Why sustainable investing is good for your pocket as well as your conscience, September 2017

“Sustainable investing is not only for investors who want their investments to 'do good'”, according to Peter Michaelis, manager of Liontrust Sustainable Investment Team. “There is also a compelling investment case for all investors taking this approach as well. In this fast-changing world, I believe that the companies that survive and thrive will be those which improve people's quality of life; increase the efficiency with which we use scarce resources and enhance the safety and resilience of human activities.”

If the impact of Sports Direct's recent employee treatment and VW's emissions-cheating scandals are anything to go by, he has a point. “Acting in an environmentally and socially-responsible manner can give companies a competitive advantage and also makes them more likely to treat shareholders well,” said Juliet Schooling Latter, Chelsea's research director.

Peter was talking at a lunch marking the start of Good Money Week, which kicks off this Sunday, 8 October. The campaign is designed to raise awareness of sustainable, responsible and ethical finance to help people make good money choices.

The Liontrust Sustainable Investment team transferred to the company from Alliance Trust Investments in April this year, bringing their funds with them. The range covers European, UK and Global equity funds, as well as bond and multi-asset funds and the process has been one the team has followed for more than 15 years. The team uses a thematic approach to identify trends that will shape the global economy of the future.

Themes in focus

Safer and more efficient

Figures from the World Health Organisation show there are 1.3 million road traffic deaths every year. The United Nations has targets to halve the number of deaths and injuries from road traffic accidents by 2020. Any company that can help deliver this target will benefit not only society, but also their share price.

While Tesla is the company that is making the headlines in terms of the next generation of automobiles at the moment, there are a number of companies in the manufacturing supply-chain that can help improve the safety and efficiency of our vehicles.

For example, one holding in the Liontrust funds is German company Hella, a market leader in LED lights. More than 50% of road accidents happen at night and their lighting provides superior illumination on the road for drivers and faster brake lights.

Umicore is another example of a global materials technology and recycling group based in Belgium, with activities in scrap and precious metals and a cathode material for lithium ion batteries used by electric vehicles.

Healthier and higher quality of life

DNA sequencing is an example of how quality of life is being improved. Thermofisher is a leading company in this field, which is revolutionising the healthcare industry. As we begin to understand more about diseases and patients, doctors will be able to start personalising treatment which should lead to much higher success rates.

Kerry Group is an Irish company that started life as a dairy farmer. It now employs over 1,000 scientists, working on ways to make food taste good, even when the sugars, salt and fat is taken out of the recipe! 40% of the global population is expected to be obese by 2050 and, as governments start to legislate against some of the unhealthier options in our diet, so more and more companies are looking for tasty solutions. Kerry is working with the likes of Sainsbury's, Unilever and Kraft.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and those quoted and do not constitute financial advice.

Published on 04/10/2017