Liontrust Sustainable Future Funds - Annual Review 2019 - Page 38



The world we made
JONATHON PORRITT
Jonathon Porritt is founder director of Forum for the Future, the UK’s
leading sustainable development charity. He is one of five members
of the external Advisory Committee that works with Liontrust’s
Sustainable Investment team. The following is an extract from his
speech at Liontrust’s 2019 Sustainable Investment Conference.
Ultimately, however, whatever pressure we see from civil society, it
will still depend on governments to reframe markets in order to drive
the shift to lower carbon. There is still work ahead but the changing
tenor of the debate is encouraging: people are increasingly realising
they cannot ignore this situation and asking what can be done.
Net zero carbon has become firmly entrenched as a concept across
much of the world in recent years and despite a range of target
dates, what is clear from an investment perspective is that a huge
suite of technology is required to make the project a reality.
In terms of next steps, it is important to look beyond the more obvious
sectors of energy and infrastructure: there is no area of human endeavour
without a pipeline of innovation towards greater sustainability.
In contrast to 10 or 15 years ago when many investors saw these
as marginal concerns, there is a clear risk in dismissing these
opportunities today.
While it is always difficult to call an inflection point, there are three
key drivers behind this step change.
First, the planet is increasingly telling us, in incontrovertible terms, that
if we continue on the current path, we will face massive dislocation
and trauma, with the cost of fixing this running into the trillions of
dollars annually.
Second was a report last year from the Intergovernmental Panel on
Climate Change examining the difference between a 1.5 degree
average rise in temperatures by the end of the century and a twodegree rise. That may seem a minimal variance, but the predicted
impact would be huge and that has prompted more realistic dialogue
on the climate change question in recent months.
Finally, we have also seen the emergence of a much stronger voice
from civil society on these issues, with Extinction Rebellion leading
the way. From Greta Thunberg
stood alone outside her school
in Sweden with a ‘strike
for the climate’ banner in
2018, we saw four million
schoolchildren strike last
year. We need to consider
the multiplier effect here:
these issues are not going
to disappear and that intergenerational anger is a
driver we have never
seen before.
Take food and farming, for example, which are responsible for 25%
of total global emissions. The livestock industry, primarily meat and
dairy, make up a significant share of that and right at the heart of
this sizable footprint is the feed industry, producing the food for the
animals at the centre of many of our diets.
There is nothing like as much in the news about this as renewable
energy but we feel addressing this situation can have a similar impact
on the climate change picture.
Moving to the ‘hard to abate’ sectors of cement, chemicals and steel
– so-called because the cost of cutting emissions is high and progress
has been slow – the technology behind more sustainable steel and
cement is underdeveloped and not sufficiently tested. There is huge
space for innovation in an area that, combined with long distance
road transport, shipping and aviation, is responsible for 30% of total
global emissions.
Greta Thunberg has talked about the ‘fairy tales of eternal growth’ as
a major factor behind the climate change crisis and the world must
ultimately face that reckoning. For today’s investors, however, there
is a clear opportunity in the companies helping with the transition to
a more sustainable, zero carbon world in the coming years, with
massive growth required from many of these sectors as they work to
overcome the embedded hurdles from the fossil fuel industry.
Key risks
Past performance is not a guide to future performance. Do remember
that the value of an investment and the income generated from them
can fall as well as rise and is not guaranteed, therefore, you may
not get back the amount originally invested and potentially risk
total loss of capital. Some of the Funds managed by the Sustainable
Future Equities team involve foreign currencies and may be subject to
fluctuations in value due to movements in exchange rates. Investment in
Funds managed by the Sustainable Future Fixed Income team involves
foreign currencies and may be subject to fluctuations in value due to
movements in exchange rates. The value of fixed income securities
will fall if the issuer is unable to repay its debt or has its credit rating
reduced. Generally, the higher the perceived credit risk of the issuer,
the higher the rate of interest. The Monthly Income Bond Fund has a
Distribution Yield which is higher than the Underlying Yield because
the fund distributes coupon income and the fund’s expenses are
charged to capital. This has the effect of increasing dividends while
constraining the fund’s capital appreciation. The Distribution Yield and
the Underlying Yield is the same for the SF Corporate Bond Fund.
Disclaimer:
Issued by Liontrust Fund Partners LLP (2 Savoy Court, London WC2R
0EZ), authorised and regulated in the UK by the Financial Conduct
Authority (FRN 518165) to undertake regulated investment business.
This document should not be construed as advice for investment in
any product or security mentioned, an offer to buy or sell units/shares
of Funds mentioned, or a solicitation to purchase securities in any
company or investment product. All use of company logos, images or
trademarks in this presentation are for reference purposes only. Examples
of stocks are provided for general information only to demonstrate
our investment philosophy. It contains information and analysis that
is believed to be accurate at the time of publication, but is subject
to change without notice. Whilst care has been taken in compiling
the content of this document, no representation or warranty, express
or implied, is made by Liontrust as to its accuracy or completeness,
including for external sources (which may have been used) which
have not been verified. It should not be copied, faxed, reproduced,
divulged or distributed, in whole or in part, without the express written
consent of Liontrust. Always research your own investments and (if you
are not a professional or a financial adviser) consult suitability with
a regulated financial adviser before investing. 2020.04 [20/060]
All our documents are printed on recycled paper or paper from a
sustainable source in accordance with either the FSC, PEFC or EU
Ecolabel criteria to help keep our environmental impact to a minimum.
Liontrust is a signatory of:
The United Nations Principles for Responsible Investment (UN PRI)
is a global initiative for international investors to implement the six
principles. The objectives are to understand the implications of
sustainability for investors and support signatories to incorporate
these principles into their investment decision making and ownership
practices. As a PRI Signatory, Liontrust Investment Partners LLP commits to
completing the PRI Reporting Framework on an annual basis. For more
information about UN PRI and the six principles, please visit unpri.org
liontrust.co.uk/sustainable
@LiontrustFuture
Liontrust
38 - Liontrust Sustainable Investment: Annual Review 2019
Liontrust Sustainable Investment: Annual Review 2019 - 39

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