Liontrust Responsible Capitalism Report 2022 - Flipbook - Page 30
We endeavour to have the following steps fully integrated by the
end of 2021:
• full integration of Climate Change risk within the risk management
framework.
• full integration of Climate Change risk within investment risk and
portfolio analysis.
• disclose how the company is integrating scenarios within
investment management.
• ensure all appropriate staff are trained on new policies and
processes.
• have a full engagement programme in place; and
• target full disclosure in the 2021 PRI’s climate risk indicators and
2020/2021 Annual Report.
We recognise the challenges highlighted by TCFD, including the
variability of climate-related impacts across and within different
sectors and markets. As long-term active investors, helping to
develop thought leadership that advances the understanding of
risks and opportunities related to climate change aligns with the
commitment to investor stewardship we have made to our clients.
Risk Management
The Board regularly discusses the potential impact of climate
change on our business and our future strategy, in particular the
impact on our ability to deliver long-term superior performance
due to the climate change risk on our client’s investments. The key
climate change factors that may impact us are increasing climate
change regulation, actual changes in climate and its impact on
crops, water and extreme weather.
Over the last year, we have been working to integrate climate
risk into our group risk frameworks. We have introduced various
scenarios into our internal capital adequacy assessment program to
simulate the impact of climate change on our prudential modelling.
The investment risk team is working with MSCI to automate the
analysis of climate risk on our portfolios and report these to the fund
management teams and the governance committees in a consistent
manner. We are also looking to improve our long-term risk planning
for the Group, which will also incorporate climate change into our
risk framework as we try to understand how climate change will
impact us and our investments.
30 - Liontrust Sustainability Report 2020
Metrics and Targets
As at 31 March 2020, 8.4% of the Liontrust equity and fixed income
portfolios are in climate relevant sectors according to The Paris Agreement
Capital Transition Assessment Tool, 2°C scenario analysis that focuses
on the fossil fuel, power, and automotive sectors, which account for
between 70% and 90% of energy-related emissions. The outputs in
this report provide an analysis of the portfolio relative to an economic
transition consistent with limiting global warming to 2°C above preindustrial levels. The analysis provides answers to the following:
1. What is the current exposure in the portfolio to economic
activities affected by the transition to a low carbon economy?
2. Does the portfolio increase or decrease its alignment with a
Sustainable Development Scenario (SDS) transition over the
next 5 years?
3. What is the expected future exposure to high and low carbon
economic activities?
The analysis covers two asset classes: listed equity and corporate
bonds. These are compared to either a portfolio or market, as
if they would transition aligned to the SDS. The equity market is
represented by all securities from publicly listed companies and
the corporate bond market by all companies with outstanding debt
from Bloomberg at the end of 2018.
Since 2012, the Sustainable Investment team has disclosed the
aggregated carbon emissions for the single strategy funds. This work
is carried out independently and, on average, the Sustainable Future
funds emit 75% less carbon dioxide than the markets in which they are
invested, have 25% exposure to companies whose products help to
reduce emissions and hold 0%in companies exposed to the extraction
and production of fossil fuels (such as coal miners and oil and natural
gas exploration and production). Further details can be found at
https://liontrust.co.uk/75pc-less-carbon