Liontrust’s sustainable investment team is increasing its engagement with companies in its bonds and equity funds, challenging them to reduce their absolute carbon emission to zero.
The asset manager has adopted the “One and a Half Degree Transition Challenge”, which calls on companies in the bonds and equities sectors to explain before the end of 2020 their decarbonisation strategy to limit global warming to 1.5 degrees. This is to ensure that the companies the Liontrust invests in can be profitable and attractive in the ultra-low carbon world of the future.
Over 200 companies held across Liontrust’s funds have until the end of the year to provide a plan explaining how they will reach zero carbon emissions and over what time period this can be achieved. The sustainability team is also asking for evidence that companies 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, while those listed in the UK have a capitalisation above £500 million.
Liontrust’s sustainable fund managers believe that companies which are being proactive on reducing carbon emissions and are able to articulate this in their business strategy will gain a competitive advantage and generate superior investment returns. By contrast, those that do not will face increasing risks to their businesses.
The team will report on how the companies it has 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 fund managers will utilise all measures at their disposal, including voting and ultimately divesting over time to persuade companies to reduce their absolute carbon emissions to zero.
Harriet Parker, investment manager on the Liontrust sustainable investment team, explained: “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.
Commenting on Liontrust’s outlook on how companies reach the expected goals, she said: “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.”
