LSE – Ethical investing boom: record results and a London IPO

The growth of sustainable investing in the wake of Covid-19 was shown today by a record quarter at Impax Asset Management (LSE:IPX) and plans for one of London’s first flotations of 2021.

The IPO involves the potential £500 million debut of Foresight Group, which manages £6.8 billion of renewable assets including £1.7 billion of solar power in the UK, Europe and Australia. 

Its Foresight Solar (LSE:FSFL) fund is already a member of the FTSE 250 index, having listed on the London Stock Exchange in 2013. Executive chairman Bernard Fairman, who co-founded Foresight in 1984, said a stock market listing for the London and Guernsey-based group was the logical next step after a “consistently strong performance” over many years.

ESG investing strategies — based on environmental, social and governance criteria — have been given added momentum by the pandemic highlighting the need for a more sustainable economy. By 2028, it is estimated that global assets under management invested in ESG mandates will exceed $100 trillion.

These trends have clearly benefited AIM-listed Impax, which provides some of the world’s largest investors with exposure to the sustainable economy transition. It ended the year with assets totalling £25.2 billion, an increase of almost 25% across the December quarter and a fresh record high after further strong client inflows.

CEO Ian Simm said: “After a year dominated by the effects of Covid-19, there are strong reasons to believe that the business opportunities arising from the transition to a more sustainable global economy will be increasingly attractive to companies and the investors that back them.

“Against this backdrop, Impax is well placed to extend its well-established franchise as a specialist investment manager.”

At the time of December’s annual results, Peel Hunt highlighted “exceptional” assets growth of 16% in the previous two months, with net inflows of £1.9 billion. The broker increased its target price to 660p, but this estimate has now been overtaken after today’s rise of 7% to 798p.

Operating profits in the recent annual results to the end of September were 29% stronger at £23.3 million, leading to a total dividend 56% higher at 6.8p a share.

An ethical IPO for 2021?

Impax is valued at more than £800 million, whereas Foresight is expected to have a valuation of around £500 million should it go ahead with its plan for a main market listing on the LSE.

The offer will see existing shareholders sell down some of their holdings, including the 57% held by Fairman. The company will also sell new shares to support its growth strategy, including geographic diversification and the targeting of new sustainable investment.

As well as being one of Europe’s most established renewable energy and infrastructure investors, the group has a £700 million private equity division focused primarily on SMEs outside London.

Fairman added: “More than three decades experience of managing UK SMEs through economic cycles makes us one of very few companies with the network and expertise to help drive the recapitalisation of the UK regional SME sector.”

Fairman co-founded the business with Peter English in 1984 after the pair met at venture capital firm 3i. It made its first environmental investment in 2007.