pocket expenses

incurred in performance of their duties. These expenses

are unlikely to be of a significant amount.

Fees are payable from the date of appointment as a

Director of the Company and cease on the date of

termination of appointment. Any new Directors will be

paid at the same rate as existing Directors. Directors

are not entitled to compensation for loss of office,

and there is no notice period upon early termination

of appointment.

No incentive fees will be paid to any person to

encourage them to become a director of the Company.

The Company may, however, pay fees to external

agencies to assist the Board in the search and selection

of directors or in reviewing remuneration. Where a

consultant is appointed, the consultant shall be identified

in the annual report alongside a statement about any

other connection it has with the Company or individual

Directors. Independent judgement will be exercised

when evaluating the advice of external third parties.

Statement of consideration of conditions elsewhere

in the Company

As stated above, the Company has no employees.

Therefore, the process of consulting with employees on

the setting of the Remuneration Policy is not applicable.

Review of the Policy

This Policy will be reviewed on an annual basis by the

Remuneration Committee and any changes approved

by the Board. As part of the review, the Remuneration

Committee will consider whether the Policy supports

the long-term success of the Company and takes into

consideration all relevant regulatory requirements. Any

material change to the Policy must be approved by

shareholders.

Effective date

The Policy is effective from the date of approval by

shareholders.

Current and future policy

Component Director Purpose of reward Operation

Annual fee Chairman of the Board For services as Chairman of a plc Determined by the Board

Annual fee Other Directors For services as non-executive

directors of a plc

Determined by the Board

Additional fee Chairman of the Audit

Committee

For additional responsibility and time

commitment

Determined by the Board

Additional fee Senior Independent Director For additional responsibility and time

commitment

Determined by the Board

Expenses All Directors Reimbursement of expenses incurred

in the performance of duties

Submission of appropriate

supporting documentation

54 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Directors’ Remuneration Implementation Report

This Directors’ Remuneration Implementation Report

(the “Report”) has been prepared in accordance with

Schedule 8 of the Large and Medium-sized Companies

and Groups (Accounts and Reports) (Amendment)

Regulation 2013. An ordinary resolution for the

approval of this Report will be put forward at the

forthcoming AGM.

The Report is put forward for approval by

shareholders on an annual basis. The result of the

shareholder resolution on the Report is non-binding

on the Company, although it gives shareholders

an opportunity to express their views, which

will be taken into account by the Board and the

Remuneration Committee.

The law requires the Company’s auditor to audit

certain of the disclosures provided. Where disclosures

are audited they are indicated as such. The auditor’s

opinion is shown on page 57.

Remuneration Committee

The Company currently has five non-executive

Directors. The Remuneration Committee comprises

the whole Board. Further detail on the duties of

the Remuneration Committee can be found in the

Corporate Governance statement on page 49.

The Board carried out a review of Directors' annual fees

during the year with regard to the latest inflation rates,

measured by the increase in the Consumer Prices Index,

and taking into account peer group comparisons by

sector and market capitalisation. Following this review, it

was agreed that with effect from 1 January 2023, annual

fees would be increased to £45,000 for the Chairman,

and £30,000 for the Directors of the Company, with

additional amounts of £7,500 and £3,000 payable

to the Audit Committee Chairman and the Senior

Independent Director, respectively, to reflect the extra

responsibility and work required by those roles.

The Remuneration Committee believes that the level

of increase and resulting fees appropriately reflects

prevailing market rates for an investment trust of the

Company’s mandate and size, the increasing complexity

of regulation and resultant time spent by the Directors

on Company matters, and will also enable the Company

to attract appropriately experienced additional

Directors in the future. Due to the size and nature of

the Company, it was not deemed necessary to use a

remuneration consultant although the Remuneration

Committee did review peer group information on

Directors' fees and took this into account in its

deliberations.

The maximum level of fees payable, in aggregate, to the

Directors of the Company is currently £250,000 per

annum. This maximum was approved by shareholders at

the Company's AGM held in 2022.

The Company’s Remuneration Policy, which was

approved by shareholders at the AGM held on

20 May 2021, states that the remuneration of Directors

should be fair and reasonable in relation to the duties,

responsibilities and time commitment of Directors; be

sufficient to retain and motivate appointees, as well as

ensure that candidates of a high calibre are recruited

to the Board.

Directors’ appointment letters and shareholding

rights

The Directors have appointment letters which do not

provide for any specific term. The Directors are not

entitled to compensation on loss of office. There are

no restrictions on transfers of the Company’s shares

held by the Directors or any special rights attached

to such shares.

Performance

The following chart shows the performance of the

Company’s share price by comparison to two relevant

indices on a total return basis. The Company does not

have a specific benchmark but has deemed the MSCI

ACWI Index and the FTSE ET100 Index to be the most

appropriate comparators for this report.

Total return performance

* FTSE ET50 Index until 31 December 2013 and then FTSE ET100 Index thereafter.

IEM Share Price

MSCI ACWI

FTSE ET50/ET100 composite*

100

200

300

400

500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 55

Governance

Directors’ emoluments for the year (audited)

The Directors who served during the year received the following remuneration for qualifying services.

2022 2021

Fees

Taxable

benefits

Total

Fees

Taxable

benefits

Total

John Scott 42,000 – 42,000 39,975 – 39,975

Stephanie Eastment 35,000 259 35,259 33,315 – 33,315

Vicky Hastings 28,000 – 28,000 26,650 – 26,650

Nicholas Hurd – appointed on 1 August 2021 28,000 – 28,000 11,104 – 11,104

Aine Kelly 30,800 801 31,601 29,315 – 29,315

Glen Suarez – appointed on 1 October 2022 7,000 1,983 8,983 – – –

Simon Fraser – served 1 March to 9 August 2021 – – – 11,707 – 11,707

William Rickett – retired on 20 May 2021 – – – 10,344 – 10,344

Total 170,800 3,043 173,843 162,410 – 162,410

Annual percentage change in Directors’ remuneration (unaudited)

The table below sets out the annual percentage change in Directors’ fees for the past three years.

Year ended

31 December

2022

Year ended

31 December

2021

Year ended

31 December

2020

John Scott 5.2 2.5 10.6

Stephanie Eastment

5.1 11.0 155.5

Vicky Hastings 5.1 2.5 10.6

Nicholas Hurd

– appointed on 1 August 2021 152.2 – –

Aine Kelly

5.1 12.75 10.6

Glen Suarez – appointed on 1 October 2022 – – –

Simon Fraser – served 1 March to 9 August 2021 – – –

William Rickett – retired on 21 May 2021 – – 10.6

1. The increases for 2020 and 2021 reflect the fact that Mrs Eastment joined the Board part way through 2019 and became Chairman of the

Audit Committee part way through 2020. Mrs Eastment’s fee increase in 2021 and 2020 would have been 2.5% and 13.5%, respectively, had

she been Chairman of the Audit Committee for the whole of the period from 2019 to 2021.

2. The increase for 2022 reflects the fact that Mr Hurd joined the Board part way through 2021.

3. The increase for 2021 reflects the fact that an additional fee for the Senior Independent Director of £2,665 was introduced from

1January2021. Without the additional fee, Miss Kelly's fee increase would have been 2.5%.

There are no other taxable benefits payable by the Company other than certain expenses which may be deemed to

be taxable, such as travel expenses. No travel expenses were incurred in 2021 because all Board meetings were virtual

as a result of the pandemic. In person Board meetings subsequently resumed in 2022. Percentage changes for taxable

benefits have not been shown in the table above. None of the above fees was paid to third parties.

The resolution to approve the Remuneration Report contained in the Annual Report for the year ended

31 December 2021 was put forward at the AGM held on 18 May 2022. The resolution was passed with 99.95% of

the shares voted (representing 135,068,941 Ordinary Shares) being in favour of the resolution, 0.05% against

(representing 67,347 Ordinary Shares) and 112,889 votes withheld.

The Directors’ Remuneration Policy was last put forward at the AGM held on 20 May 2021. The resolution was

passed with 99.93% of the shares voted (representing 143,969,060 Ordinary Shares) being in favour, against 0.07%

(representing 94,069 Ordinary Shares) and votes withheld 42,693.

56 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Relative importance of spend on pay

The following table sets out the total level of Directors’ remuneration compared to the distributions to shareholders

by way of dividends and share buybacks, and the management fees and other expenses incurred by the Company.

2022

£’000

2021

£’000

Difference

Spend on Directors’ fees 171 162 5.2%

Management fees and other expenses 10,715 11,243 (4.7)%

Dividends paid to shareholders – note 9 to the financial statements 9,039 6,501 39.0%

The disclosure of the information in the table above is required under The Large and Medium-sized Companies and

Groups (Accounts and Reports) (Amendment) Regulations 2013 with the exception of management fees and other

expenses which have been included to show the total operating expenses of the Company.

Directors’ holdings (audited)

At 31 December 2022 the Directors had the following holdings in the Company (beneficial unless stated).

Ordinary

shares at

31 December

2022

Ordinary

shares at

31 December

2021

John Scott 115,512 105,512

Stephanie Eastment* 13,200 12,000

Vicky Hastings 19,500 19,500

Nicholas Hurd 1,626 –

Aine Kelly 16,000 16,000

Glen Suarez – –

* 8,500 held non-beneficially; shares held by connected person.

On 5 January 2023, Mr Glen Suarez purchased 23,375 shares in the Company.

Statement

On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and

Groups (Accounts and Reports) (Amendment) Regulations 2013, I confirm that the above Remuneration Report and

Remuneration Policy summarises, as applicable, for the year to 31 December 2022:

(a) the major decisions on Directors’ remuneration;

(b) any substantial changes relating to Directors’ remuneration made during the year; and

Vicky Hastings

Chairman of the Remuneration Committee

31 March 2023

Directors' Remuneration Implementation Report continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 57

Governance

Report of the Audit Committee

THE AUDIT COMMITTEE

As Chairman of the Audit Committee (the “Committee”),

I am pleased to present the Committee’s report to

shareholders for the year ended 31 December 2022.

Composition

All of the Directors are members of the Committee.

In accordance with the UK Code, the Chairman of the

Board should not be a member. However, the AIC

Code permits the Chairman to be a member of, but

not chair, the Committee if they were independent

on appointment - which the Chairman was and in the

Board’s view continues to be. In view of the size of

the Board the Directors feel it is appropriate for him

to continue as a member, so that the Committee can

continue to benefit from his experience and knowledge.

The members of the Committee consider that they

have the requisite skills and experience to fulfil the

responsibilities of the Committee. As a Chartered

Accountant, the Chairman of the Committee has recent

and relevant financial experience, and the Committee as

a whole has competence relevant to the sector.

Role and responsibilities

The main role and responsibilities of the Committee are

set out in the Committee's terms of reference. The terms

are updated annually and are available on the Company’s

website or on request from the Company Secretary.

The Committee meets formally at least twice a year

for the purpose, amongst other things, of advising the

Board on the appointment, effectiveness, independence,

objectivity and remuneration of the external auditor.

The Committee monitors the integrity of the

financial statements of the Company and any formal

announcements relating to the Company’s financial

performance, reviewing significant financial reporting

judgements contained in them. The Committee also

reviews the Company’s risk management, internal

financial controls and internal control systems and

reviews the Manager’s whistleblowing arrangements.

The provision of non-audit services by the auditor are

reviewed against the Committee’s policy described below.

Meetings

There were three Committee meetings during the year

ended 31 December 2022. In addition, the Committee

met the auditor, without any other party present, for a

private discussion and the Chairman of the Committee

met with the auditor prior to the half-yearly and annual

Committee meetings.

Committee evaluation

The Committee’s activities fell within the scope of the

review of Board effectiveness performed in the year.

Details of this process can be found under 'Performance

Appraisal’ on page 52.

FINANCIAL STATEMENTS AND SIGNIFICANT

ACCOUNTING MATTERS

The Committee reviewed the financial statements and

considered the following significant accounting matters

in relation to the Company’s financial statements for the

year ended 31 December 2022.

