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Liontrust Sustainable Investment Annual Review 2021 - Flipbook - Page 23


Climate change: how we think about it and
how this influences our investments
How we generate and consume energy is undergoing huge change
and this is affecting many parts of our economy; and the science is telling
us to act ever faster to reduce greenhouse gas emissions. We believe
this transition from high to ultra-low carbon energy sources and how we
can use energy more efficiently to reduce emissions represents a huge
structural shift and has a major impact on our investment decisions.
Average exposure of SF funds to companies offering cleantech
solutions
40%
Second, we want to ensure the companies we own understand the
magnitude of the energy transition and are managing their businesses
in a proactive way that protects them from inevitable tightening
regulations. We engage with companies to encourage them to
manage this (and other key) material impacts on their business.
25.3%
22.3%
We disclose the aggregated carbon emissions for our single strategy
funds, which we started doing in 2012. This work is carried out
independently and, on average, the Liontrust SF funds emit 75%
less carbon dioxide than the markets in which they are invested,
have 25% exposure to companies whose products help to reduce
emissions and hold 0% in companies exposed to the extraction and
production of fossil fuels (such as coal miners and oil and natural gas
exploration and production).
Average carbon exposure reduction of SF funds compared with
mainstream benchmarks
100%
88%
90%
80%
78%
78%
75%
70%
60%
54%
50%
Our clients have also asked us to show how the companies in
which we invest are aligned with the UN’s SDGs. The SDGs are an
internationally recognised set of goals to aim for by 2030, which will
help the world develop in a more sustainable way. They replaced the
UN’s Millennium Goals and have captured many investors’ interest
Each of our themes is limited to one main SDG, although, in reality,
there are overlaps and most companies are exposed to more than
one goal.
Investment themes mapped to primary SDGs
Our investment theme
Sustainable Development Goal
Better monitoring of supply chains and quality control
12 Responsible consumption and production
Building better cities
11 Sustainable cities and communities
Connecting people
9
Industry, innovation and infrastructure
Delivering healthier foods
3
Good health and well-being
Enabling healthier lifestyles
3
Good health and well-being
Enabling innovation in healthcare
3
Good health and well-being
Enhancing digital security
9
Industry, innovation and infrastructure
Improving auto safety
3
Good health and well-being
Improving industrial and agricultural processes
9
Industry, innovation and infrastructure
2
Zero hunger
Improving the management of water
6
Clean water and sanitation
Improving the efficiency of energy use
7
Affordable and clean energy
The very low carbon emissions coming from the businesses in our
funds mean these portfolios will have more resilient margins as
carbon-related regulations tighten.
Increasing electricity generation from renewable sources
7
Affordable and clean energy
Increasing financial resilience
8
Decent work and economic growth
While there have been big advances in reducing carbon in some
sectors, global emissions remain stubbornly high, and we are
concerned the current pace of change is not fast enough. We are
engaging with companies we own to encourage them to dial up their
ambition to reduce their greenhouse gas emissions this decade. As
stated earlier, we launched our One and a Half Degree Transition
Challenge in January 2020 and will be reporting on our findings in
the last quarter of the year.
Saving for the future
8
Decent work and economic growth
Insuring a sustainable economy
8
Decent work and economic growth
Increasing waste treatment and recycling
12 Responsible consumption and production
Leading ESG management
20
Making transportation more efficient
11 Sustainable cities and communities
Providing affordable healthcare globally
3
Good health and well-being
Providing education
4
Quality education
20%
15%
8.6%
10%
5%
Finally, there are some industries, no matter how proactively managed,
on the wrong side of this transition and these will experience secular
decline in demand for their carbon-intensive products or services. We
choose to avoid areas such as fossil fuel extraction and production,
internal combustion engine car manufacturers, airlines and energyintensive businesses that are not positioning themselves for a lower
carbon world.
as a more comprehensive way of thinking about and reporting on
sustainable investing.
30%
25%
First, companies helping to reduce emissions will experience
significant growth across industries as diverse as power and heat
generation, transport and heating and cooling buildings.
34.7%
35%
35.4%
Alignment of the SF funds with the UN’s SDGs
0%
SF UK
Growth
SF European
Growth
SF Global
Growth
SF Corporate
Bond
Average
Source: Liontrust, MSCI Carbon Analytics Report for funds as at 31.12.19
In addition to Liontrust SF funds emitting less carbon, there are other
important positive attributes of these low-carbon portfolios. In the
event of a tax on carbon, companies that can pass this cost on
to their customers will not face a negative impact on their margins
(and profitability). In contrast, companies unable to pass these costs
through to clients will have to bear it themselves.
Multiple SDGs, dependent on company operations
40%
30%
20%
10%
0%
SF UK
Growth
SF European
Growth
SF Global
Growth
SF Corporate
Bond
Average
Source: Liontrust, MSCI Carbon Analytics Report for funds and mainstream benchmarks
as at 31.12.19
22 - Liontrust Sustainable Investment: Annual Review 2019
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