Liontrust Sustainable Future Funds - Annual Review 2019 - Page 3



Contents
Introduction
Introduction
3
How we invest: Our sustainable vision
4
Identifying superior stocks
5
Avoiding greenwash
6
Meet the team
7
Performance
10
The Bond angle
12
Key themes
13
Themes over two decades
14
Welcome to our third Sustainable Investment Annual Review, in
which we cover the highlights of a busy and successful 2019 for
Liontrust’s Sustainable Investment team.
I write this in the midst of the Coronavirus outbreak, for which – as
things stand – there remain a wide range of outcomes. Since we
have no way of predicting the likelihood of these extremes, we do
not take a bet on such scenarios.
Instead, we concentrate on where we do have expertise and
confidence in our predictions, namely the 20 sustainable themes
that identify companies we believe are set to benefit from decadeslong growth and will make our world cleaner, healthier and safer.
These are the macro trends that will persist over the longer term
– and they have informed our thinking and investing since we
launched the Sustainable Future (SF) funds in 2001.
Of these, the most significant has to be the reaction to the climate
emergency and the need to wean our societies off fossil fuels.
The rule of thumb is for a 50% reduction in emissions every decade;
a huge challenge but one we believe can be met.
Developing themes
18
Impacts
20
Impact measurement
21
Climate change: how we think about it and how this
influences our investments
22
How our themes are aligned to the SDGs
25
Engagement
30
Our approach to engagement and voting
31
The One and a Half Degree Transition Challenge
2019 engagement highlights
34
2020 priority initiatives
35
2020 investment outlook
36
We are stepping up our engagement with companies to ensure
they reduce their absolute carbon emissions to zero. In our view,
businesses that are proactive in reducing carbon emissions, and are
able and willing to articulate this in their business strategy, will gain
a competitive advantage and generate better investment returns.
Those that do not will face increasing risks to their businesses.
For our part, we will continue to invest in companies innovating in
energy efficiency, renewable energy and electrification of transport.
But we also need all the companies in our economy to reduce
emissions and this is behind the One a Half Degree Transition
Challenge that we launched in early 2020. I look forward to the results
from this engagement being available before the end of the year.
We look forward to greater progress on making our use of materials
more circular, with companies that design packaging for re-use and
recycling prospering at the expense of single-use plastic, as the bold
targets of governments and food companies are looming into view.
On food, the revolution in diets will continue as it becomes more
evident that our health and that of the planet, as well as the welfare
of animals, depends on what we choose to have on our plates.
In our own industry, we expect the rise in demand for sustainable
investment to continue as people realise they can control the type
of assets in their savings and pensions. We hope the financial
services industry maintains high standards in meeting this demand
and is clear and transparent to investors about the sustainable
products they offer. Greenwashing is a troubling trend and we
outline our tips to avoid this on page six.
As the SF funds approach their 20th anniversary in 2021, we
would like to thank our investors for their continued loyalty and
support. Our own hopes for 2020 and beyond are to continue
delivering strong returns by investing in sustainable companies that
are able to evidence the positive impacts they have on all our lives.
Peter Michaelis, Head of Sustainable Investment at Liontrust
For more information on Sustainable Investment plus our funds and
team, go to www.liontrust.co.uk/sustainable
The One and a Half Degree Transition Challenge is calling for all
companies held within our equity and bond funds to explain how
they plan to decarbonise their businesses to limit global warming
to 1.5 degrees. Over 200 companies held across the funds have
until the end of 2020 to provide a plan for how they are going to
reach zero carbon emissions and over what time period this will
be achieved. Our fund managers will use all measures at their
disposal, including voting and ultimately divesting over time, to
persuade companies to reduce their emissions.
There should also be interesting developments in 2020 in our
theme of Enabling innovation in healthcare, with the prospect of
positive developments in the field of DNA sequencing and gene
therapies. These offer step-changes in the way we treat cancers
and inherited diseases.
2 - Liontrust Sustainable Investment: Annual Review 2019
Liontrust Sustainable Investment: Annual Review 2019 - 3

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