Valuation and existence of investments

The accuracy of the valuation of the investment portfolio

and verification of ownership of the investments is the

most material matter in the production of the financial

statements. The Company holds all but one of its assets

in listed investments. Listed investments are valued

using stock exchange prices provided by independent

pricing sources. The Depositary confirmed that at the

year end the accounting records recorded all investment

holdings and that these had been agreed to custodian

records. The Depositary is responsible for financial

restitution for the loss of financial investments held in

custody, and the Committee received assurance from

the Depositary that all investments were held in custody

At 31 December 2022, the Company held one unquoted

company in the portfolio, its valuation was written down

from £582,000 to nil in the year.

Recognition of income

Income may not be accrued in the correct period

and/or incorrectly allocated to revenue or capital.

TheCommittee reviewed the Administrator’s procedures

for recognition of income in the year.

As part of the annual report review, the Committee:

– obtained assurances from the Manager and the

Administrator that the financial statements had been

prepared appropriately;

– reviewed the procedures in place for the calculation

of management fees;

– reviewed the basis of allocating management fees

and finance costs to capital and agreed that allocating

75% of such costs to capital remained an appropriate

basis. The assessment involved an analysis of the

expected split of the Company’s future long-term

returns as well as a review of past returns;

– reviewed the consistency of accounting policies;

– reviewed the tax compliance of the Company during

the year with the eligibility conditions and ongoing

requirements in order for investment trust status to

be maintained;

– reviewed the Company’s financial resources, and

considered the forthcoming continuation vote, and

concluded that it is appropriate for the Company’s

financial statements to be prepared on a going

concern basis as described in the Directors’ Report

on page 48; and

58 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

– concluded that the annual report for the year ended

31 December 2022, taken as a whole, is fair, balanced

and understandable and provides the information

necessary for shareholders to assess the Company’s

position and performance, business model and

strategy. The Committee reached this conclusion

through a process of review of the document and

enquiries to the various parties involved in the

production of the annual report, and the external

auditor’s report thereon.

In addition to the above, during the year the Committee

reviewed the half-yearly financial report.

The Committee reported the results of this work,

including its assessment that the annual report is fair,

balanced and understandable, to the Board.

EXTERNAL AUDITOR

This year’s audit was the fourth performed by BDO LLP

("BDO"), and by Peter Smith as engagement partner,

since BDO was appointed on 21 May 2019, following an

audit tender process earlier in 2019.

Effectiveness of audit

The Committee reviewed the audit planning and the

standing, skills and experience of the firm and the audit

team. The Committee also considered the independence

of BDO and the objectivity of the audit process. BDO has

confirmed that it is independent of the Company and

has complied with relevant auditing standards.

No modifications were required to the external audit

approach. The Committee received a presentation of

the audit plan from the external auditor prior to the

commencement of the 2022 audit and a presentation

of the results of the audit following completion of the

main audit testing. Additionally, the Committee received

feedback from the Manager and Administrator regarding

the effectiveness of the external audit process.

The Committee is satisfied that BDO has provided

effective independent challenge in carrying out its

responsibilities. After due consideration, the Committee

recommended the re-appointment of BDO and their

re-appointment will be put forward to the Company's

shareholders at the 2023 AGM.

Provision of non-audit services

The Committee has put in place a policy on the supply of

any non-audit services provided by the external auditor

which was reviewed during the year.

Non-audit services are considered on a case-by case

basis and may only be provided to the Company if

such services meet the requirements of the standard,

including: at a reasonable and competitive cost; do not

constitute a conflict of interest for the auditor; and all

non-audit services must be approved in advance. No

non-audit services were provided by the auditor during

the year (2021: none).

INTERNAL AUDIT

The Committee has considered the need for an internal

audit function and considered that this is not appropriate

given the nature and circumstances of the Company. The

Committee keeps the need for an internal function under

annual review. The Manager reports the key conclusions

of its internal audit report to the Company’s Committee.

The Committee obtains an understanding of the internal

controls in place at both the Manager and Administrator

by reviewing the relevant internal control reports issued

by their independent auditors.

Stephanie Eastment

Audit Committee Chairman

31 March 2023

Report of the Audit Committee continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 59

Governance

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual

Report and the financial statements in accordance with

applicable laws and regulations.

Company law requires the Directors to prepare

accounts for each financial year. Under that law

the Directors have elected to prepare the financial

statements in accordance with United Kingdom

Generally Accepted Accounting Practice, including

FRS 102 ‘The Financial Reporting Standard applicable

in the UK and the Republic of Ireland’. Under company

law the Directors must not approve the financial

statements unless they are satisfied that they give a

true and fair view of the state of affairs of the Company

as at the end of the year and of the net return for

the year. In preparing these accounts, the Directors

are required to:

•

select suitable accounting policies and then apply

them consistently;

•

make judgements and estimates which are

reasonable and prudent; and

•

state whether applicable accounting standards have

been followed, subject to any material departures

disclosed and explained in the accounts.

The Directors are responsible for keeping adequate

accounting records that are sufficient to show and

explain the Company’s transactions and which

disclose with reasonable accuracy at any time

the financial position of the Company and enable

them to ensure that the accounts comply with the

Companies Act 2006.

They are also responsible for safeguarding the assets

of the Company and hence for taking reasonable steps

for the prevention and detection of fraud and other

irregularities.

The accounts are published on the

www.impaxenvironmentalmarkets.co.uk and

www.impaxam.com websites which are maintained

by the Company’s Manager, Impax Asset Management

(AIFM) Limited (“Impax”). The work carried out by

the auditor does not involve consideration of the

maintenance and integrity of these websites and,

accordingly, the auditor accepts no responsibility for

any changes that have occurred to the accounts since

being initially presented on the website. Legislation in

the United Kingdom governing the preparation and

dissemination of financial statements may differ from

legislation in other jurisdictions.

Directors’ confirmation statement

The Directors each confirm to the best of their

knowledge that:

(a) the accounts, prepared in accordance with applicable

accounting standards, give a true and fair view of the

assets, liabilities, financial position and profit or loss

of the Company; and

(b) this Annual Report includes a fair review of the

development and performance of the business and

position of the Company, together with a description

of the principal risks and uncertainties that it faces.

Having taken advice from the Audit Committee, the

Directors consider that the Annual Report and financial

statements, taken as a whole, is fair, balanced and

understandable and provides the information necessary

for shareholders to assess the Company’s position and

performance, business model and strategy.

For and on behalf of the Board

John Scott

Chairman

31 March 2023

60 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Independent Auditor’s Report to the members of

Impax Environmental Markets plc

Opinion on the financial statements

In our opinion the financial statements:

•

give a true and fair view of the state of the Company’s

affairs as at 31 December 2022 and of its loss for the

year then ended;

•

have been properly prepared in accordance with

United Kingdom Generally Accepted Accounting

Practice; and

•

have been prepared in accordance with the

requirements of the Companies Act 2006.

We have audited the financial statements of

Impax

Environmental Markets plc

(the ‘Company’) for the year

ended

31 December 2022

which comprise the income

statement, the balance sheet, the statement of changes

in equity, the statement of cashflows and notes to the

financial statements, including a summary of significant

accounting policies. The financial reporting framework

that has been applied in their preparation is applicable

law and United Kingdom Accounting Standards,

including Financial Reporting Standard 102

The Financial

Reporting Standard applicable in the UK and Republic

of Ireland

(United Kingdom Generally Accepted

Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) and applicable

law. Our responsibilities under those standards are

further described in the Auditor’s responsibilities for the

audit of the financial statements section of our report.

We believe that the audit evidence we have obtained

is sufficient and appropriate to provide a basis for

our opinion. Our audit opinion is consistent with the

additional report to the audit committee.

Independence

Following the recommendation of the audit committee,

we were appointed by the Board of Directors on

21 May 2019 to audit the financial statements for

the year ending 31 December 2019 and subsequent

financial periods. The period of total uninterrupted

engagement including retenders and reappointments

is 4 years, covering the years ended 31 December 2019

to 31 December 2022. We remain independent of the

Company in accordance with the ethical requirements

that are relevant to our audit of the financial statements

in the UK, including the FRC’s Ethical Standard as applied

to listed public interest entities, and we have fulfilled our

other ethical responsibilities in accordance with these

requirements. The non-audit services prohibited by that

standard were not provided to the Company.

Conclusions relating to going concern

In auditing the financial statements, we have concluded

that the Directors’ use of the going concern basis of

accounting in the preparation of the financial statements

is appropriate. Our evaluation of the Directors’

assessment of the Company’s ability to continue to adopt

the going concern basis of accounting included:

•

Evaluating the appropriateness of the Directors’

method of assessing the going concern in light of

market volatility and the present uncertainties in

economic recovery created by the current economic

environment of high inflation and interest rates, by

reviewing the information used by the Directors in

completing their assessment;

•

Assessing the liquidity of the investment portfolio,

which is available to meet the future obligations and

operating expenses of the Company for a period of

12months from the date of approval of these financial

statements; and

•

Challenging the reasonableness of the Director’s

assumptions and judgements made in their forecasts

by performing multiple downside scenarios testing to

analyse the headroom in loan covenants.

Based on the work we have performed, we have not

identified any material uncertainties relating to events

or conditions that, individually or collectively, may

cast significant doubt on the Company’s ability to

continue as a going concern for a period of at least

twelve months from when the financial statements are

authorised for issue.

In relation to the Company’s reporting on how it has

applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to

the Directors’ statement in the financial statements about

whether the Directors considered it appropriate to adopt

the going concern basis of accounting.

Our responsibilities and the responsibilities of the

Directors with respect to going concern are described in

the relevant sections of this report.

Overview

Key audit matters 2022 2021

Valuation and ownership

of investments

3 3

Company financial statements

as a whole

Materiality £12.7m (2021:£14.8m) based

on 1% (2021: 1%) of Net assets

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding

of the Company and its environment, including the

Company’s system of internal control, and assessing the

risks of material misstatement in the financial statements.

We also addressed the risk of management override

of internal controls, including assessing whether there

was evidence of bias by the Directors that may have

represented a risk of material misstatement.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 61

Governance

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the

financial statements of the current period and include the most significant assessed risks of material misstatement

(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit

strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters

were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,

and we do not provide a separate opinion on these matters.

Key audit matter How the scope of our audit addressed the key audit matter

Valuation and ownership of

investments Note 1(b) and Note 2 on

Page 68 and page 70)

The investment portfolio at the year-end

comprised of listed equity investments

held at fair value through profit or loss.

There is a risk that the prices used

for the listed investments held by the

Company are not reflective of fair

value and the risk that errors made in

the recording of investment holdings

result in the incorrect reflection of

investments owned by the Company.

Therefore we considered the valuation

and ownership of quoted investments to

be the most significant audit area as the

quoted investments also represent the

most significant balance in the financial

statements and underpin the principal

activity of the entity.

For these reasons and the materiality of

the balance in relation to the financial

statements as a whole, we considered

this to be a key audit matter.

We responded to this matter by testing the valuation and ownership of the whole

portfolio of quoted investments. We performed the following procedures:

•

Confirmed the year-end bid price was used by agreeing to externally

quoted prices:

•

Assessed if there were contra indicators, such as liquidity

considerations, to suggest bid price was not the most appropriate

indication of fair value by considering the realisation period for

individual holdings;

•

Obtained direct confirmation of the number of shares held per equity

investment from the custodian regarding all investments held at the

balance sheet date; and

•

Recalculated the valuation by multiplying the number of shares held

per the statement obtained from the custodian by the valuation

pershare.

Key observations:

Based on our procedures performed we did not identify any matters

to suggest that the valuation and ownership of investments was not

appropriate.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of

misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could

influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we

use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,

misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature

of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the

financial statements as a whole.

