Liontrust Sustainable Investment Annual Review 2023 - Flipbook - Page 14
Engagement highlights
Active ownership is integral to how our Sustainable Investment team ensures it
invests in high-quality companies. Raising ESG issues with companies gives us
greater insight and helps identify leading companies.
Making specific requests for change can help foster greater
ambition within investee companies and promote best practices,
while voting at company AGMs further encourages better business
and governance practices. In our experience, active stewardship
challenges and encourages companies to proactively manage their
business for the benefit of long-term shareholder value.
In 2023, we raised 417 ESG issues with companies. Below, in
this snapshot, we show how our engagement covered a broad
range of topics, from company-specific issues to driving ongoing
improvements in areas such as companies’ responses to the
ongoing climate crisis and increasing gender diversity on boards.
Engagement is a resource-intensive process, and our team conducts
sustainability research alongside traditional financial and business
fundamental analysis. This approach enables us to better target
engagement on material issues and integrate it into our financial
assessment of a company, maximising the information advantage
that engagement can bring to analysis. The annual SF Engagement
Report is available on the Liontrust website.
Preventing irreversible damage from the climate crisis
1.5 degree Transition Challenge
Our 1.5C Transition Challenge launched in 2020. We asked
companies to develop plans for absolute emissions reduction and
to develop strategies for full decarbonisation. We target the top 10
emitters for each SF strategy and have engaged with 86 companies
as part of the 1.5C challenge.
The results have been revealing. Of the companies responsible
for over 85% of the emissions in our portfolios, 60% have made
meaningful, timely commitments to reduce emissions in line with
the science, and, of these, 53% were already involved with the
Science Based Targets Initiative (SBTi). 36% had a commitment to
a 1.5C pathway by 2030.
In 2023, we raised this issue with 52 companies and made 12
specific requests for change. We are focused on keeping up the
pressure and continuing to assess the plans and performance of
investee companies, highlighting examples of leadership and also
encouraging those that need to do more.
For example, the team met with Ashtead, an international
equipment rental firm and Trex, which produces composite decking
from recycled materials to push for absolute emissions reduction
targets. But it is not just high emitting companies that the team
engaged with to address their climate goals and targets – the team
also engaged with digital platform Trustpilot.
THEME: CONNECTING PEOPLE
The team requested that Trustpilot reduce its absolute emissions in line with our 1.5-degree transition
challenge and discussed the progression of targets. Emissions predominantly come from business
travel and procurement, with nearly half of emissions generated from procurement where only 9% of
Trustpilot’s suppliers have science-based targets. Going forward, the group will aim to use suppliers
that are signed up to the SBTI.
Corporate TCFD (Taskforce on Climate-Related Financial Disclosures) reporting and climate transition
plans were also discussed in the team’s engagement with Trustpilot. The company has made
significant progress since the team first began to engage on this issue and Trustpilot’s validation of
SBTi is likely due in the first half of 2024 (with credible IFRS disclosures by March 2025).
Banking sector: financing oil and gas exploration
Over the year, the team conducted a sector-wide engagement
initiative across its bank holdings, covering 13 companies. The
focus of the initial round of discussions was on companies’ existing
policies and exposures around financing the oil and gas sector,
and, specifically, new oil and gas exploration activities.
14 - Liontrust Sustainable Investment: Annual Review 2023
These discussions have enabled the team to better understand
current company policies and to ascertain how well aligned these
policies are with the team’s objectives. The information received
from this initiative is being used to refine investment eligibility
criteria where necessary and to enable the team to make additional
specific requests for change to further best practice.