Liontrust Sustainable team challenges companies on zero carbon emissions strategy

The Liontrust Sustainable Investment team is stepping up its engagement with companies to ensure that they reduce their absolute carbon emissions to zero.

This is to ensure the companies the team invests in will continue to be profitable and attractive in the ultra-low carbon world of the future.

The Liontrust Sustainable fund managers believe companies that are being proactive on 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.

In what the team call the One and a Half Degree Transition Challenge, they are calling for all companies held within the team’s equity and bond funds to explain before the end of 2020 the strategy 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. The team are also asking for evidence that companies will have started the process of reducing carbon emissions before the end of this year.

The global companies held within the funds have a capitalisation of more than £2 billion or more and those listed in the UK have a capitalisation above £500 million.

The team will report on how the companies they are invested in are progressing towards ultra-low carbon emissions in preparation for the COP26 (the 26th United Nations Climate Change Conference), which starts in Glasgow on 9 November 2020.

The Sustainable Investment fund managers will use all measures at their disposal, including voting and ultimately divesting over time, to persuade companies to reduce their absolute carbon emissions to zero.

The team have been engaging with companies on reducing carbon emissions for two decades, with the result that their funds are already up to 77% less carbon intensive than their respective indices and have up to 30% invested in companies accelerating the shift to a lower carbon economy.

The urgency of this engagement, the need for companies to increase their ambition and to speed up the pace of positive change, however, is accelerating as the science is showing the increasing impact of the climate crisis.

Harriet Parker, Investment Manager on the Liontrust Sustainable Investment team, said: “Companies that do not develop and enact a rapid decarbonisation of their business activities will face rising costs and risk to their future success. They need to start the transition now.

“We are not being prescriptive on how companies achieve zero carbon emissions, although we expect it to include energy efficient products, low carbon energy, renewables and improving building efficiencies.”

Mike Appleby, Investment Manager, added: “Companies need to set a date for achieving this, identify the key challenges that need to be met and how they will accomplish the target.

“Given the scale of the challenge, all companies will need to play their part, even those in parts of the economy that are not the most carbon intensive.”

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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. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities - fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.


The information and opinions provided 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. 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.


Wednesday, January 29, 2020, 9:42 AM