62 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Independent Auditor’s Report to the members of Impax Environmental Markets plc (the "Company") continued

Based on our professional judgement, we determined materiality for the financial statements as a whole and

performance materiality as follows:

Company financial statements

Materiality

2022

£m

2021

£m

Materiality 12.7 14.8

Basis for determining materiality 1% of Net Assets 1% of Net Assets

Rationale for the benchmark applied As an investment trust, the net asset value is the key measure of

performance for users of the financial statements.

Performance materiality 9.5 11.1

Basis for determining performance materiality 75% of materiality. 75% of materiality.

Rationale for determining performance materiality The level of performance materiality applied was set after having

considered a number of factors including the expected total value

of known and likely misstatements and the level of transactions in

theyear.

Lower testing threshold

We have determined that for net revenue returns on ordinary activities before taxation, a misstatement of less than

materiality for the financial statements as a whole, could influence the economic decisions of users as it is a measure

of the Company’s performance of income generated from its investments after expenses. Thus, we have set a lower

testing threshold for those items impacting revenue return of £1,600,000 (2021: £1,100,000) which is based on 10%

(2021: 10%) of net revenue returns on ordinary activities before taxation.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of

£255,000 (2021: £296,000). We also agreed to report differences below this threshold that, in our view, warranted

reporting on qualitative grounds.

Other information

The directors are responsible for the other information. The other information comprises the information included in

the annual report and accounts other than the financial statements and our auditor’s report thereon. Our opinion on

the financial statements does not cover the other information and, except to the extent otherwise explicitly stated

in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other

information and, in doing so, consider whether the other information is materially inconsistent with the financial

statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine

whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we

have performed, we conclude that there is a material misstatement of this other information, we are required to

report that fact.

We have nothing to report in this regard.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 63

Governance

Corporate governance statement

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and

that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK

Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the

Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained

during the audit.

Going concern and longer-term

viability

•

The Directors' statement with regards to the appropriateness of adopting the

going concern basis of accounting and any material uncertainties identified set

out on page 48; and

•

The Directors’ explanation as to their assessment of the Company’s prospects,

the period this assessment covers and why the period is appropriate set out on

page 38.

Other Code provisions

•

Directors' statement on fair, balanced and understandable set out on page 58;

•

Board’s confirmation that it has carried out a robust assessment of the

emerging and principal risks set out on page 34;

•

The section of the annual report that describes the review of effectiveness of

risk management and internal control systems set out on page 52; and

•

The section describing the work of the audit committee set out on page 57.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required

by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

Strategic Report and Directors’

Report

In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the Strategic report and the Directors’ report for the

financial year for which the financial statements are prepared is consistent with

the financial statements; and

•

the Strategic report and the Directors’ report have been prepared in

accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its

environment obtained in the course of the audit, we have not identified material

misstatements in the strategic report or the Directors’ report.

Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has

been properly prepared in accordance with the Companies Act 2006.

Matters on which we are required

to report by exception

We have nothing to report in respect of the following matters in relation to which

the Companies Act 2006 requires us to report to you if, in our opinion:

•

adequate accounting records have not been kept, or returns adequate for our

audit have not been received from branches not visited by us; or

•

the financial statements and the part of the Directors’ remuneration report to

be audited are not in agreement with the accounting records and returns; or

•

certain disclosures of Directors’ remuneration specified by law are not made; or

•

we have not received all the information and explanations we require for

ouraudit.

64 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Governance

Responsibilities of directors

As explained more fully in the Statement of Directors’

responsibilities, the Directors are responsible for the

preparation of the financial statements and for being

satisfied that they give a true and fair view, and for such

internal control as the Directors determine is necessary

to enable the preparation of financial statements that

are free from material misstatement, whether due to

fraud or error.

In preparing the financial statements, the Directors

are responsible for assessing the Company’s ability to

continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going

concern basis of accounting unless the Directors either

intend to liquidate the Company or to cease operations,

or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial

statements

Our objectives are to obtain reasonable assurance

about whether the financial statements as a whole

are free from material misstatement, whether due to

fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high

level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs (UK) will

always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate,

they could reasonably be expected to influence the

economic decisions of users taken on the basis of these

financial statements.

Extent to which the audit was capable of detecting

irregularities, including fraud

Irregularities, including fraud, are instances of

non-compliance with laws and regulations. We design

procedures in line with our responsibilities, outlined

above, to detect material misstatements in respect

of irregularities, including fraud. The extent to which

our procedures are capable of detecting irregularities,

including fraud is detailed below:

We gained an understanding of the legal and regulatory

framework applicable to the Company and the industry

in which it operates, and considered the risk of acts by

the Company which were contrary to applicable laws

and regulations, including fraud. We considered the

significant laws and regulations to be the Companies Act

2006, the FCA listing and DTR rules, the principles of the

AIC Code of Corporate Governance, industry practice

represented by the AIC SORP, the applicable accounting

framework, and qualification as an Investment Trust

under UK tax legislation as any non-compliance of this

would lead to the Company losing various deductions

and exemptions from corporation tax.

We focused on laws and regulations that could give rise

to a material misstatement in the Company financial

statements. Our procedures included:

•

agreement of the financial statement disclosures to

underlying supporting documentation;

•

enquiries of management and those charged with

governance relating to the existence of any

non-compliance with laws and regulations;

•

review of minutes of board meetings throughout the

period throughout the period for instances of non-

compliance with laws and regulations;

•

obtaining an understanding of the control

environment in monitoring compliance with laws and

regulations; and

•

reviewing the calculation in relation to Investment

Trust compliance to check that the Company was

meeting its requirements to retain their Investment

Trust Status.

We assessed the susceptibility of the financial statement

to material misstatement including fraud.

Our risk assessment procedures included:

•

Enquiry with management and those charged with

governance also considered Audit Committee,

regarding any known or suspected instances of fraud;

•

Obtaining an understanding of the Company’s

policies and procedures relating to:

•

Detecting and responding to the risks of fraud; and

•

Internal controls established to mitigate risks

related to fraud.

•

Review of minutes of meeting of those charged with

governance for any known or suspected instances of

fraud; and

•

Discussion amongst the engagement team as to

how and where fraud might occur in the financial

statements.

Based on our risk assessment, we considered the areas

most susceptible to be classification of the revenue and

management override of controls.

Our tests included, but were not limited to:

•

The procedures set out in the Key Audit Matters

section above;

•

Recalculating investment management fees in total;

•

Checking the portfolio against corporate actions and

special dividends to challenge if these have been

appropriately accounted for as income or capital;

•

Analysing the whole population of dividend receipts

to identify any unusual items that could indicate a

capital distribution, for example where a dividend

represents a particularly high yield;

•

Obtaining independent confirmation of bank

balances; and

•

Testing journals which met a defined risk criteria by

agreeing to supporting documentation.

Independent Auditor’s Report to the members of Impax Environmental Markets plc (the "Company") continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 65

Governance

We also communicated relevant identified laws and

regulations and potential fraud risks to all engagement

team members who were all deemed to have

appropriate competence and capabilities and remained

alert to any indications of fraud or non-compliance with

laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks

of material misstatement in the financial statements,

recognising that the risk of not detecting a material

misstatement due to fraud is higher than the risk of

not detecting one resulting from error, as fraud may

involve deliberate concealment by, for example, forgery,

misrepresentations or through collusion. There are

inherent limitations in the audit procedures performed

and the further removed non-compliance with laws and

regulations is from the events and transactions reflected

in the financial statements, the less likely we are to

become aware of it.

A further description of our responsibilities is available

on the Financial Reporting Council’s website at: www.frc.

org.uk/auditorsresponsibilities. This description forms

part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members,

as a body, in accordance with Chapter 3 of Part 16 of

the Companies Act 2006. Our audit work has been

undertaken so that we might state to the Company’s

members those matters we are required to state to them

in an auditor’s report and for no other purpose. To the

fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company

and the Company’s members as a body, for our audit

work, for this report, or for the opinions we have formed.

Peter Smith (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

31 March 2023

BDO LLP is a limited liability partnership registered in

England and Wales (with registered number OC305127).

66 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

Year ended 31 December 2022 Year ended 31 December 2021

Notes

Revenue

£’000

Capital

£’000

Total

£’000

Revenue

£’000

Capital

£’000

Total

£’000

(Losses)/gains on investments 2 – (226,293) (226,293) – 239,534 239,534

Net foreign exchange losses – (2,778) (2,778) – (314) (314)

Income 3 20,160 – 20,160 15,195 – 15,195

Investment management fees 4 (2,420) (7,258) (9,678) (2,471) (7,412) (9,883)

Other expenses 5 (1,037) – (1,037) (1,360) – (1,360)

(Loss)/return on ordinary activities before

finance costs and taxation 16,703 (236,329) (219,626) 11,364 231,808 243,172

Finance costs 6 (475) (1,424) (1,899) (368) (1,103) (1,471)

(Loss)/return on ordinary activities before

taxation 16,228 (237,753) (221,525) 10,996 230,705 241,701

Taxation 7 (2,956) 211 (2,745) (1,605) 342 (1,263)

(Loss)/return on ordinary activities after

taxation 13,272 (237,542) (224,270) 9,391 231,047 240,438

(Loss)/return per Ordinary Share 8 4.37p (78.18p) (73.81p) 3.29p 81.06p 84.35p

The total column of the Income Statement is the profit and loss account of the Company.

The supplementary revenue and capital columns are provided for information purposes in accordance with the

Statement of Recommended Practice issued by the Association of Investment Companies. All revenue and capital

items in the above statement derive from continuing operations. No operations were acquired or discontinued

during the year.

Return on ordinary activities after taxation is also the “Total comprehensive income for the year”.

The notes on pages 70 to 83 form part of these financial statements.

Income Statement

Financials

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 67

Notes

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Fixed assets

Investments at fair value through profit or loss 2 1,302,605 1,503,750

Current assets

Dividend receivable 512 274

Taxation recoverable 90 23

Other debtors 108 –

Cash and cash equivalents 26,327 28,319

27,037 28,616

Creditors: amounts falling due within one year

Trade and other payables 10 (1,929) (3,036)

Bank loans and credit facility 11 (51,606) –

(53,535) (3,036)

Net current (liabilities)/assets (26,498) 25,580

Total assets less current liabilities 1,276,107 1,529,330

Creditors: amounts falling due after more than one year

Capital gains tax provision 7 (169) (579)

Bank loans and credit facility 11 – (49,113)

Net assets 1,275,938 1,479,638

Capital and reserves: equity

Share capital 12 30,562 29,806

Share premium account 423,098 388,262

Capital redemption reserve 9,877 9,877

Share purchase reserve 141,872 147,855

Capital reserve 13 657,373 894,915

Revenue reserve 13,156 8,923

Shareholders' funds 1,275,938 1,479,638

Net assets per Ordinary Share 14 419.49p 496.42p

Approved by the Board of Directors and authorised for issue on 31 March 2023 and signed on their behalf by:

John Scott

Chairman

Impax Environmental Market plc incorporated in England with registered number 4348393.

The notes on pages 70 to 83 form part of these financial statements.

Balance Sheet

68 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

Year ended

31 December 2022 Note

capital

£’000

premium

account

£’000

Capital

redemp-

tion

reserve

£’000

purchase

reserve

£’000

Capital

reserve

£’000

Revenue

reserve

£’000

Total

£’000

Opening equity as at 1 January 2022 29,806 388,262 9,877 147,855 894,915 8,923 1,479,638

Dividends paid 9 – – – – – (9,039) (9,039)

Net proceeds from issue of new

shares 12 756 34,162 – – – – 34,918

Net proceeds of shares sold from

treasury 12 – 674 – 6,904 – – 7,578

Cost of share buybacks 12 – – – (12,887) – – (12,887)

(Loss)/return for the year – – – – (237,542) 13,272 (224,270)

Closing equity as at 31 December

2022 30,562 423,098 9,877 141,872 657,373 13,156 1,275,938

Year ended

31 December 2021 Note

capital

£’000

premium

account

£’000

Capital

redemp-

tion

reserve

£’000

purchase

reserve

£’000

Capital

reserve

£’000

Revenue

reserve

£’000

Total

£’000

Opening equity as at 1 January 2021 26,588 239,059 9,877 147,855 663,868 6,033 1,093,280

Dividends paid 9 – – – – – (6,501) (6,501)

Net proceeds from issue of new

shares 12 3,218 149,203 – – – – 152,421

Return for the year – – – – 231,047 9,391 240,438

Closing equity as at 31 December

2021 29,806 388,262 9,877 147,855 894,915 8,923 1,479,638

The notes on pages 70 to 83 form part of these financial statements.

