Liontrust Sustainable Investment Annual Review 2023 - Flipbook - Page 10
The underlying trends
There are numerous other positive stories we could highlight, but
the point is that the underlying trends in many areas important to life
are getting much better. Clearly, this is not happening everywhere,
but by examining these trends we can isolate what they have in
common and consider how to apply the same mechanisms to the
many challenges that remain.
Typically, there are three elements at work: science and understanding;
society and government; and investment and business. Science
shows that air pollution is bad for health and determines where it
is coming from; people demand change, and the government sets
pollution rules and businesses invest and innovate to provide the
solutions. The cycle then continues as this innovation in turn allows
people and governments to increase their ambition, businesses
provide the solutions to scale up and prices drop – this positive
feedback mechanism leads to a wide distribution of solutions.
This is where sustainable investment comes in. For the Sustainable
Future funds, we identify in our sustainability themes 22 areas of the
economy where companies are growing while delivering solutions
to these environmental and societal challenges. From an investment
perspective, these companies tend to have good attributes: growth,
innovation-led returns, and large addressable markets. And profitmaking businesses have shown themselves to be a mechanism that
distributes solutions rapidly. For this reason, we can demonstrate
good alignment between sustainable businesses and strong
investment returns.
For instance, £1,000 invested in SF Managed, our largest fund,
grew to £2,220 over 10 years versus the peer group average of
£1,650. This is a 35% difference.
We see no diminishing of these sustainable investment themes.
Here are just two of our themes for 2024:
Innovation in healthcare
Digital security
Our team identified a major shift in the way that medical treatments are
formulated: moving away from small simple molecules (used in a pill)
towards larger more complex molecules, which are called biologics.
This shift is expected to deliver much more effective ways of treating
disease (many of which can’t be treated by using a simple pill).
Digital security is a theme that keeps gathering momentum, as
anyone wanting to access the British Library services will know.
Unless you have secure systems, your organisation risks being shut
down and having data and money stolen. Ransomware attacks
are estimated to have risen 37% in frequency over the last year
and 28% in cost per attack.
We believe companies involved in selling life science equipment
and consumables, as well as companies that have specialised in the
manufacture of these more complicated biologics treatments, are set
to benefit from the increased demand for their specialised services.
As more of our lives move online, it becomes ever more critical
that information and networks are secure. Home working, cloud
computing and AI (artifical intelligence) have only accelerated the
pace of this race.
We are invested in companies expected to benefit from this broad
trend through our Innovation in healthcare sustainable investment
theme. These companies include:
For this reason, we believe those companies helping to protect
us in the digital world will see strong growth. Among these, we
highlight Palo Alto Networks, which is the leading platform for
firewalls and endpoint security; Softcat, which sells security to
UK SMEs; and Verisign, which oversees the security of internet
domain names.
Lonza, a company specialising in making biologics molecules
– many pharmaceutical companies get Lonza to make these
treatments for them.
Sartorius is a global company headquartered in Germany that
specialises in making the containers used to create and transport
these biologics.
Thermo Fischer is a US-based company that sells a broad range of
specialist consumables and equipment used in life sciences. It has
been one of our biggest holdings for many years.
10 - Liontrust Sustainable Investment: Annual Review 2023