EXAMPLE PAGE - ANNUAL REPORT - LIONTRUST - Flipbook - Sida 18
Our Approach to Responsible Investment
Liontrust recognises that good governance and stewardship, sustainability and social impact are
important considerations in choosing and monitoring investments and longer-term performance.
In particular, we have committed to integrate sustainability
appropriately throughout the business to:
• enhance returns and risk management
• demonstrate effective consideration of ESG exposures
• exercise responsible stewardship of investee companies
• show the positive impact our investment management activities
have on our clients and wider society.
We are committed to continue our work on achieving the following:
• enhancing our ESG data and analytics for all our strategies
• train our investment staff
• invest in our company engagement capacity and resourcing
• disclose how we integrate sustainability in each strategy and
across the company
• increase our reporting for portfolios on their ESG and climate
characteristics
• improve our aggregated group reporting.
During the year, we published our Responsible Investment policy,
which provides details of our engagement-led approach and how
we manage our stewardship at both Group level and for individual
investment teams. We aim to be as transparent as possible to allow
investors to understand exactly what we do and do not do.
ESG Integration
Our Governance and Stewardship team co-ordinates the company’s
overarching approach: producing ESG reporting; climate and
emissions analysis; drawing up and implementing our voting policies;
and engaging with companies. The team supports our fund managers,
helping to integrate and enhance sustainability for all our clients.
Each team takes its own approach to integrating ESG factors into
their investment process. Liontrust believes that the best people to
understand the future impact of ESG on a company are those who
analyse the businesses: our fund managers. Each Liontrust team has
spent years developing their investment approach and understand
what characteristics are important in driving the long-term returns we
aim to deliver for investors. We have been working to provide each
team with the information and support to allow them to integrate ESG in
the optimal way, ensuring their investment processes are enhanced and
complemented by this work rather than imposing a centralised solution.
Our Sustainable Investment team, who manages over a third of our
assets, have fully integrated ESG factors and analysis throughout their
process. This includes using long-term sustainability themes to identify
potential opportunities and using a screening and sustainability
analysis through a proprietary Sustainability Matrix combining product
sustainability with ESG management quality.
The Global Fixed Income team also directly integrates ESG into its
investment process with two of the five investment pillars relating to
these factors. To evaluate ESG factors, the team uses a combination of
complementary internal and third-party research.
The Economic Advantage team has added ESG as a new, ninth,
risk factor to the process’ existing risk grid: the risk grid operates
within ‘stage two’ of the EA investment process to determine the
weighting of a stock once it has been selected for purchase under
‘stage’ one (after consideration of its intellectual capital, CFROC
profile and valuation). The practical implications of this approach
are that the team will not exclude a stock on account of ESG factors
alone, but an adverse ESG score – like an adverse valuation score
– will, once purchased, reduce its weighting.
The Multi-Asset investment team combines ESG data from third parties
and a dedicated questionnaire followed by face-to-face due diligence
meetings with both an RI (Responsible Investment) representative at
company level and an investment manager of the respective fund(s).
The idea of this deeper dive is to explore how firms are incorporating
ESG across their top-down processes, what the priorities are and
the current challenges. At fund level, they look at how this is actually
performed in practice and by whom, among other considerations.
These insights form part of the risk framework.
For our other investment teams, the management of sustainability
risk forms part of the due diligence process. Each team reviews
the potential investment using their risk framework, which includes
assessing the risk that the value of such investments could be materially
negatively impacted by an ESG event or issue. The teams use ESG
information from third-party data providers to assist in understanding
18 - Liontrust Sustainability Report 2021