Statement of Changes in Equity

Financials

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 69

Notes

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Operating activities

(Loss)/return on ordinary activities before finance costs and taxation* (219,626) 243,172

Less: Tax deducted at source on income from investments (3,155) (1,776)

Foreign exchange non cash flow losses 2,775 205

Adjustment for losses/(gains) on investments 226,293 (239,534)

Special dividends received as capital 393 –

Increase in other debtors (413) (99)

(Decrease)/increase in other creditors (1,142) 821

Net cash flow from operating activities 5,125 2,789

Investing activities

Sale of investments 313,189 336,772

Purchase of investments (338,730) (485,732)

Net cash flow used in investing (25,541) (148,960)

Financing activities

Equity dividends paid 9 (9,039) (6,501)

Repayment of revolving credit facility (282) –

Finance costs paid (1,864) (1,467)

Net proceeds from issue of new shares 12 34,918 152,421

Net proceeds of shares sold from treasury 12 7,578 –

Cost of share buybacks 12 (12,887) –

Net cash flow from financing 12 18,424 144,453

Decrease in cash (1,992) (1,718)

Cash and cash equivalents at start of year 28,319 30,037

Cash and Cash equivalents at end of year 26,327 28,319

* Cash inflow includes dividend income received during the year ended 31 December 2022 of £20,348,000 (2021: £15,117,000) and bank

interest of £205,000 (2021: £nil).

Changes in net debt note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Net debt at start of year (20,794) (18,871)

Decrease in cash and cash equivalents (1,992) (1,718)

Foreign exchange movements (2,775) (205)

Repayment of revolving credit facility

282 –

Net debt at end of year (25,279) (20,794)

The notes on pages 70 to 83 form part of these financial statements.

Statement of Cash Flows

70 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

Notes to the Financial Statements

1 ACCOUNTING POLICIES

The Company is an investment company within the meaning of Section 833 of the Companies Act 2006.

The accounts have been prepared in accordance with applicable UK accounting standards. The particular accounting

policies adopted are described below.

(a) Basis of accounting

The accounts are prepared in accordance with UK Generally Accepted Accounting Practice (‘UK GAAP’) including

FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and the Statement of

Recommended Practice ‘Financial statements of investment trust companies and venture capital trusts’ (‘SORP’)

issued by the Association of Investment Companies in July 2022.

The accounts have been prepared on a going concern basis. Details of the Directors’ assessment of the going

concern status of the Company, which considered the adequacy of the Company's resources and the macroeconomic

backdrop such as higher inflation and interest rates and possible recession, is given on page 48.

Amounts in the accounts have been rounded to the nearest £’000 unless otherwise stated.

(b) Investments

Securities of companies quoted on regulated stock exchanges and the Company’s holdings in unquoted companies

have been classified as ‘at fair value through profit or loss’ and are initially recognised on the trade date and measured

at fair value in accordance with sections 11 and 12 of FRS 102. Investments are measured at subsequent reporting

dates at fair value by reference to their market bid prices. Any unquoted investments are measured at fair value which

is determined by the Directors in accordance with the International Private Equity and Venture Capital guidelines.

Changes in fair value are included in the Income Statement as a capital item.

The accounts are presented in sterling which is the functional currency of the Company. Sterling is the reference

currency for this UK registered and listed company.

(d) Income from investments

Investment income from shares is accounted for when the Company’s right to receive the income is established, which

is usually considered to be the ex-dividend date. Overseas income is grossed up at the appropriate rate of tax but UK

dividend income is not grossed up for tax credits.

Special dividends are assessed on their individual merits and may be credited to the Income Statement as a capital

item if considered to be closely linked to reconstructions of the investee company or other capital transactions. All

other investment income is credited to the Income Statement as a revenue item.

(e) Nature and purpose of equity and reserves:

Share capital represents the 10p nominal value of the issued share capital.

The share premium account arose from the net proceeds of new shares and from the excess proceeds received on the

sale of shares from treasury over the repurchase cost.

The capital redemption reserve represents the nominal value of shares repurchased for cancellation.

The share purchase reserve was created following shareholders’ approval and confirmation of the Court, through the

cancellation and transfer of £44,125,000 in December 2002 and £246,486,789 in July 2009 from the share premium

account. This reserve may only be used for share repurchases, both into treasury or for cancellation. When shares are

subsequently reissued from treasury, the amount equal to their repurchase cost is reflected in this reserve, with any

proceeds in excess of the repurchase cost transferred to the share premium account.

The capital reserve reflects any:

•

gains or losses on the disposal of investments;

•

exchange movements of a capital nature;

•

the increases and decreases in the fair value of investments which have been recognised in the capital column of

the income statement; and

•

expenses which are capital in nature.

Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the

capital reserve.

The revenue reserve reflects all income and expenditure recognised in the revenue column of the income statement

and is distributable by way of dividend.

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 71

Financials

1 ACCOUNTING POLICIES CONTINUED

The Company's distributable reserves consists of the share purchase reserve, the capital reserve attributable to

realised profits and the revenue reserve. The share purchase reserve may only be used for share repurchases, both

into treasury or for cancellation.

(f) Expenses

All expenses are accounted for on an accruals basis. Expenses are recognised through the Income Statement as

revenue items except as follows:

Management fees

In accordance with the Company’s stated policy and the Directors’ expectation of the split of future returns, three

quarters of investment management fees are charged as a capital item in the Income Statement. There is no

performance fee arrangement with the Manager.

Finance costs

Finance costs include interest payable and direct loan costs. In accordance with Directors’ expectation of the

split of future returns, three quarters of finance costs are charged as capital items in the Income Statement. Loan

arrangement costs are amortised over the term of the loan.

Transaction costs

Transaction costs incurred on the acquisition and disposal of investments are charged to the Income Statement as a

capital item.

(g) Taxation

Irrecoverable taxation on dividends is recognised on an accruals basis in the Income Statement.

Deferred taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the

financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or

right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets

only being recognised if it is considered more likely than not that there will be suitable profits from which the future

reversal of the timing differences can be deducted. Deferred tax assets and liabilities are measured at the rates

applicable to the legal jurisdictions in which they arise.

(h) Foreign currency translation

All transactions and income in foreign currencies are translated into sterling at the rates of exchange on the dates of

such transactions or income recognition. Monetary assets and liabilities and financial instruments carried at fair value

denominated in foreign currency are translated into sterling at the rates of exchange at the balance sheet date. Any gain

or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange

gain or loss in the Income Statement as either a capital or revenue item depending on the nature of the gain or loss.

(i) Financial liabilities

Bank loans and overdrafts are measured at amortised cost. They are initially recorded at the proceeds received net of

direct issue costs.

(j) Cash and cash equivalents

Cash comprises cash and demand deposits. Cash equivalents are short term, highly liquid investments that are readily

convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose

of meeting short-term cash commitments rather than for investment or other purposes.

(k) Estimates and assumptions

The preparation of financial statements requires the Directors to make estimates and assumptions that affect items

reported in the Balance Sheet and Income Statement. Although these estimates are based on management’s best

knowledge of current facts, circumstances and, to some extent, future events and actions, the Company’s actual

results may ultimately differ from those estimates, possibly significantly.

The assumptions regarding the valuation of unquoted financial instruments are disclosed in note 2.

(l) Dividend payable

Final dividends payable to equity shareholders are recognised in the financial statements when they have been

approved by shareholders and become a liability of the Company. Interim dividends payable are recognised in the

period in which they are paid. The capital reserve attributable to realised profits and revenue reserve may be used to

fund dividend distributions.

(m) Treasury shares

Treasury shares are recognised at cost as a deduction from equity shareholders’ funds. Subsequent consideration

received for the sale of such shares is also recognised in equity, with any difference between the sale proceeds and

the original cost being taken to share premium account. No gain or loss is recognised in the financial statements on

transactions in treasury shares.

72 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

2 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

2022

£'000

2021

£'000

(a) Summary of valuation

Analysis of closing balance:

UK quoted securities 88,985 118,644

Overseas quoted securities 1,213,620 1,384,524

Overseas unquoted securities – 582

Total investments 1,302,605 1,503,750

(b) Movements during the year:

Opening balance of investments, at cost 1,031,903 748,272

Additions, at cost 338,730 484,211

Disposals, at cost (248,327) (200,580)

Cost of investments at 31 December 1,122,306 1,031,903

Revaluation of investments to fair value:

Opening balance of capital reserve – investments held 471,847 364,617

Unrealised (losses)/gains on investments held (291,548) 107,230

Balance of capital reserve – investments held at 31 December 180,299 471,847

Fair value of investments at 31 December 1,302,605 1,503,750

Gains on disposal of investments 65,492 132,716

Net transaction costs (630) (412)

Special dividends received as capital 393 –

Unrealised (losses)/gains on investments held (291,548) 107,230

(Losses)/gains on investments (226,293) 239,534

During the year, the Company incurred transaction costs on purchases totalling in aggregate £588,000 (2021:

£508,000) and on disposals totalling in aggregate £313,000 (2021: £246,000). Following MiFID II, the Manager has

rebated £271,000 (2021: £299,000) in respect of transaction research costs for the year ended 31 December 2022,

and nil (2021: £43,000) in relation to prior periods. Transaction costs are recorded in the capital column of the

Income Statement.

The Company received £327,757,000 (2021: £333,296,000) from investments sold in the year. The book cost of

these investments when they were purchased was £262,265,000 (2021: £200,580,000). These investments have

been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of

the investments.

Classification of financial instruments

FRS 102 requires classification of financial instruments within the fair value hierarchy be determined by reference

to the source of inputs used to derive the fair value and the lowest level input that is significant to the fair value

measurement as a whole. The classifications and their descriptions are below:

Level 1

The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the

measurement date.

Level 2

Holdings in companies with no quoted prices. Inputs other than quoted prices included within Level 1 that are

observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3

Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 73

Financials

2 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED

The classification of the Company’s investments held at fair value is detailed in the table below:

31 December 2022 31 December 2021

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

Investments at fair value through

profit or loss

- Quoted 1,302,605 – – 1,302,605 1,503,168 – – 1,503,168

- Unquoted – – – – – – 582 582

1,302,605 – – 1,302,605 1,503,168 – 582 1,503,750

The movement on the Level 3 unquoted investments during the year is shown below:

2022

£'000

2021

£'000

Opening balance 582 577

Writedown of investment to nil (582) –

Foreign exchange movements – 5

Closing balance – 582

Unquoted investments are valued using relevant financial data available on those investments and applying

International Private Equity and Venture Capital guidelines. This includes, where appropriate, consideration of price of

recent market transactions, earnings multiples, discounted cash flows, net assets and liquidity discounts.

At the year end the Company had one unlisted holding (2021: one).

3 INCOME

2022

£'000

2021

£'000

Dividends from UK listed investments 2,295 1,484

Dividends from overseas listed investments 17,660 13,711

Bank interest received 205 –

Total Income 20,160 15,195

Dividends from overseas listed investments includes special dividends of £283,000 (2021: nil).

4 INVESTMENT MANAGEMENT FEES

2022 2021

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Investment management fees 2,420 7,258 9,678 2,471 7,412 9,883

Details of the investment management fee are given on page 46. At 31 December 2022, investment management fees

accrued were £1,601,000 (2021: 2,730,000).

