Mike Appleby

How the Sustainable Future funds are aligned with the Sustainable Development Goals

Mike Appleby

We have been asked by clients to show how the companies we invest in for our Sustainable Future range of funds are aligned with the United Nations’ Sustainable Development Goals (SDG).

The SDGs are an internationally recognised set of goals to aim for by 2030, which will help the world develop in a more sustainable way. They replaced the United Nations’ Millennium Goals and have captured many progressive investors’ interest as a more comprehensive way of thinking about and reporting on sustainable investing.

We have done some work to show how our positive investment themes are aligned with the SDGs by analysing where each theme is directly linked to Key Performance Indicators in the SDG text. We have limited each of our themes to one main SDG, although in reality there are overlaps and most companies are exposed to more than one goal. A summary table showing which of our themes are aligned to which SDG, along with which specific Key Performance Indicator they improve, is available here.

All 22 of the Sustainable Future investment themes are contributing in a positive manner to the SDGs and can be linked to Key Performance Indicators in the text.

The Sustainable Development Goals where our funds have largest exposure are:

  • Good health and well-being (SDG #3)
  • Affordable and clean energy (SDG #7)
  • Decent work and economic growth (SDG #8)
  • Industry, innovation and infrastructure (SDG #9)
  • Sustainable cities and communities (SDG #11)

In addition to these, we also have exposure to: Zero hunger (SDG# 2), Quality education (SDG #4), Clean water and sanitation (SDG #6), and Responsible consumption and production (SDG #12).


How our investment themes are aligned to the SDGs where we have most exposure

Good health and well-being (SDG #3)
We have five positive investment themes aligned with this SDG to ensure healthy lives and promote wellbeing for all at all ages. These include:

Improving auto safety: we have identified companies whose products improve the safety of travel and reduce road traffic accidents, principally through active safety, which involves collision avoidance, active breaking and semi-autonomous driving. We concentrate on the specialist companies making the kit to improve safety (or reduce emissions) rather than the car manufacturers who we believe are challenged to meet tightening regulations to improve safety as well as reducing emissions.

Delivering healthier foods: there is a trend in the food industry where consumers are changing their preferences and demanding healthier foods. We have identified companies that provide reformulation services to change the recipe of foods to make them healthier (less fat, sugars and salts) while maintaining the taste. These companies are a beneficiary of this demand for healthier food as their customers (many of which are the big incumbent food producers) respond to changing consumer preferences and use their reformulation services. This improved diet has positive health impacts. For example, it can help reduce non-communicable diseases such as obesity and cardio-vascular disease. This contributes to the Key Performance Indicator 3.4 of the SDGs, which is to reduce by one third premature mortality from non-communicable diseases through prevention and treatment.

Enabling healthier lifestyles: companies that promote healthier lifestyles, principally through increasing activity, taking exercise and sport help meet the same Key Performance Indicator 3.4 of this SDG.

Providing affordable healthcare globally: companies that help deliver affordable, positive patient outcomes in managing disease also help achieve this goal.

Enabling innovation within the healthcare system: companies whose products or services help promote innovation within healthcare are helping achieve this goal. They do this by either coming up with new, more effective ways to treat diseases (creating a significant step change in the mechanism used to treat a given disease), or by providing essential equipment or services for biotechnology research (such as specialist measuring equipment, genetic sequencing equipment or high quality consumables for research) or software to help make treatments more effective.

 

Affordable and clean energy (SDG #7)
We have three main investment themes aligned with achieving this SDG to ensure access to affordable, reliable, sustainable and modern energy for all.

Increasing electricity generation from renewable sources: substituting coal intensive fossil fuel electricity generation with renewable power sources reduces carbon emissions as well as providing a cost effective means in some off-grid situations to connect people to cheaper more reliable power sources.

Accelerating the transition to lower carbon fuels: companies that provide services or equipment, particularly in upgrading the power grid network to be able to deal with changing production and consumption patterns of electricity are an important requirement to achieve affordable clean energy.

