It has been a challenging year for investors with volatility across almost every asset class and major macro-economic and political uncertainties that are ongoing. This has been especially the case for those investing sustainably. And yet, looking to 2023, we are more excited about the prospects than we have been in years.
This confidence comes from the strength of our 20 sustainable investment themes and the quality of the businesses aligned with solving critical sustainability challenges. We believe that sustainable companies have stronger growth prospects and better management than the market appreciates.
Our societies and economies evolve to deliver not only growth in GDP but also a better outcome for people in a progression to a cleaner, healthier and safer world. We have seen a 1 million-fold improvement in computing power, dramatic increases in life expectancy (up five years in the last 20 years) and activities like driving becoming 50 times less fatal per km driven.
Over decades and centuries of a market-based economy, these are powerful, persistent trends.
A simple way to think of the mechanism behind this improvement is that society desires these better outcomes: governments, through regulation, incentives or taxation, encourage businesses to deliver solutions; and businesses innovate, scale and distribute the solutions, experiencing strong growth and, crucially, usually less competition as they bring these novel ideas to market.
Think of gene-sequencing. This is now a $5 billion market that delivers a step change in our ability to diagnose and treat diseases (such as the Greek alphabet of coronaviruses). But initially it required the US government to launch the human genome project at the cost of billions of dollars for the first genome. Now after many iterations, business has driven down the cost to hundreds of dollars. Renewable energy has followed a similar pattern.
While we are now operating in a very different environment to the past decade, with inflation and therefore interest rates no longer at zero, it is important to use such times of market stress to upgrade the quality of our portfolios. We have taken advantage of the broad-based sell-off to add to certain companies that we have long admired in every aspect except valuation. This was achieved both during the Covid sell-off in 2020 and in 2022.
One example is Agilent Technologies, which we have bought for our Liontrust SF Global Growth Fund. The company is a global leader in quality control and testing, ensuring the food we eat, the air we breathe and the water we drink does not contain harmful chemicals and contaminants. Held within our Better monitoring of supply chains and quality control theme, it is also a leader in the supply of research and development tools in the area of increasingly cutting-edge technology related to gene-editing.
We have also added Ashtead to the Liontrust SF UK Growth Fund, which is the embodiment of the sharing economy. Held within our Delivering a circular materials economy theme, the company rents out industrial, commercial and general equipment across the US, UK and Canada, thus maximising the utilisation of equipment that would otherwise sit idle for long periods, and offers assurance that equipment is serviced and maintained properly and is reliable. In doing so, it allows its customers to concentrate on their core business competencies and to reduce their inventories of capital equipment.
A legitimate challenge to our approach would be to ask whether our sustainable investment themes have run their course. This would only be the case if we had solved every problem and satisfied every need; we are a long way from that! There is still plenty of growing to do for sustainable companies.
We are continually reviewing and refreshing our ideas to ensure we are invested in those areas where companies are delivering the best improvements in terms of a cleaner, healthier and safer world and offering strong growth. It has been a challenging year in terms of performance but we have strong conviction in the longer term prospects of the sustainable businesses we are invested in.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
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.
Some of the Funds managed by the Sustainable Future 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 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. Some Funds may invest in derivatives. The use of derivatives may create leverage or gearing. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. 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, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