74 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

5 OTHER EXPENSES

2022 2021

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Secretary and administrator fees 250 – 250 276 – 276

Depository fees* 104 – 104 162 – 162

Depository fees refund* (66) – (66) – – –

Custody fees* 170 – 170

219

– 219

Custody fees refund* (55) – (55)

– –

–

Directors' fees- see below 171 – 171 162 – 162

Directors' expenses 3 – 4 – – –

Directors' other costs- see below 9 – 8 17 – 17

Directors’ D&O insurance 16 – 16 13 – 13

Director recruitment fees 20 – 20 20 – 20

Broker retainer 24 – 24 50 – 50

Auditor's fee 42 – 42 37 – 37

Tax advisor fees 9 – 9 8 – 8

Association of Investment Companies 21 – 21 21 – 21

Registrar's fees 119 – 119 146 – 146

Marketing fees 61 – 61 75 – 75

FCA and listing fees 107 – 107 64 – 64

Printing fees 30 – 30 30 – 30

Other expenses

2 – 2 60 – 60

1,037 – 1,037 1,360 – 1,360

Full detail on Directors’ fees in the year is provided in the Directors’ Remuneration Implementation Report on

page 55. Employer’s National Insurance upon the fees is included as appropriate in Directors’ other costs. At

31 December 2022, Directors’ fees, Directors’ expenses and national insurance fees outstanding were £7,000

(2021: £1,000).

* Refunds of £66,000 and £55,000 were received respectively for depository and custody fees charged in 2021 due to revised depository and

custody fee rates being retrospectively applied from 1 January 2021.

6 FINANCE COSTS

2022 2021

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Interest charges 471 1,414 1,885 364 1,091 1,455

Direct finance costs 4 10 14 4 12 16

Total 475 1,424 1,899 368 1,103 1,471

Facility arrangement costs amounting to £72,000 are amortised over the life of the facility on a straight-line basis.

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 75

Financials

7 TAXATION

(a) Analysis of charge in the year

2022 2021

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Overseas taxation 2,956 59 3,015 1,605 – 1,605

Decrease in CGT provision – (270) (270) – (342) (342)

Taxation 2,956 (211) 2,745 1,605 (342) 1,263

(b) Factors affecting total tax charge for the year:

The standard UK corporation tax rate at 31 December 2022 was 19% (2021: 19.00%). The tax charge differs from the

charge resulting from applying the standard rate of UK corporation tax for an investment trust company.

The differences are explained below:

2022

£'000

2021

£'000

(Loss)/return on ordinary activities before taxation (221,525) 241,701

Corporation tax at 19.00% (2021: 19.00%) (42,090) 45,923

Effects of:

Non-taxable UK dividend income (436) (282)

Non-taxable overseas dividend income (3,355) (2,605)

Non-taxable interest income (39) –

Movement in unutilised management expenses 2,036 2,136

Movement on non-trade relationship deficits 361 280

Losses/(gains) on investments not taxable 42,995 (45,512)

Loss in foreign currency movement 528 60

Capital gains tax provision movement (270) (342)

Overseas taxation 3,015 1,605

Total tax charge for the year 2,745 1,263

Corporation Tax Act 2010 are exempt from tax on capital gains. Due to the Company’s status as an Investment

Trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the

Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments.

(d) The capital gains tax provision represents an estimate of the amount of tax provisionally payable by the Company

on direct investment in Indian equities. It is calculated based on the long term or short term nature of the investments

and the unrealised gain thereon at the applicable tax rate at the year end.

Movements on the capital gains tax provision for the year

2022

£'000

2021

£'000

Provision brought forward 579 1,092

Capital gains tax paid (140) (171)

Decrease in provision in year (270) (342)

Provision carried forward 169 579

(e) The Company has unrelieved excess management expenses and non-trade relationship deficits of £90,629,000

(2021: £78,015,000). It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these

expenses and therefore no deferred tax asset has been recognised. The unrecognised deferred tax asset calculated

using a rate of 25% (2021: 25%) amounts to £22,657,000 (2021: £19,500,000). The March 2021 Budget announced

an increase to the main rate of corporation tax to 25% from 1st April 2023. This increase in the standard rate of

corporation tax was substantively enacted on 24th May 2021 and became effective from 2nd June 2021.

76 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

8 RETURN PER SHARE

Year ended

31 December

2022

£'000

Year ended

31 December

2021

£'000

Revenue return after taxation (£’000s) 13,272 9,391

Capital (loss)/return after taxation (£’000s) (237,542) 231,047

Total net (loss)/return after tax (£’000s) (224,270) 240,438

Weighted average number of Ordinary Shares 303,853,145 285,059,568

Net return per Ordinary Share is based on the above totals of revenue and capital and the weighted average number

of Ordinary Shares in issue during each year.

There is no dilution to return per share as the Company has only Ordinary Shares in issue.

9 DIVIDENDS

(a) Dividends paid in the year

Rate

2022

£'000 Rate

2021

£'000

Interim in lieu of final for the previous year 1.50p 4,471 1.00p 2,734

First interim for the current year 1.50p 4,568 1.30p 3,767

3.00p 9,039 2.30p 6,501

(b) Dividends paid and payable in respect of the financial year, which is the basis on which the requirements of

s1158-1159 of the Corporation Tax Act 2010 are considered

Rate

2022

£'000 Rate

2021

£'000

First interim for the current year 1.50p 4,568 1.30p 3,767

Second interim in lieu of final for the current year 2.50p 7,604 1.50p 4,471

4.00p 12,172 2.80p 8,238

The Board declared two dividends in respect of the year and expects to continue paying two dividends annually.

10 TRADE AND OTHER PAYABLES

2022

£'000

2021

£'000

Finance costs payable 133 98

Accrued management fees 1,601 2,730

Other accrued expenses 195 208

Total 1,929 3,036

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 77

Financials

11 BANK LOANS AND CREDIT FACILITY

On 6 September 2018, the Company entered into five–year fixed rate multi–currency US$20 million and £15 million

loans with Scotiabank Europe plc (“Scotiabank”). The loans expire on 6 September 2023.

The Company also has a £20 million multi-currency revolving credit facility ("RCF") with Scotiabank which

was fully drawn in two currencies, US $12.2 million and £10 million throughout the year. The facility expires on

6 September 2023.

A summary of the Company’s loans follows.

2022 2021

Bank loans-fixed rate Interest rate

Loan

currency

amount £'000

Loan

currency

amount £'000

Sterling 2.910% 15,000,000 15,000 15,000,000 15,000

Non-sterling 4.504% 20,000,000 16,531 20,000,000 14,777

31,531 29,777

RCF-floating rate

Sterling Six month SONIA +1.7% 10,000,000 10,000 10,000,000 10,000

Non-sterling Six month SOFR +1.7% 12,185,017 10,075 12,637,000 9,336

51,606 49,113

The maturity profile of the bank loans and credit facility as follows:

Payable at 31 December

2022

£'000

2021

£'000

Bank loans payable less than one year 31,531 –

Bank loans payable after more than one year – 29,777

Revolving credit facility payable less than one year 20,075 –

Revolving credit facility payable after more than one year – 19,336

51,606 49,113

The Company’s loans and revolving credit facility contain the following covenants, with which failure to comply could

necessitate the early repayment of the loan:

1) Adjusted asset coverage should not be less than 4:1.

2) Net Asset Value should not be less than £260,000,000.

3) The maximum permitted borrowing should not exceed that permitted in the Company’s Articles of Association as

described in the Gearing section of the Investment Policy on page 33.

78 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

12 SHARE CAPITAL

2022 2021

Number £'000 Number £'000

Issued and fully paid shares of 10p each

Brought forward 298,061,439 29,806 265,877,138 26,588

New shares issued in year 7,562,100 756 32,184,301 3,218

Shares bought back and held in treasury (3,119,400) (312) – –

Treasury shares issued in year 1,662,900 166 – –

Carried forward 304,167,039 30,416 298,061,439 29,806

Treasury shares of 10p each

Brought forward – – – –

Shares bought back and held in treasury 3,119,400 312

Issued in year (1,662,900) (166) – –

Carried forward 1,456,500 146 – –

Share capital 305,623,539 30,562 298,061,439 29,806

The Company received aggregate gross proceeds of £35,126,000 (2021: £153,493,000) from the issue of shares

and net proceeds of £34,918,000 (2021: £152,421,000) after issue costs of £208,000 (2021: £1,072,000). During the

year, the Company bought back a total of 3,119,400 Ordinary Shares (2021: nil) held in treasury for a total cost of

£12,887,000 after purchase costs of £90,000. In addition, 1,662,900 Ordinary Shares (2021: Nil) have been re-issued

for net proceeds of £7,578,000 after reissue costs of £91,000.

As at 27 March 2023, the latest practicable date before publication of this report, 725,000 Ordinary Shares have been

bought back at a total cost of £3,244,000 after purchase costs of £23,000.

13 CAPITAL RESERVE

Realised capital reserve

2022

£'000

2021

£'000

Opening balance 423,068 299,251

Gains on disposal of investments 65,492 132,716

Net transaction costs (630) (412)

Net foreign exchange losses (2,778) (314)

Investment management fees charged to capital (7,258) (7,412)

Finance costs charged to capital (1,424) (1,103)

Special dividends received as capital 393 –

Taxation credit to capital 211 342

Balance at 31 December 477,074 423,068

Unrealised gains on investments

2022

£'000

2021

£'000

Unrealised gains brought forward 471,847 364,617

Unrealised (losses)/gains on investments held (291,548) 107,230

Unrealised gains carried forward 180,299 471,847

Capital reserve balance at 31 December 657,039 894,915

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 79

Financials

14 NET ASSET VALUE PER SHARE

2022 2021

Net asset value (£'000) £1,275,938 1,479,638

Shares in issue (excluding shares held in treasury) 304,167,039 298,061,439

Net asset value per share at 31 December 419.49p 496.42p

15 TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS

Details of the management contract can be found in the Directors’ Report on page 46 to 47. Fees payable to the

Manager are detailed in note 4 on page 73. Since 1 January 2018, the Manager has agreed to rebate commission which

relates to research fees to the Company with such amount disclosed in note 2.

The Directors’ fees are disclosed in note 5 and the Directors’ shareholdings are disclosed in the Directors’

Remuneration Implementation Report on page 55.

16 FINANCIAL RISK MANAGEMENT

As an investment trust, the Company invests in equities for the long-term so as to enable investors to benefit from

growth in the markets for cleaner or more efficient delivery of basic services of energy, water and waste, as stated

in the Company’s investment objective which can be found on page 32. In pursuing its investment objective, the

Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a

reduction of the profits available for dividends. These risks include market risk (comprising currency risk, interest rate

risk, and other price risk), credit risk and liquidity risk and the Directors’ approach to the management of them is set

out below. These metrics are monitored by the AIFM. The objectives, policies and processes for managing the risks,

and the methods used to measure the risks, are set out below.

Market risks

The potential market risks are (i) currency risk, (ii) interest rate risk, and (iii) other price risk. Each is considered

in turn below.

(i) Currency risk

The Company invests in global equity markets and therefore is exposed to currency risk as it affects the value of the

shares in the base currency. These currency exposures are not hedged. The Manager monitors currency exposure as

part of its investment process. Currency exposures for the Company as at 31 December 2022 are detailed in the table

at the end of this note.

Currency sensitivity

The below table shows the strengthening/(weakening) of sterling against the local currencies over the financial year

for the Company’s financial assets and liabilities held at 31 December 2022.

2022

%change

2021

%change

Australian Dollar (4.7%) 4.6%

Canadian Dollar (4.2%) (1.8%)

Danish Krone (4.9%) 6.0%

Euro (5.0%) 6.1%

Hong Kong Dollar (10.6%) (0.3%)

Indian Rupee (1.1%) 0.9%

Israeli Shekel 1.3% (4.6%)

Korean Won (5.4%) 7.7%

Norwegian Krone (0.5%) 1.7%

Swedish Krona 3.1% 8.3%

Swiss Franc (9.3%) 2.1%

Taiwanese Dollar (1.4%) (2.3%)

US Dollar (10.7%) (0.9%)

1 Percentage change of Sterling against local currency from 1 January to 31 December.

80 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

16 FINANCIAL RISK MANAGEMENT CONTINUED

Based on the financial assets and liabilities at 31 December 2022 and all other things being equal, if sterling had

weakened by 10%, the profit after taxation for the year ended 31 December 2022 and the Company’s net assets at

31 December 2022 would have increased by the amounts shown in the table below. If sterling had strengthened by

10% this would have had the opposite effect.

