The Liontrust Sustainable Investment aims to bolster its engagement with companies to ensure that they reduce their carbon emissions to zero. The Liontrust Sustainable fund managers believe companies proactive in reducing carbon emissions will gain a competitive advantage and generate better investment returns. Those that don´t will face increasing risks in the ultra-low carbon world of the future.
The team has implemented a plan called One and a Half Degree Transition Challenge. Its objectives is engaging with all companies held within the team’s equity and bond funds to explain their strategy to decarbonize their businesses before the end of 2020.
Over 200 companies held across the funds have until the end of 2020 to provide a plan for how they are going to reach zero carbon emissions and over what time period this will be achieved. The team is also asking for evidence that companies will 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 and those listed in the UK have a capitalisation above £500 million.
The team will report on how the companies it is invested in are progressing towards ultra-low carbon emissions to limit global warming to 1.5 degrees.
How to implement decarbonization?
The Sustainable Investment fund managers will use all measures at their disposal, including voting and ultimately divesting over time, to persuade companies to reduce their absolute carbon emissions to zero.
The team has been engaging with companies on reducing carbon emissions for two decades, with the result that their funds are already up to 77% less carbon-intensive than their respective indices and have up to 30% invested in companies accelerating the shift to a lower-carbon economy.
The urgency of this engagement, the need for companies to increase their ambition and to speed up the pace of positive change, however, is accelerating as the science is showing the increasing impact of the climate crisis.
Harriet Parker, Investment Manager on the Liontrust Sustainable Investment team, said:
“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.
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.”