Liontrust Sustainable Investment Annual Review 2023 - Flipbook - Page 15
Preserving and restoring nature
The team engaged with investee companies to encourage better
information and reporting of natural capital impacts from their
activities, products and services, and from policies and programmes
that preserve and restore nature and promote biodiversity. The team
made 11 requests for change, all of which are still ongoing.
The team became a signatory to the Nature Action 100 initiative,
where it participates in engagement with other investors on several
targeted companies, leading on groups for Roche, Unilever and
Smurfit Kappa.
THEME: DELIVERING A CIRCULAR MATERIALS ECONOMY
The team met with Smurfit Kappa to explain its involvement and ascertain the extent to which the
company believes it meets the NA100 investor expectations. The team also asked about some of
the biodiversity frameworks that the company uses to report on how it manages nature risks. The
company has a long-standing position of disclosing on key areas like biodiversity impacts as part of
its materiality assessments. Smurfit’s impacts have been reviewed and targets have been assigned so
the company is likely to have already satisfied some of the NA100 investor expectations. The team
expects that, in time, Smurfit will be a leader in terms of TCFD reporting.
The team also asked the group about its ‘double materiality’ framework conducted by a big
accountancy firm and was given some examples, which reassured the team that Smurfit Kappa is truly
analysing its dependencies on nature. The company has a number of targets already in place and
many are tied to incentives; ESG objectives are incorporated into a revolving credit facility and five
targets need to be met to get the best margin. Forest targets are also part of executive remuneration.
Performance against KPIs is considered by the Board twice yearly. Board members include policy
experts and ministers, academics and ambassadors, and ex-management of fast-moving consumer
goods companies (FMCG).
UK water companies
We met with all six water companies where bonds are held
across our range of fixed income and managed funds. To note,
the team has owned bonds issued by water
companies but not their shares. This is
because we believe these bonds can
better support the investment in water
companies’ infrastructure which is
so vital for future performance and
sustainability. The focus this year
was on four key areas – companies’
environmental performance; the strategy
to markedly improve this; managing
biodiversity; and strengthening the link
between environmental performance
and remuneration.
There is a long journey ahead and
to achieve the improvement investors
and broader society expect in UK water
management will require substantial investment.
Overall, of the UK water companies, Severn Trent
stands out as a clear industry leader, with close and
explicit links between environmental performance and
remuneration throughout the organisation. However, by
contrast, having failed to convince the team on the pace of
its environmental improvements, we have sold Thames Water.
Liontrust Sustainable Investment: Annual Review 2023 - 15