Improving the efficiency of energy use: we see many ways of making energy cheaper by reducing wasted energy while also reducing emissions through more efficient use of energy. This cuts across many areas of the economy and includes building insulation, efficient lighting, energy efficient climate control, travel and industrial processes.


Decent work and economic growth (SDG #8)
We have one positive investment theme aligned to this development goal to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Increasing financial resilience: we believe a resilient financial services sector is a necessary for economic well-being through utility-like provision of banking, lending, and effective ways of appropriately saving for the future as well as mitigating risks through insurance. This does not mean any company in the financial sector is automatically investable, but we do see positive ways that these companies contribute to society when appropriately and proactively managed. This is aligned with the SDG Key Performance Indicator 8.3 to encourage growth of business through access to financial services.


Industry, innovation and infrastructure (SDG #9)
We have three investment themes aligned with this SDG to build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation.

Improving industrial processes: we like companies providing products or services that help make industrial processes more resource efficient, as well as safer for workers and users. These improved industrial processes help reduce the negative impacts on people and the environment and are making a positive contribution. We see investment opportunities in software and systems that help implement life-cycle design (including disposal of products), help manage supply chains as well as opportunities in automation of factory processes to remove repetitive or dangerous mechanical tasks as they all help modernise industry and meet with this SDG.

Enhancing digital security: as more and more of our lives and critical services are carried out online, we need to protect the data from theft. Digital security helps make this growing area of the economy secure.

Connecting people: we believe access to easy communication tools and the ability to access information, increasing amounts of which are online, is a positive requisite in a more sustainable economy.


Sustainable cities and communities (SDG #11)
We have two investment themes aligned with achieving this SDG to make cities and human settlements resilient and sustainable.

Making transport more efficient: urban transport systems are improved by reducing congestion as well as transport emissions (which make the local air quality toxic) as the mode of transport shifts from self-driven cars to public transport systems such as trains, tubes and buses.

Building better homes: shelter is a basic human requirement and companies that build quality affordable homes are helping to provide this.


How companies manage their business is also important in meeting the SDGs
How companies in which we invest contribute positively to the SDGs is mainly through the products and services they provide. However, we have also identified a number of SDGs that can be met through companies managing their operations better with these goals in mind. The way companies manage their operations and how they treat and pay their staff has an obvious impact on the quality of the work (SDG #8) they provide and is relevant to all the companies we own.

Which environmental, social or governance challenges are most material varies depending on the industry in question. For example, this can include quality of work (through working conditions, fair pay, working conditions in supply chains) as well as equality and diversity in the workforce and on the board. This is an area where our engagement to promote proactive management of the Environmental, Social and Governance issues - and the Sustainable Development Goals they are aligned to - can help achieve the SDGs and we intend to explore and report on this further.


Investment theme exposure and Sustainable Development Goal alignment for our equity and fixed income Sustainable Future funds

Below, we have included the positive investment theme exposure and how this is aligned to the SDGs for our main Sustainable Future strategies: UK Growth (equities), European Growth (equities), Global Growth (equities) and Corporate Bond (fixed income). We intend to disclose this same data for our multi-asset funds shortly.

We encourage you to get in contact if you have any questions about this analysis of how the Sustainable Future funds are aligned with the SDGs and we look forward to hearing from you.

How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals


How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals

How the Sustainable Future funds are aligned with the Sustainable Development Goals


Source: Liontrust, as at 30.06.17

Disclaimer:

• This content contains information and analysis that is believed to be accurate at the date of publication but is subject to change without notice. Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness. Some parts/sections of this content may been compiled from external sources. Whilst these sources are believed to be reliable, the information has not been independently verified and therefore no representation is made as to its accuracy or completeness. • It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. • 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. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term. • Any decision to invest should be always based on the final Prospectus and Key Investor Information Documents (KIIDs) and you should take independent legal advice if necessary. These documents contain important information which should be read before investing in any fund and they can be obtained, free of charge, here.

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Friday, November 10, 2017, 7:08 AM