Sustainable Investment – now, more than ever

Neil Brown

COVID-19 is bringing almost unprecedented stresses and challenges to our society and economies. In highlighting our weaknesses, however, this crisis also shows our resilience.

We believe that sustainable business practices offer resilience in a crisis and that whatever shape the recovery takes, it will have sustainability at its core. In this article, we highlight a few of the companies in our portfolios that are proving their value in the early stages of this crisis. We also note their improved prospects as we come through this crisis and accelerate the transition to a more resilient, safer and cleaner world.

We invest in companies that are exposed to our 20 themes, offering products and services that improve our lives and the environment. They also outperform on environmental, social and governance (ESG) factors. We look for companies that treat their employees, supply chains, customers and the environment with respect. To find great investments from this pool of companies, we pioneered the integration of these issues deep into forecast earnings and valuation.

This focus on companies delivering positive financial returns through their positive impact on the world has served us well in the early stages of this crisis. Although the crisis is new, our companies have long been grappling with the challenges of reducing business travel, protecting workers in stressed supply chains and creating diverse boards to make the very best decisions.

We view the tools and techniques developed in the face of the climate emergency, the obesity epidemic, failing corporate governance and combatting modern slavery to be an asset. Outperformance on these issues can protect employees and other stakeholders through difficult times and prepare them to capitalise on recovery. This is particularly powerful when, as we believe, the recovery will show the rapid acceleration of our key themes.

Our Connecting People theme has seen the most marked acceleration as millions of us adjust to working from home and connecting with friends and family digitally. This long-term theme, the need to reduce the environmental impact of travel while increasing global connectivity, has been accelerated by global lockdowns and is likely to persist to a greater degree when these come to an end.

Tower company Cellnex and remote desktop software company TeamViewer are two businesses on the right side of this theme. We believe the increased demand for their products now will survive long into the recovery as we make more permanent shifts in our work, communication and travel habits.

Among our healthcare names, blood plasma company Grifols underscores the importance of sustainable business practices. Blood plasma may have a key role to play in treating the virus, and the positive way in which this business is run gives us confidence the company can manage staff and donors to respond effectively.

Our holdings in Roche and Lonza Group are also among our stronger names year to date. Our Enabling innovation in healthcare and Providing affordable healthcare themes focus on solving genuine unmet medical needs affordably. We anticipate a fundamental rethink of our healthcare systems following this crisis, which will increase investments in innovation, efficacy and affordability.

To conclude, we are proud to own those companies that can make a difference in times of crisis. At the start of 2020, we were looking to 2030 as the deadline by which fundamental shifts in our economy had to happen to avoid a range of crises. Our response to this terrible situation might just pave the way to avoiding those to come, and we will remain invested in companies that can deliver a cleaner, healthier and safer planet.

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


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.

Wednesday, April 22, 2020, 10:27 AM