Liontrust 20 Years of Sustainable Investing 03.2021 - Flipbook - Page 7
In April (2001), Morley launched its revised voting policy, which
requires UK companies within the FTSE 100 Index to publish
environmental reports. Morley believes this was the first initiative of
its type in the UK fund management industry.
In a number of high-profile cases this year, positive engagement
has helped companies to respond to risk in time to avert irreparable
damage to their corporate reputation and share prices:
• Chocolate: In April, following the sighting of a ship carrying
slave children off the coast of West Africa, the issue of enforced
labour in the production of chocolate led to international pressure
on major chocolate manufacturers. Following engagement from
shareholders (including Morley), major manufacturers and industry
bodies agreed to take responsibility for the supply chain conditions.
Experts believe this is the first time an agricultural industry has taken
responsibility for its product from harvesting to market.
• Pharmaceuticals: In May, the issue of access to affordable medicines
in developing countries came to a head when 42 pharmaceutical
companies took the South African government to court over breach of
drug patents. Pressure from campaigning organisations and positive
engagement from Morley and others in the SRI community contributed
to the companies’ decision to settle the case out of court and to agree
to offer essential AIDS drugs to South Africa at affordable prices.
• Balfour Beatty: The Ilisu dam project threatens the livelihood and
land of large numbers of Kurdish people and has been linked to
ethnic cleansing. In August, shareholder pressure and positive SRI
engagement from Morley featured significantly in Balfour Beatty’s
decision to pull out of the project thereby saving the company time
and money and preserving its reputation.
• Burma: In December, Morley joined forces with a group of financial
institutions to launch ‘Business involvement in Myanmar (Burma)
- A Statement from Institutional Investors’. The statement outlines
the concerns raised by the presence of a military dictatorship
in Burma and highlights the risks to shareholders of investing in
companies that have interests in the country. This unprecedented
initiative has been launched to encourage companies to establish
effective procedures for managing risk as international pressure on
companies doing business in Burma intensifies.
This shows the persistence of the issues on which we have engaged
for 20 years, with the item on Burma/Myanmar especially poignant
today. The difference is that we are no longer a lone voice and the
number of investors engaging alongside us has grown dramatically.
The UN’s Principles for Responsible Investment (PRI), which cleverly
focuses on asset owners and whose six principles made signing
up simple and uncontroversial, has played an important role in this
growth and we are proud to have been founder signatories in 2006.
Our stance on the flagship sustainable issue of climate change
also shows how we have consistently been ahead of the pack. In
November 2001, the third major report on climate change (from
Former US Vice-President
Al Gore’s documentary,
An Inconvenient Truth, wins Academy
Award. Gore and the Intergovernmental
Panel on Climate Change share Nobel
the Intergovernmental Panel) stated clearly that ‘global warming was
very likely with highly damaging future impacts’. We had launched
our funds earlier in the year with a clear focus on avoiding carbonintensive industries, so no exposure to companies involved in coal,
oil or (internal combustion engine) autos.
In 2006, the Stern Review came out, telling us the cost of reducing
emissions would be far less than the cost of the damage these
emissions would cause. This backed up our original thinking that
investing in companies helping to cut emissions makes economic
sense. By then, we had also started investing in companies whose
products improve the energy efficiency of buildings. We began
monitoring the carbon footprint of our funds in 2012, allowing us
to better understand where portfolio emissions were coming from,
and we strengthened our approach in 2016. The team, and our
external Advisory Committee, agreed that natural gas should no
longer be considered a primary transition fuel so, in addition to coal
and oil screens, we decided to exclude companies exploring for or
producing natural gas from our funds.
Our funds continue to be positioned progressively because we believe
the shift to decarbonise will be bigger and happen quicker than the
market anticipates. The Paris Agreement in 2016 was a major step
forward, as was the Intergovernmental Panel on Climate Change’s
(IPCC) 2018 report on limiting global warming to 1.5 degrees, but
we expect further tightening of global regulations as well as shifts in
consumer behaviour. With this in mind, we started the 1.5 degree
Transition Challenge in 2019, in which we committed to step up
engagement with companies to ensure they reduce their absolute
carbon emissions to zero, and this remains an ongoing project.
If anyone had asked us in 2001, we would not have dreamt
of the success that sustainable investment has achieved over the
subsequent 20 years: according to the Forum for Sustainable and
Responsible Investment’s 2020 trends report, it now represents 33%
of the $51.4 trillion in total US assets under management, and
the figure in Europe doubled over 2020 to hit €1.1 trillion. The
pace at which these funds have launched over recent years is also
striking, with more than 500 European launches in 2020 alone.
Overall, on this count, we can claim to have played our part,
particularly in putting ESG on the agenda of company management
and the asset management industry at large. We would also
highlight the rarity of a 20-year track record in what is clearly
a very fast-growing industry; fears about greenwashing are
understandable but we can point to two decades of making money
for our clients while helping to make the world of the future cleaner,
healthier and safer.
Liontrust: 20 Years of Sustainable Investing - 7