Liontrust Sustainable Investment Annual Review 2022 - Flipbook - Page 3
Introduction
2022 was a challenging year for investors with volatility across
almost every asset class and major macro-economic and political
uncertainties – many of which are still ongoing. This environment
has been especially challenging for those investing sustainably.
And yet, looking to 2023 we are more excited about the prospects
than we have been for years.
gene sequencing: falling from $400 million for the first genome
sequenced to around $400 today. This improves understanding
of disease mechanisms and how to arrest them, as shown in the
speed at which the vaccines for Covid-19 were developed (under
12 months) in comparison to the vaccine for typhoid fever which
took over 100 years to develop.
Since we launched our Sustainable Future (SF) funds in 2001,
our proposition to clients has been to deliver superior returns
by investing in sustainable companies – those companies that
are making our world cleaner, healthier and safer. We believe
these businesses have better growth and greater resilience than
the market anticipates. In addition, by allocating capital to these
businesses and engaging with management, we can accelerate
environmental and societal improvements.
Lastly, looking at Greater safety and resilience and the role of
finance in enabling the transition to a low carbon energy system:
large amounts of capital will be needed to finance the renewable
energy growth and in 2022 we saw extremely strong progress in
this area, with key banks committing £3 trillion of finance to clean
energy projects. To put this into perspective, if 1MW of renewables
is roughly £1 million, then this amount could fund 3000GW,
which is equivalent to the entire capacity of US electric generation.
This gives an idea of the quantum of capital that is being targeted
towards renewables, and the critical importance of banks being
prepared to finance these projects.
In spite of the poor performance of the SF funds in 2022, we are
confident that we will deliver stronger returns in the years to come.
This confidence comes from the strong foundations of our 20
sustainable investment themes. It is our view that they identify the
strongest and most dependable growth trends in the economy.
Peter Michaelis, Head of Sustainable Investment at Liontrust
For more information on Sustainable Investment plus our funds and
team, go to www.liontrust.co.uk/sustainable
These themes can be summarised as the move to a cleaner, healthier
and safer future. And, while it may sound a bold claim, we believe
that 2022 was a bumper year for these themes.
If we look at the picture around renewable energy, which sits
within our theme of Better resource efficiency, the cost of
generating electricity from solar and onshore/offshore wind
has continued to fall over the past 10 years. In addition,
the competitive position of renewables versus fossil fuels
has improved dramatically following volatile price spikes
in fossil fuels.
When we as societies look to resolve the energy trilemma
of being affordable, secure and clean, there is little that
can compete with renewables. This is being recognised in
government stimuli such as the US Inflation Reduction Act which
has earmarked $370 billion towards reducing emissions. The
EU ‘Fit for 55’ target of reducing net greenhouse gas emissions
by at least 55% by 2030 will double the share of renewables.
Even China has stated its target of being carbon neutral before
2060 and to phase down coal post-2025. These are dramatic
changes with exceptional stimulus for this theme.
Turning to Improved health and innovation within healthcare: We
have seen an acceleration in our ability to diagnose and treat
diseases. This is exemplified by the dramatic cost reduction in
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