MARKETING - The PRIDE Magazine by Liontrust - Flipbook - Page 7
positive screening because the funds
focus on what they do want to invest
in. Funds may concentrate on single
investment themes such as environmental
technology, renewable energy or water.
Others have multiple sustainability
themes that can include healthcare,
resource efficiency and education.
High-quality companies must exhibit
three characteristics. The first is excellent
management and core products or
services that are making a positive
contribution to society. The other two
are strong growth prospects and the
ability to translate these into leading
returns on equity.
The third approach is engagement,
also known as active ownership. In this
case, fund managers engage with the
companies they invest in so they can
influence management into changing
positively the strategy or operational
management. This can be reflected in
voting at Annual General Meetings to
impact the business. For example, this
could be to improve labour rights in
the company’s supply chain, employee
safety or other environmental, social or
governance issues.
Let’s highlight a couple of companies
that we hold in the Funds we manage
to bring the investment process to life.
One of our key long-term holdings is
Kerry Group, which is an Irish-based
food technology company. Consumers
are demanding more and more from
their food, wanting healthier and more
natural ingredients while still retaining
an appealing taste and texture. It can
be difficult to achieve these competing
characteristics and so food manufacturers
and hospitality companies come to
Kerry for its expertise and technology in
ingredients and flavourings.
The Liontrust Sustainable Investment team
uses all three of these approaches in
managing our Funds.
How do these approaches translate
into an investment process which can
enhance performance? At the heart
of our Sustainable Future investment
process is the belief the companies that
will survive and thrive are those which:
improve people’s quality of life through
medical, technological or educational
advances;
drive improvements in the efficiency
in which we use increasingly scarce
resources; and
help to build a more stable, resilient
and prosperous economy.
This process, which has been developed
and honed over more than 15 years,
seeks to invest in:
high-quality
organisations
with
robust business fundamentals, strong
management and attractive valuations;
adaptors and innovators capitalising
on change, accessing new markets
and opportunities and outperforming
their competitors; and
companies that are creating real and
lasting value for shareholders and
society, now and in the future.
Another key trend set to change our lives
in the future and the business environment
today is our rapidly changing cars. The
trends we focus on are electrification
and improving safety. These two
complementary trends come together
in Active Safety, including automatic
electronic braking, forward collision
warning and even the prospect of fully
autonomous driving.
Sustainability is an
increasingly important
theme for today’s
consumers.
These two trends both require a significant
increase in semi-conductor content in a
car. For example, on average, there is
$300 of semi-conductor content in an
internal combustion engine car but this
rises to $900 for a full electric vehicle.
A Tesla can have more than $1,000 of
semi-conductor content in it.
The leading provider of semi-conductor
content is Infineon. Growing demand
for reducing emissions and increasing
safety has helped the sales growth of
the company over the past five years.
Infineon also scores well on ESG
(Environmental, Social and Governance)
by setting challenging targets every year
for energy use and employee training.
Well-run companies whose products
and operations capitalise on the types
of transformative changes outlined in
this article are able to benefit financially.
We believe that identifying these
powerful trends and investing in exposed
companies can make for attractive and
sustainable investments.
S U S TA I N A B L E
DRIVERS
There are three key factors influencing
the way business is done and driving
more sustainable and responsible
corporate behaviour. These are:
pressure
1 Consumer
With individuals increasingly aware
of the impact of their decisions,
demand for sustainable products
is increasing. Companies capable
of providing sustainable goods,
produced in an ethical manner, are
well placed.
sense
2 Financial
Regulations and legislation increase
costs for polluting companies,
thereby providing significant impetus for efficiency improvements.
Companies creating less pollution
and those providing pollution reduction and efficiency technologies
should continue to prosper.
climate & regulation
3 Political
The environment and related social
impacts are now widely regarded
as mainstream political issues with
policy decisions increasingly made
with sustainability in mind. This
political will has a marked effect on
regulation, as seen in the banking
sector, energy policy and emissions
regulation, which in turn affects
the competitive landscape for
businesses. Regulation influences
company behaviour and typically
favours more sustainable or resilient
companies.
Issue 1 Winter 2017 - TH E P R IDE - 7