2022

Potential

effect

£'000

2021

Potential

effect

£'000

Australian Dollar 3,335 3,127

Canadian Dollar 5,606 6,925

Danish Krone 2,777 2,595

Euro 25,237 23,141

Hong Kong Dollar 1,955 3,017

Indian Rupee 2,249 2,492

Israeli Shekel 461 537

Korean Won 1,486 2,067

Norwegian Krone 2,336 4,706

Swedish Krona 2,135 3,052

Swiss Franc 5,655 4,751

Taiwanese Dollar 6,451 8,475

US Dollar 59,587 71,532

Total 119,270 136,417

(ii) Interest rate risk

The Company is typically fully invested in global equities but will from time to time hold interest bearing assets. These

assets are cash balances that earn interest at a floating rate and, typically, UK Treasury Bills when large amounts of

cash are held.

With the exception of cash, no significant interest rate risks arise in respect of any current asset. The Company,

generally, does not hold significant cash balances, with short-term borrowings being used when required. Cash held

as a current asset is sterling and is held at the variable interest rates of the custodian. Movement in interest rates will

not materially affect the Company’s income and as such no sensitivity analysis is required.

The Company had two bank loans in place during the year. The loan interest on the current loans is based on a fixed

rate as such no sensitivity analysis is required.

The Company's £20 million multi-currency revolving credit facility is based on a floating reference interest rate plus

a margin of 1.70% per annum. If interest rates had increased or decreased by 350 basis points, which is regarded as

reasonable based upon interest rate movements observed during the year, the impact to the Company’s profit or

loss would be:

2022

Profit or loss £'000

2021

Profit or loss £'000

350 bps

increase

350 bps

decrease

25 bps

increase

25 bps

decrease

31 December

Non-sterling Revolving Credit Facility (353) 353 (23) 23

Sterling Revolving Credit Facility (350) 350 (25) 25

(iii) Other price risk

The principal price risk for the Company is the price volatility of shares that are owned by the Company. The Company

is well diversified across different sub-sectors and geographies and has a volatility level similar to global stock market

indices such as the MSCI ACWI Index to which the Company has had an annualised tracking error of 6.8% (2021:

6.4%) over the ten year period to 31 December 2022. The historic 3-year (annualised) volatility of the Company to

31 December 2022 is 19.9% (2021: 16.6%).

At the year end the Company held investments with an aggregate market value of £1,302,605,000 (2021:

£1,503,750,000). All other things being equal, the effect of a 10% increase or decrease in the share prices of the

investments held at the year end would have been an increase or decrease of £130,260,500 (2021: £150,375,000) in

the profit after taxation for the year ended 31 December 2022 and the Company’s net assets at 31 December 2022.

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 81

Financials

16 FINANCIAL RISK MANAGEMENT CONTINUED

Overall sensitivity

The Manager has used the Parametric VaR to calculate value at risk (‘VAR’). This model has been used to estimate

the maximum expected loss from the portfolio held at 31 December 2022 over 1 day, 5 day, 10 day and 21 day periods

given the historical performance of the fund over the previous five years. The data in the previous five years is

analysed under discrete periods to provide 1 in 10, 1 in 20 and 1 in 100 possible outcomes. The results of the analysis

are shown below.

2022

Expected as percentage

at limit

2021

Expected as percentage

at limit

1 in 20

(95%)

1 in 100

(99%)

1 in 20

(95%)

1 in 100

(99%)

1 day return 1.87 2.64 1.46 2.07

5 day return 4.18 5.91 3.27 4.63

10 day return 5.90 8.35 4.63 6.54

21 day return 8.76 12.39 6.86 9.70

The above analysis has been based on the following main assumptions:

•

The distribution of share price returns will be the same in the future as they were in the past.

•

The portfolio weightings will remain as they were at 31 December 2022.

The above results suggest, for example, that there is a 5% or less chance of the NAV falling by 4.18% or more over a

5day period. Similarly, there is a 1% or less chance of the NAV falling by 2.64% or more on any given day.

Credit risks

BNP Paribas Securities Services (the 'Depositary') has been appointed as custodian and depositary to the Company.

Cash at bank at 31 December 2022 included £25,835,000 (2021: £27,887,000) held in its bank accounts at the

Depositary. The Company also held £492,000 (2021: £432,000) in its accounts with NatWest Group plc. The Board

has established guidelines that, under normal circumstances, the maximum level of cash to be held at any one bank

should be the lower of i) 5% of the Company’s net assets and ii) £30 million. These are guidelines and there may be

instances when this amount is exceeded for short periods of time.

Substantially all of the assets of the Company at the year end were held by the Depositary or sub-custodians of the

Depositary. Bankruptcy or insolvency of the Depositary may cause the Company’s rights with respect to securities

held by the Depositary to be delayed or limited. The Depositary segregates the Company’s assets from its own

assets and only uses sub-custodians on its approved list of sub-custodians. At the year end, the Depository held

£1,302,605,000 (2021: £1,503,168,000) in respect of quoted investments.

The credit rating of the Depositary, which is a Fitch rating of A+, was reviewed at the time of appointment and is

reviewed on a regular basis by the Manager and/or the Board.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled

transactions is considered to be low as trading is almost always done on a delivery versus payment basis.

There is credit risk on dividends receivable during the time between recognition of the income entitlement and actual

receipt of dividend.

Liquidity risks

The Company invests in a range of global equities with different market capitalisations and liquidities and therefore

needs to be conscious of liquidity risk. The Manager monitors the liquidity risk by carrying out a ‘Maturity Analysis’ of

the Company’s listed equities based on the 3 Month Average Liquidities of each investment and assuming 15% of the

daily traded volume.

82 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Financials

16 FINANCIAL RISK MANAGEMENT CONTINUED

Quantitative disclosures

The results of the Managers maturity analysis at 31 December 2022 are reported in the following table as a percentage

of the portfolio that could be liquidated over different time periods. On 31 December 2022, 2.59% (2021: 2.37%) of the

portfolio by value (excluding unquoted investments) might have taken more than three months to be realised.

2022 2021

Percentage of portfolio by value that could be liquidated in one week 65.9 64.5

Percentage of portfolio by value that could be liquidated in one month 92.4 92.1

Percentage of portfolio by value that could be liquidated in three months 97.4 97.6

Percentage of portfolio by value that could be liquidated in one year 98.9 98.6

The Company may invest up to 10% of its net assets into pre-IPO investments which are possible candidates

for flotation.

Liquidity risk

This is the risk that the Company will encounter difficulty in meeting its obligations for financial liabilities as they fall

due. This risk is minimised because a majority of the Company's investments are in readily realisable securities which

can be sold to meet funding commitments. The maturity profile analysis of the Company's financial liabilities is shown

below. The Company does not have derivative financial liabilities and the amounts shown are undiscounted.

Financial liabilities by maturity at the year end are shown below on an undiscounted basis:

2022 2021

Within 1 year

£'000

Within

1-3 years

£'000

Total

£'000

Within 1 year

£'000

Within

1-3 years

£'000

Total

£'000

Bank loans 31,531 – 31,531 – 29,777 29,777

Revolving credit facility 20,075 – 20,075 – 19,336 19,336

Interest cash flows on bank loans 887 – 887 1,102 827 1,929

Interest cash flows on revolving credit

facility 794 – 794 401 304 705

Cash flows on other creditors

1,796 – 1,796

2,938 – 2,938

55,083 – 55,083

4,441 50,244 54,685

Notes to the Financial Statements continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 83

Financials

16 FINANCIAL RISK MANAGEMENT CONTINUED

Financial assets and liabilities

All liabilities carrying amount approximates fair value.

The Company’s financial assets and liabilities at 31 December 2022 comprised:

2022 2021

Interest

bearing

£'000

Non-interest

bearing

£'000

Total

£'000

Interest

bearing

£'000

Non-interest

bearing

£'000

Total

£'000

Investments

Australian Dollar – 33,347 33,347 – 31,273 31,273

Canadian Dollar – 55,901 55,901 – 69,087 69,087

Danish Krone – 27,769 27,769 – 25,948 25,948

Euro – 252,369 252,369 – 231,414 231,414

Hong Kong Dollar – 19,548 19,548 – 30,167 30,167

Indian Rupee – 23,074 23,074 – 25,496 25,496

Israeli Schekel – 4,608 4,608 – 5,370 5,370

Korean Won – 14,856 14,856 – 20,673 20,673

Norwegian Krone – 23,356 23,356 – 47,060 47,060

Sterling – 88,985 88,985 – 118,644 118,644

Swedish Krona – 21,346 21,346 – 30,524 30,524

Swiss Franc – 56,551 56,551 – 47,512 47,512

Taiwanese Dollar – 64,511 64,511 – 84,747 84,747

US Dollar – 616,384 616,384 – 735,835 735,835

– 1,302,605 1,302,605 – 1,503,750 1,503,750

Other assets and liabilities

Cash and cash equivalents

Sterling 23,705 – 23,705 24,722 – 24,722

Canadian Dollar – – – 97 – 97

Taiwanese Dollar 14 – 14 – – –

US Dollar 2,608 – 2,608 3,500 – 3,500

26,327 – 26,327 28,319 – 28,319

Short term net (creditors)/debtors

Sterling

(25,000) (1,588) (26,588) – (2,918) (2,918)

Canadian Dollar

– 68 68 – 60 60

US Dollar

(26,606) 211 (26,395) – 96 96

(51,606) (1,309) (52,915) – (2,762) (2,762)

Long term creditors

Sterling

– – – (25,000) – (25,000)

US Dollar

– – – (24,113) – (24,113)

– – – (49,113) – (49,113)

Total

(25,279) 1,301,296 1,276,017 (20,794) 1,500,988 1,480,194

Capital management

The Company considers its capital to consist of its share capital of Ordinary Shares of 10p each, its distributable

reserves and its borrowings.

At 31 December 2022 there were 305,623,539 Ordinary Shares in issue (2021: 298,061,439) of which 1,456,500

Ordinary Shares were held in treasury (2021: nil).

The Company has a stated premium/discount control policy. The Manager and the Company’s broker monitor the

demand for the Company’s shares and the Directors review the position at Board meetings. Further details on share

issues and buy backs during the year and the Company’s policies for issuing further shares and buying back shares

(including the Company’s premium/discount control policy) can be found in the Directors’ Report.

The Company’s policy on borrowings is detailed in the Directors’ Report.

84 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Investor information

As at 31December 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net assets (£millions) 386 374 372 465 507 450 657 1,093 1,480 1,276

NAV per Ordinary Share

167.9p 169.8p 178.6p 243.4p 281.6p 249.6p 321.8p 411.2p 496.4p 419.5

Share price 150.0p 152.8p 160.0p 218.0p 256.5p 253.0p 333.0p 422.5p 547.0p 419.5

Premium / (discount)

1,2

(10.7%) (10.2%) (10.4%) (10.4%) (8.9%) 1.4% 3.5% 2.7% 10.2% 0.0%

Year ended 31December 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

NAV return

1,3

34.1% 1.7% 6.0% 37.3% 16.4% (10.8%) 30.6% 31.0% 21.3% (15.0%)

Share price return

1,3

47.4% 2.5% 5.8% 37.4% 18.7% (0.4%) 32.9% 28.9% 30.1% (22.8%)

MSCI ACWI Index

20.5% 10.6% 3.3% 28.7% 13.2% (3.8%) 21.7% 12.7% 19.6% (8.1%)

FTSE ET100

4,5

44.9% 4.1% 5.0% 21.9% 20.2% (9.9%) 29.2% 90.3% 13.1% (20.1%)

Revenue return per

Ordinary

Share 1.3p 1.5p 1.5p 2.0p 2.8p 3.2p 3.6p 2.2p 3.3p 4.4p

Dividends

1.2p 1.4p 1.45p 1.95p 2.50p 3.0p 3.0p 2.3p 2.8p 4.0p

Ongoing charges

1.13% 1.12% 1.11% 1.13% 1.05% 1.04% 1.02% 0.95% 0.85% 0.81%

Notes

1. These are considered to be APMs.

2. Share price premium/(discount) to NAV.

3. Total return (discrete annual returns) – source: Morningstar up to 2016, Bloomberg 2017 thereafter (except year 2018).

