Liontrust Sustainable Investment Annual Review 2021 - International - Report - Page 22
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 strategies 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.
35.4%
30%
25.3%
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%
22.3%
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.
We disclose the aggregated carbon emissions for our single strategy
portfolios, which we started doing in 2012. This work is carried out
independently and, on average, the Liontrust SF strategies 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 strategies compared
with mainstream benchmarks
100%
88%
90%
80%
78%
78%
75%
70%
60%
54%
50%
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 strategies and mainstream
benchmarks as at 31.12.19
22 - Liontrust Sustainable Investment: Annual Review 2019
0%
SF UK
Growth
SF European
Growth
SF Global
Growth
SF Corporate
Bond
Average
Source: Liontrust, MSCI Carbon Analytics Report for strategies as at 31.12.19
In addition to Liontrust SF strategies 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.
The very low carbon emissions coming from the businesses in our
strategies mean these portfolios will have more resilient margins as
carbon-related regulations tighten.
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.
