Peter Michaelis

Ongoing evolution of our Sustainable Investment themes

Peter Michaelis

Themes sit at the heart of the Liontrust Sustainable Investment process, identifying areas of structural growth within the economy associated with improvements to resource efficiency, quality of life and the safety and resilience of society. Every year, we review our themes to ensure they are current, consistent and clear.

As a result of the 2020 review, we have added an additional theme, Encouraging sustainable leisure (taking the total to 21), and changed the language around three others, as set out in the table below. These changes will be implemented at the start of 2021.

Old theme

New theme

Increasing waste treatment and recycling

Delivering a circular materials economy

Improving auto safety

Improving transport safety

Improving industrial and agricultural processes

Improving the resource efficiency of industrial and agricultural processes

 

New definitions


Delivering a circular materials economy:
With finite resources on earth, recycling remains a huge part of the shift to a more sustainable world. But to make better use of materials, we need to consider the whole life cycle rather than just the ‘waste’ stage, moving beyond the current take-make-waste model towards a more circular economy. This is based on three core principles designing out waste and pollution, keeping products and materials in use and regenerating natural systems and we believe companies built on these lines should benefit from this trend.

Improving transport safety: We have identified companies whose products improve the safety of travel and reduce accidents. Much of our work has focused on autos, in areas such as collision avoidance, active braking and semi-autonomous driving, but we should not assume cars will remain dominant, particularly with safe, efficient mass transport key to reducing emissions. Whatever the mode of travel, we concentrate on the specialist companies making the kit to improve safety, from better lighting to more efficient braking.

Improving the resource efficiency of industrial and agricultural processes: We like companies that provide products or services that help to make industrial processes more resource efficient, as well as safer for workers and users. We see investment opportunities in software and systems that help implement life-cycle design (including disposal of products) and manage supply chains as they modernise and improve industry. We are looking for companies driving real improvements in energy and material use.

 

New theme: Encouraging sustainable leisure


Our themes focus on companies helping towards a cleaner, healthier and safer world, but beyond these fundamental issues, there is a natural progression to spend more time on leisure activities. As economist Tim Jackson, a member of our external Advisory Committee, puts it in his book Prosperity without Growth:

“…in the advanced economies…material needs are broadly met and disposable incomes are increasingly dedicated to different ends: leisure, social interaction, experience… what really matters to us: family, friendship, sense of belonging, community, identity, social status, meaning and purpose in life.”

Leisure time and social activities enable many of these desires, such as going to a concert with a friend, having dinner at a restaurant or playing a video game with an online community. The social experience of these is positive and should be a growing part of the economy as we develop. As there can be negative aspects to some leisure activities – such as gambling addiction or excessive alcohol consumption – we focus those companies where the positive experience far outweighs any such issues. For a full rundown of this new theme, as well as examples of stocks we hold within it, read Martyn Jones' latest blog, Encouraging sustainable leisure – introducing our new theme.

For a comprehensive list of common financial words and terms, see our glossary here.

Liontrust Insights



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.

Disclaimer

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.

Thursday, December 17, 2020, 11:57 AM