Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 74
ENGAGING GOVERNMENT / LEGISLATORS /
INDUSTRY BODIES
The Economic Advantage team has been engaging with the UK
Government to raise concerns about the health of the UK equity markets
and to call for policy intervention. Central to this has been discussing
and evidencing the importance of UK equity markets to the wider
economy through the jobs they create and tax revenues they pay.
Finding ways to boost the market on both the supply and demand
side is an essential part of ‘going for growth’. This activity has
included meeting with officials at HM Treasury and forming part
of a group that penned a letter for The Times in November 2023
calling for the Chancellor to introduce a “British ISA”. The team
believes this is one of the quickest and easiest to implement among
the proposals that have been suggested: to receive tax breaks
the ISA has to be invested in UK companies, thereby having a
positive impact on the UK economy. There are also reforms needed
to improve the attractiveness of the UK as a place to list - with so
many companies being taken off the market through acquisition.
The team intends to continue to engage and highlight the problems
facing the UK equities market.
ENGAGEMENT WITH HOLDINGS: PURPOSE/OBJECTIVE
The Economic Advantage team engages its holdings on factors
material to its investment process.
COMMITMENT TO NET ZERO
The Economic Advantage team has not committed its funds to
Liontrust’s support for NZAM. This is due in large part to the lack of
reliable data on carbon emissions for its holdings. The team does,
however, consider any material risks regarding carbon climate
change when making investment decisions and does engage its
holdings on this topic when the team deems this to be relevant to
its investment process.
Engagement on climate change
During the year, the team engaged its holdings on a variety of
climate change related issues, including:
Company
What the
group does
Date
Discussion
topic(s)
Discussion summary
Impact on investment
decision (if any)
BP
Oil and gas
company
August 2023
Intangible
assets:
distribution
network; IP;
and net zero
The team met with BP’s CEO following the group’s first half
results. The discussion centred on the intangible asset strengths
of the business, such as with BP’s acquisition of TravelCentres
of America. The team asked how this has improved BP’s
distribution network on US highways and provided a platform
for four of five of BP’s transition growth engines. The team
asked about the strength of the group’s IP. For example, the
team asked about BP’s R&D focusing on developing crops that
don’t compete for water or food and about BP’s developments
in seismic algorithms enabling the group to see through salt
and dramatically drive efficiencies in extracting hydrocarbons.
The team also asked about BP’s net zero plans and how the
group has driven methane emissions to close to zero. The team
covered other topics, including BP’s trading performance, the
political backdrop, how the group might use generative AI, and
the impact of extreme heat on the business’s operations.
This discussion
sought to reinforce
the investment thesis
that BP’s distribution
network would be
a powerful enabler
for the transition and
that the company
is in possession of
significant IP.
Shell
Oil and gas
company
August 2023
Intangible
assets:
distribution
and IP, net
zero, and
renewables
In August, the team met with Shell and discussed how the
As above
company uses data to optimise its production and maintenance
of assets. (Shell is the third biggest credit card issuer in the
world and therefore has access to rich data on purchases.) The
team asked about the investment Shell is making in R&D and its
intentions to open a direct air capture technology centre. The
team asked how Shell might use AI to drive further improvements
in its operations. The team asked about the tone set by the
new management and its strategy as outlined at Shell’s CMD,
including how Shell is approaching net zero and whether its
investments in renewables will focus on the areas where the
company feels it has a competitive advantage. The team also
asked about the importance of Shell’s trading arm and the
current political backdrop.
James
Cropper
Advanced
materials
and paper
packaging
group
August 2023
Net zero
strategy
The team met with James Cropper to discuss the group’s results
and its capital allocation decisions surrounding the group’s
future energy business. The team asked about Cropper’s net
zero strategy, its ambition to stop using gas fired boilers, and
its potential move to heat exchangers by 2025. The group
provided details on why it views this move as a competitive
advantage for their luxury brand customers.
74 - Responsible Capitalism Report 2023
The discussion helped
inform and reinforce
the IP and customer
relationship arguments
in the investment thesis