Liontrust Sustainable Future Funds - Annual Review 2017 - Page 24



Case study:
Impacts: social indicators, diversity
FOSSIL FUEL
While no investor can completely avoid exposure to
fossil fuels, as all companies use electricity, we invest in
businesses that profit from positive changes underway in
our energy system.
We look for companies reducing costs through energy
efficiencies, selling products that drive efficiencies for
others or generating and transmitting renewable energy.
Naturally, we avoid companies that stand to lose from
these positive trends – the fossil fuel sectors.
We invest in businesses that
profit from positive changes
underway in our
energy system
Burning fossil fuels currently provides the majority of energy
used for generating electricity, transport and industrial
processes. It is also the largest source of greenhouse gas
emissions, which countries and companies are working
hard to reduce against clear and challenging targets.
The ‘Fossil Free’ movement calls for asset owners to end
support for the industry by freezing new investment in
fossil fuels and selling positions in equities or corporate
bonds within five years. Our Funds have long taken a
more positive approach:
••Invest in companies profiting from accelerating the
decarbonisation of our economies.
••Invest in companies with low exposure to carbon risk.
••Avoid investment in coal, oil, tar sands and natural gas.
Our thematic investment ideas continue to evolve rapidly
but currently include insulation providers, vehicle battery
components and power semiconductors.
In response to clients wanting to see more social key
performance indicators, we have worked with our
different ESG data providers to see how we could do this.
We do engage actively with
companies we own to urge
them to improve diversity
We looked at the proportion of women on the boards
for companies in the Sustainable Future Funds and
compared this to the conventional benchmarks where
they are invested.
We found, on average, the SF equity Funds had 27.8%
of women board members compared to 27.5% in
the conventional benchmarks. While our Funds have
marginally more women represented on boards, the
proportions are very small and so should be regarded
as the same.
We do not screen out companies on the basis of board
diversity but we do engage actively with companies
we own to urge them to improve diversity. This is one
of our key engagement priorities for 2018 as there is
evidence to suggest more diverse boards function better
and therefore deliver as good, if not better, returns.
Proportion of women on the board: SF Funds compared to the market
SF UK Growth
22.2%
MSCI UK
In summary, there are global commitments to transition
away from fossil fuels and meeting these commitments
presents challenges. We believe there are profits to
be made in meeting these challenges and risks for
companies on the wrong side. By providing capital to
companies that are leaders in these fields, we believe
we can continue to profit from a credible pathway to a
lower carbon economy.
21.3%
SF European ex UK
33.9%
MSCI Europe ex UK
33.0%
SF Global Growth
22.9%
MSCI World Developed
24.6%
Simple average SF Funds
27.8%
Simple average
conventional benchmarks
27.5%
0
10
20
30
40
Source: Liontrust as at 31.12.17
24 Liontrust Sustainable Future Funds: Annual Review 2017
Liontrust Sustainable Future Funds: Annual Review 2017 25





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