This article first appeared in The Edge Malaysia Weekly on October 28, 2024 - November 3, 2024

Manulife Investment Management’s (Manulife IM) Manulife Global Aqua Fund took the top awards for best impact in the basic needs and resource security fund categories for the second consecutive year at The Edge Malaysia ESG Awards 2024.

The unit trust fund invests in companies across the water value chain, including water treatment, distribution and technology, targeting those at the forefront of addressing key global challenges such as water contamination and infrastructure sustainability. Its portfolio includes leading consultants, laboratories and water treatment providers.

At least 85% of the fund’s net asset value (NAV) is invested in the BNP Paribas Funds Aqua fund, which is managed by Impax Asset Management Ltd.

In 2023, based on US$1 million invested, companies in the BNP Paribas Funds Aqua contributed to 236 megalitres of water treated, saved or provided; 308 tonnes of avoided greenhouse gas emissions; 118 tonnes of materials recovered or waste treated and 26 MWh of renewable electricity generated, according to the fund manager.

One of its investee companies, Veolia Environnement, designs and provides water, waste and energy management solutions globally — an increasingly crucial endeavour amid growing global populations and scarcer resources.

The fund delivered resilient operational results, which drove share price strength for most portfolio companies, but not without some macro uncertainties thrown in the mix. These included the higher-for-longer interest rate environment, which proved to be a headwind for companies with water products exposed to residential and commercial real estate.

Manulife IM says central banks could lower interest rates going forward, based on the recent supportive inflation data, with bond yields to follow. However, this view must be balanced with cautionary guidance from the US Federal Reserve.

It also says certain end markets remain impacted by the post-Covid downturn, such as the bioprocessing sector, which struggled with a slower-than-expected recovery due to ongoing destocking and has yet to return to its pre-Covid growth rate.

Meanwhile, the slower recovery has been priced into the share prices of companies in the sector, which now seems undervalued compared with its growth potential.

Looking ahead, the fund manager sees significant opportunities for solutions in the water sector, driven by challenges posed by climate change, ageing infrastructure, pollution and meeting the rising demand from growing populations and emerging water-intensive industries.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.