Investing to tackle our toughest sustainability challenges

Fund management company Liontrust has announced its intention to launch the Liontrust ESG Trust PLC (ESGT). The portfolio of ESGT will comprise 25-35 holdings in sustainable companies around the world that Liontrust has awarded the highest sustainability scores.

In 2015, the United Nations laid out 17 Sustainable Development Goals (SDGs). These ambitious, global goals aim to achieve a more sustainable future by 2030. These include improving education, tackling poverty and gender inequality and creating more sustainable and responsible industry and infrastructure.

With its goal of offering sustainable investments, ESGT is seeking to align itself with the UN’s SDGs. But some fit more easily into an investment framework than others. Peter Michaelis, head of the Liontrust Sustainable Investment team, explains the process of working with the team to try to find ways to support those more challenging targets through investing:

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“One of several ways our team highlights the impact of our investments is to show how our themes are aligned with the United Nations’ 17 Sustainable Development Goals. Each theme is limited to one main SDG. In reality however, there are overlaps. Most companies in our portfolios are exposed to areas helping to meet more than one SDG.

“However, we have found gaps where our themes do not have significant exposure to certain SDGs. This is unsurprising. We designed the themes specifically for investment, whereas the SDGs involve civil society, governments and other aspects of human endeavour. Nevertheless, we believe it is important to examine whether investment could have a positive impact on these areas and will donate a portion of the management fee from ESGT – an investment trust whose stock market listing is planned for early July – to projects that explore potential for instruments relating to four SDGs in particular:

• SDG 1: End Poverty – via provision of access to loans at fair rates for those in poverty
• SDG 2: End Hunger – via investment in food production and distribution in developing regions
• SDG 14: Life Below Water – via development of bonds in blue carbon (marine sequestration of carbon dioxide) or to back marine protected areas
• SDG 15: Life on Land – via bonds to back biodiversity or carbon and biodiversity enhancement through reforestation

“Liontrust’s Sustainable Investment team has been engaging on biodiversity-related issues for 20 years, focusing on areas including palm oil, timber and plastics. But while we can be sure our clients have avoided the worst-polluting and damage-causing companies, palm oil has caused 39% of forest loss in Borneo since 2000. Deforestation elsewhere is still rampant and there are over five trillion pieces of plastic in oceans.

“Through conversations with expert organisations such as ZSL (Zoological Society of London), we can get a better grasp of complex issues, make more targeted requests for change and continue to drive better treatment for one of the planet’s greatest natural resources.”

Learn more about ESGT