4. Net total return (dividends reinvested net of withholding tax) for MSCI indices and total return for FTSE indices (discrete annual returns).

5. FTSE ET50 data up until 31 December 2013 and then FTSE ET100 thereafter.

6. Revenue return / Ordinary Share is based upon the revenue return for the year to 31 December and the weighted average number of

Ordinary Shares in issue (excluding treasury shares) during the year.

7. Total dividends payable in respect of the year.

Total returns to 31 December 2022

NAV

price

MSCI ACWI

Index

FTSE ET100

Index

1 year (15.0)% (22.8)% (8.1)% (20.1)%

2 years 3.2% 0.4% 10.0% (9.6)%

3 years 35.1% 29.4% 23.9% 72.0%

4 years 76.5% 71.9% 50.8% 122.3%

5 years 57.5% 71.2% 45.1% 100.2%

6 years 83.3% 103.2% 64.3% 140.6%

7 years 151.7% 179.2% 111.4% 193.3%

8 years 166.7% 195.5% 118.3% 207.9%

9 years 171.3% 202.8% 141.6% 220.7%

10 years 263.7% 346.4% 191.1% 355.1%

Notes

1. These are considered to be APMs.

2. FTSE ET50 data up until 31 December 2013 and then FTSE ET100 thereafter.

10 Year Financial Record

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 85

Investor information

APMs are often used to describe the performance of investment companies although they are not specifically defined

under FRS 102. The Directors assess the Company's performance against a range of criteria which are viewed as

relevant to both the Company and its market sector. APM calculations for the Company are shown below.

GEARING

A way to magnify income and capital returns, but which can also magnify losses. A bank loan is a common

method of gearing.

At 31 December Page 2022 2021

Total assets less cash/cash equivalents (£'000) a n/a 1,303,315 1,504,047

Net assets (£'000) b 67 1,275,938 1,479,638

Gearing (net) (a÷b)-1 2.1% 1.6%

LEVERAGE

Under the Alternative Investment Fund Managers Directive (“AIFMD”), leverage is any method by which the exposure

of an Alternative Investment Fund (“AIF”) is increased through borrowing of cash or securities or leverage embedded

in derivative positions.

Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between the assets (excluding

borrowings) and the net assets (after taking account of borrowing). Under the gross method, exposure represents the

sum of the Company’s positions after deduction of cash balances, without taking account of any hedging or netting

arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and

after certain hedging and netting positions are offset against each other.

ONGOING CHARGES

A measure, expressed as a percentage of the average daily net asset values during the year, of the regular, recurring

annual costs of running an investment company.

Year end 31 December Page 2022 2021

Average NAV (£'000) a n/a 1,321,438 1,324,967

Investment Management fees (£'000) b 73 9,678 9,883

Other expenses (£'000) c 74 1,037 1,360

(b+c)÷a 0.81% 0.85%

PREMIUM/(DISCOUNT)

The amount, expressed as a percentage, by which the share price is more/(less) than the Net Asset Value per

Ordinary Share.

At 31 December Page 2022 2021

NAV per Ordinary Share (p) a 1 419.49 496.42

Share price (p) b 1 419.50 547.00

Premium/(discount) (b÷a)-1 0.0% 10.2%

Alternative Performance

Measures (APMs)

86 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Investor information

TOTAL RETURN

A measure of performance that includes both income and capital returns. This takes into account capital gains and

reinvestment of dividends paid out by the Company into its Ordinary Shares on the ex-dividend date.

Year ended 31 December 2022 Page

price NAV

Opening at 1 January 2022 (p) a n/a 547.00 496.42

Closing at 31 December 2022 (p) b 1 419.50 419.49

Dividend/income adjustment factor

c n/a 1.0066 1.0059

Adjusted closing (d = b x c) d n/a 422.28 421.96

Total return (d÷a)-1 (22.8)% (15.0)%

Year ended 31 December 2021 Page

price NAV

Opening at 1 January 2021 (p) a n/a 422.50 411.20

Closing at 31 December 2021 (p) b 1 547.00 496.42

Dividend/income adjustment factor

c n/a 1.0049 1.0048

Adjusted closing (d = b x c) d n/a 549.67 498.79

Total return (d÷a)-1 30.1% 21.3%

1 The dividend adjustment factor is calculated on the assumption that dividends paid out by the Company are reinvested into the shares of the

Company at NAV at the ex-dividend date.

Alternative Performance Measures (APMs) continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 87

Investor information

AIC Association of Investment Companies.

Alternative Investment Fund or

"AIF"

An investment vehicle under AIFMD. Under AIFMD (see below) Impax Environmental

Markets plc is classified as an AIF.

Alternative Investment Fund

Managers Directive or "AIFMD"

A European Union directive which came into force on 22 July 2013 and has been

implemented in the UK.

Annual General Meeting or "AGM" A meeting held once a year which shareholders can attend and where they can vote

on resolutions to be put forward at the meeting and ask directors questions about the

company in which they are invested.

the Company Impax Environmental Markets plc ("IEM").

Custodian An entity that is appointed to safeguard a company's assets.

Discount/premium The amount, expressed as a percentage, by which the share price is less/more than

the net asset value per share.

Depositary Certain AIFs must appoint depositaries under the requirements of AIFMD.

Adepositary's duties include, inter alia, safekeeping of a company's assets and cash

monitoring. Under AIFMD the depositary is appointed under a strict liability regime.

Dividend Income receivable from an investment in shares.

Ex-dividend date The date from which you are not entitled to receive a dividend which has been

declared and is due to be paid to shareholders.

Financial Conduct Authority or

"FCA"

The independent body that regulates the financial services industry in the UK.

FTSE ET100/FTSE ET50 FTSE ET100/FTSE ET50 is a combination of the FTSE ET100 and FTSE ET50 indices.

FTSE ET50 data is used for the period to 31 December 2013 and FTSE ET100 data is

used for the period from 1 January 2014. The FTSE ET (Environmental Technology)

50 and 100 indices comprise, respectively, the 50 and 100 largest pure play (i.e.

deriving at least 50% of their business from environmental markets and technologies)

environmental technology companies globally, by full market capital.

Gearing effect The effect of borrowing on a company's returns.

Index A basket of stocks which is considered to replicate a particular stock market or sector.

Investment company A company formed to invest in a diversified portfolio of assets.

Investment Trust An investment company which is based in the UK and which meets certain tax

conditions which enables it to be exempt from UK corporation tax on its capital gains.

The Company is an investment trust.

Liquidity The extent to which investments can be sold at short notice.

Net assets or net asset value

("NAV")

An investment company's assets less its liabilities.

NAV per Ordinary Share Net assets divided by the number of Ordinary Shares in issue (excluding any shares

held in treasury).

Ordinary Shares The Company's ordinary shares in issue.

Portfolio A collection of different investments held in order to deliver returns to shareholders

and to spread risk.

Relative performance Measurement of returns relative to an index.

Share buyback A purchase of a company's own shares. Shares can either be bought back for

cancellation or held in treasury.

Share price The price of a share as determined by a relevant stock market.

Tracking error A measure, expressed as a percentage, of how closely a portfolio follows an index

over a period of time.

Treasury shares A company's own shares which are available to be sold by a company to raise funds.

Volatility A measure of how much a share moves up and down in price over a period of time.

Glossary

88 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Investor information

DIRECTORS INVESTMENT MANAGER

John Scott, (Chairman) Impax Asset Management Limited (AIFM) Limited

Stephanie Eastment (Audit Committee Chairman) 7th Floor

Aine Kelly (Senior Independent Director) 30 Panton Street

Vicky Hastings London

Glen Suarez SW1Y 4AJ

www.impaxam.com

BROKER REGISTERED OFFICE*

Investec Bank plc 6th Floor

30 Gresham Street 125 London Wall

London London

EC2V 7QP EC2Y 5AS

Registered in England no. 4348393

www.impaxenvironmentalmarkets.co.uk

DEPOSITARY AND CUSTODIAN SECRETARY & ADMINISTRATOR

BNP Paribas Securities Services Apex Listed Companies Services (UK) Limited

10 Harewood Avenue (formerly Sanne Fund Services (UK) Limited)

London 6th Floor,

NW1 6AA 125 London Wall

London

EC2Y 5AS

REGISTRAR AUDITOR

Link Group BDO LLP

10th Floor 55 Baker Street

Central Square London W1U 7EU

29 Wellington Street

Leeds LS1 4DL

Link Group (a trading name of Link Market Services Limited and Link Market Services Trustees Limited) may be able

to provide you with a range of services relating to your shareholding. To learn more about the services available to

you please visit the shareholder portal at www.signalshares.com or call +44 (0) 371 664 0300.

Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be

charged at the applicable international rate.

Link Group are open between 08:00 - 17:30, Monday to Friday excluding public holidays in England and Wales.

You can also write to Link Group at the address above.

Details of how to contact the Registrar in regards to the Annual General Meeting are given the Notes to the Notice of

AGM on pages 90 to 92.

Directors, Manager and Advisers

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 89

Investor information

Notice of Annual general meeting

Notice is hereby given that the Annual General Meeting of Impax Environmental Markets plc will be held at

7thfloor, 30 Panton Street, London, SW1Y 4AJ on 16 May 2023 at 3.00pm for the following purposes:

To consider and, if thought fit, pass the following resolutions of which resolutions 1 to 9 will be proposed as ordinary

resolutions and resolutions 10 to 12 will be proposed as special resolutions.

1. To receive the Company’s annual accounts for the year ended 31 December 2022.

2. To approve the Directors’ Remuneration Report, other than the Directors' remuneration policy, for the year ended

31 December 2022.

3. To approve the Company's Distribution Policy.

4. To re-elect Aine Kelly as a director of the Company.

5. To re-elect Stephanie Eastment as a director of the Company.

6. To elect Glen Suarez as a director of the Company.

7. To reappoint BDO LLP as auditor to the Company.

8. To authorise the Audit Committee to fix the remuneration of the auditor until the conclusion of the next Annual

General Meeting of the Company.

9. That:

(a) the Directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006

(the "Act") to allot shares in the Company, or to grant rights to subscribe for or convert any security into shares

in the Company, up to a maximum nominal amount of £3,034,420 or, if less, the amount that represents 10 per

cent. of the nominal value of the Company's issued share capital (excluding treasury shares) on the date on

which this resolution is passed; and

(b) the authority given by this resolution:

(i) shall be in addition to all pre-existing authorities under section 551 of the Act; and

(ii) unless renewed, revoked or varied in accordance with the Act, shall expire at the conclusion of the Annual

General Meeting of the Company to be held in 2023 or, if earlier, on the expiry of 15 months from the date

of passing of this resolution save that the Company may, before such expiry, make any offer or enter into

an agreement which would or might require the allotment of shares in the Company, or the grant of rights

to subscribe for or to convert any security into shares in the Company, after such expiry and the Directors

may allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the

Company in pursuance of such an offer or agreement as if such authority had not expired.

