In the initial quarter of 2026, the Impax US Sustainable Economy portfolio reported results below the Russell 1000 benchmark. A key factor contributing to this was the portfolio's strategic decision to exclude the Energy sector, which saw considerable growth during this period. However, investments in the pharmaceutical and biotechnology industries delivered strong returns, positively impacting the portfolio's overall performance. This quarter highlighted both the challenges and opportunities inherent in a sustainability-focused investment approach, particularly when market dynamics favor sectors outside the fund's mandate.

Further analysis of individual holdings reveals mixed results. The fund's reduced exposure to Tesla proved advantageous, as the electric vehicle manufacturer's stock declined amid concerns over softening demand and increased competition. On the other hand, Applied Materials demonstrated robust growth, driven by strong earnings and its strategic positioning to benefit from the accelerating demand for artificial intelligence infrastructure. Conversely, Qualcomm faced a significant sell-off, despite reporting record fiscal first-quarter results, due to disappointing future guidance and the anticipated impact of Apple's in-house modem chip development. Similarly, Oracle and S&P Global also saw their contributions diminished by broader sector rotations and company-specific issues.

This quarter's performance underscores the complex interplay between sustainable investment principles and dynamic market conditions. While a commitment to sustainability can lead to long-term resilience and growth, it also necessitates navigating short-term market fluctuations, especially when sectors like Energy experience unexpected surges. The Impax US Sustainable Economy Fund's experience in Q1 2026 illustrates the importance of a diversified approach within its sustainable mandate, continuously evaluating both the ethical and financial implications of its investment decisions to achieve its objectives.