10. That, subject to the passing of resolution 9 set out in the Notice of Annual General Meeting dated 31 March 2023

(the "Allotment Authority"), the Directors be given power pursuant to sections 570 and 573 of the Companies Act

2006 (the "Act") to allot equity securities (within the meaning of section 560(1) of the Act) for cash pursuant to

the Allotment Authority, and to sell treasury shares for cash, as if section 561(1) of the Act did not apply to such

allotment or sale, provided that such power:

(a) shall be limited to the allotment of equity securities or the sale of treasury shares up to an aggregate nominal

amount of £3,034,420 or, if less, the amount that represents 10 per cent. of the nominal value of the Company's

issued share capital (excluding treasury shares) on the date on which this resolution is passed;

(b) shall be in addition to all pre-existing powers under sections 570 and 573 of the Act; and

power conferred on the Directors by this resolution, make an offer or agreement which would or might require

equity securities to be allotted or treasury shares to be sold after such expiry and the Directors may allot equity

securities or sell treasury shares in pursuance of such an offer or agreement as if such power had not expired.

11. That the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the

Companies Act 2006 (the "Act") to make market purchases (within the meaning of section 693(4) of the Act) of

its Ordinary Shares of 10p each, provided that:

(a) the maximum number of Ordinary Shares hereby authorised to be purchased shall be 45,485,961 (representing

14.99% of the Company’s issued Ordinary Share capital (excluding shares held in treasury) at the date of the

notice of this meeting);

(b) the minimum price (exclusive of any expenses) which may be paid for an Ordinary Share is 10p;

Notice of Annual General Meeting

90 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Investor information

of (i) 5% above the average of the middle market quotations for the Ordinary Shares for the five business

days immediately before the day on which it purchases that share and (ii) the higher of the price of the last

independent trade and the highest current independent bid for the Ordinary Shares;

(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company

in 2024 or, if earlier, on the expiry of 15 months from the passing of this resolution, unless such authority is

renewed prior to such time; and

(e) the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior

to the expiry of such authority, which will or may be executed wholly or partly after the expiration of such

authority and may make a purchase of Ordinary Shares pursuant to any such contract.

12. That a general meeting of the Company other than an Annual General Meeting may be called on not less than

14clear days’ notice, provided that this authority shall expire at the conclusion of the Company’s next Annual

General Meeting after the date of the passing of this resolution.

By order of the Board Registered Office:

Brian Smith 6th Floor,

For and on behalf of Apex Listed Companies Services (UK) Limited 125 London Wall,

Company Secretary London, EC2Y 5AS

31 March 2023

Notes to the Notice of AGM

Website address

1. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006,

is available from www. impaxenvironmentalmarkets.co.uk.

Entitlement to attend and vote

2. Only those holders of Ordinary Shares registered on the Company’s register of members at 3.00pm on 12 May 2023

or, if this meeting is adjourned, at 3.00pm on the day two days prior to the adjourned meeting, shall be entitled to

vote at the meeting.

You may attend the 2023 AGM virtually using your smartphone, tablet or computer. You will be able to view and

listen to a live webcast of the 2023 AGM and submit questions to the Directors in writing in advance. However, you

will not be able to vote at the event.

To join the 2023 AGM virtually, you will need to visit www.impaxenvironmentalmarkets.co.uk from your device and

complete the attendee registration form.

Shareholders' questions for either the Board or the investment managers should be submitted to clientservices@

impaxam.com by midday on 12 May 2023.

Appointment of proxies

3. Members entitled to vote at the meeting (in accordance with Note 2 above) are entitled to appoint a proxy to vote

in their place. It is recommended that shareholders appoint the “Chairman of the Meeting” as their proxy where

possible. If you wish to appoint a proxy, please follow the instructions at note 6 below. If you wish to appoint a proxy

through the CREST electronic proxy appointment service, please follow the instructions at note 7 below. If you are

an institutional investor and wish to appoint a proxy through the Proximity electronic proxy appointment service,

please follow the instructions at note 8 below. In the case of joint members, only one need sign the Form of Proxy.

The vote of the senior joint member will be accepted to the exclusion of the votes of the other joint members. For

this purpose, seniority will be determined by the order in which the names of the members appear in the register of

members in respect of the joint shareholding.

4. You can appoint the Chairman of the Meeting as your proxy using the voting methods in notes 6 and 7.

5. You can instruct your proxy how to vote on each resolution by marking the resolutions For and Against using the

voting methods stated in notes 6 and 7. If you wish to abstain from voting on any resolution, please mark these

resolutions withheld. It should be noted that a vote withheld is not a vote in law and will not be counted in the

calculation of the proportion of votes "For" and "Against" a resolution. If you do not indicate how your proxy should

vote, he/she can exercise his/her discretion as to whether, and if how so how, he/she votes on each resolution,

as he/she will do in respect of any other business (including amendments to resolutions) which may properly be

conducted at the meeting.

Notice of Annual General Meeting continued

Impax Environmental Markets plc | Annual Report and Accounts 2022 | 91

Investor information

Appointment of proxy

6. You can vote either:

• by logging on to www.signalshares.com and following the instructions;

• you may request a hard copy form of proxy directly from the registrars, Link Group on Tel: +44 (0)371 664

0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United

Kingdom will be charged at the applicable international rate. Lines are open between 9.00am – 5.30pm,

Monday to Friday excluding public holidays in England and Wales; or

• in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with

the procedures set out below.

In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must

be received by Link Group at PXS 1, Central Square, 29 Wellington Street, Leeds, LS1 4DL by 3.00pm on 12 May 2023.

Appointment of proxy through CREST

7. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service

may do so for the meeting to be held on the above date and any adjournment(s) thereof by using the procedures

described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST

members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service

provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate

CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear

UK & International Limited's specifications and must contain the information required for such instructions, as

described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or

an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted

so as to be received by the Company's agent (ID: RA10) by the latest time(s) for receipt of proxy appointments

specified in the Notice of Meeting. For this purpose, the time of receipt will be taken to be the time (as determined

by the timestamp applied to the message by the CREST Applications Host) from which the Company's agent is

able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change

of instructions to a proxy's appointee through CREST should be communicated to the appointee through other

means.

CREST members and, where applicable, their CREST sponsors or voting service providers should note that

Euroclear UK & International Limited does not make available special procedures in CREST for any particular

messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy

Instructions.

It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal

member or sponsored member or has appointed a voting service provider(s), to procure that this CREST sponsor

or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by

means of the CREST system by any particular time. In this connection, CREST members and, where applicable,

their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual

concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of

the Uncertificated Securities Regulations 2001.

All messages relating to the appointment of a proxy or an instruction to a previously appointed proxy, which

are to be transmitted through CREST, must be lodged at 3.00pm on 12 May 2023 in respect of the meeting. Any

such messages received before such time will be deemed to have been received at such time. In the case of an

adjournment, all messages must be lodged with Link Group no later than 48 hours before the rescheduled meeting.

Appointment of a proxy through Proxymity

8. If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform,

a process which has been agreed by the Company and approved by the Registrar. For further information regarding

Proxymity, please go to www.proxymity.io. Your proxy must be lodged by no later than 48 hours before the time

of the AGM, in order to be considered valid or, if the meeting is adjourned, by the time which is 48 hours before

the time of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed

to Proxymity's associated terms and conditions. It is important that you read these carefully as you will be bound

by them and they will govern the electronic appointment of your proxy. An electronic proxy appointment via the

Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing

the removal of your proxy vote.

92 | Impax Environmental Markets plc | Annual Report and Accounts 2022

Investor information

Termination of proxy appointments

9. In order to revoke a proxy instruction, you will need to inform the Company. Please send a signed hard copy

notice clearly stating your intention to revoke your proxy appointment to Link Group, 10th Floor, Central Square,

29Wellington Street, Leeds, LS1 4DL.

In the case of a member which is a company, the revocation notice must be executed under its common seal or

otherwise in accordance with section 44 of the Companies Act 2006 or by signature on its behalf by an officer or

attorney whose power of attorney or other authority should be included with the revocation notice.

If you attempt to revoke your proxy appointment but the revocation is received after the time specified in note 2

above then, subject to the paragraph directly below, your proxy will remain valid.

If you submit more than one valid proxy appointment in respect of the same Ordinary Shares, the appointment

received last before the latest time for receipt of proxies will take precedence.

Nominated persons

10. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information

rights:

• You may have a right under an agreement between you and the member of the Company who has nominated

you to have information rights (Relevant Member) to be appointed or to have someone else appointed as a

proxy for the meeting.

• If you either do not have such a right or if you have such a right but do not wish to exercise it, you may have a

right under an agreement between you and the Relevant Member to give instructions to the Relevant Member

as to the exercise of voting rights.

• Your main point of contact in terms of your investment in the Company remains the Relevant Member (or, perhaps,

your custodian or broker) and you should continue to contact them (and not the Company) regarding any

changes or queries relating to your personal details and your interest in the Company (including any administrative

matters). The only exception to this is where the Company expressly requests a response from you.

If you are not a member of the Company but you have been nominated by a member of the Company to enjoy

information rights, you do not have a right to appoint any proxies under the procedures set out in the notes to the

form of proxy.

Questions at the meeting

11. Under section 319A of the Companies Act 2006, the Company must answer any question you ask relating to the

business being dealt with at the meeting unless:

• answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of

confidential information;

• the answer has already been given on a website in the form of an answer to a question; or

• it is undesirable in the interests of the Company or the good order of the meeting that the question be

answered.

Issued Shares and total voting rights

12. The total number of shares in issue in the Company is 305,623,539 Ordinary Shares of 10p each, including

2,181,500Ordinary Shares held in treasury. Therefore, the total number of Ordinary Shares with voting rights is

303,442,039 as at 27 March 2023, being the latest practicable date before publication of this Notice. On a vote by a

show of hands, every holder of Ordinary Shares who (being an individual) is present by a person, by proxy or (being

a corporation) is present by a duly authorised representative, not being himself a member, shall have one vote. On

a poll every holder of Ordinary Shares who is present in person or by proxy shall have one vote for every Ordinary

Share held by him.

Communication

13. Except as provided above, members who have general queries about the meeting should use the following means

of communication (no other methods of communication will be accepted):

• calling the Link Group shareholder helpline on +44(0)371 664 0300. Calls are charged at the standard

geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable

international rate. Lines are open from 9.00 am to 5.30 pm Monday to Friday, excluding public holidays; or

• in writing to Link Group.

You may not use any electronic address provided either in this Notice of Meeting or in any related documents

(including the Form of Proxy for this meeting) to communicate with the Company for any purposes other than those

expressly stated.

Notice of Annual General Meeting continued

Contents

Strategic Report

Investment Objective, Financial Information

Performance Summary 1

Chairman’s Statement 2

Manager’s Report 5

Structure of the Portfolio 9

Ten Largest Investments 10

Details of Individual Holdings 12

Environmental Markets 14

Sustainability & Stewardship in the Portfolio 19

IEM Climate Disclosure 21

Biodiversity and Nature 25

IEM Stewardship 30

Investment Policy, Results and

Other Information 32

Engaging with our Stakeholders 39

Governance

Board of Directors 43

Directors’ Report 45

Corporate Governance 49

Directors’ Remuneration Policy 53

Directors’ Remuneration Implementation Report 54

Report of the Audit Committee 57

Statement of Directors’ Responsibilities 59

Independent Auditor’s Report 60

Financials

Income Statement 66

Balance Sheet 67

Statement of Changes in Equity 68

Statement of Cash Flows 69

Notes to the Financial Statements 70

Investor Information

10 Year Financial Record 84

Alternative Performance Measures 85

Glossary 87

Directors, Manager and Advisers 88

Notice of Annual General Meeting 89

Annual Report & Accounts

For the year ended

31 December 2022

impaxam.com

IMPAX ASSET MANAGEMENT

clientservices@impaxam.com



@ImpaxAM

Impax Environmental Markets plc Annual Report and Accounts 2022

Impax Asset Management

CBP018022

This report is printed on Nautilus Superwhite

recycled.

The paper stock is manufactured from FSC

Recycled 100% post-consumer waste pulp.

It is manufactured in accordance with

ISOcertified standards for environmental,

quality and energy management and is

Carbon Balanced.

IMPAX ENVIRONMENTAL

MARKETS PLC

clientservices@impaxam.com

@IEMplc

Impax Environmental Markets plc



impaxenvironmental

markets.co.uk