SUSTAINABILITY is an increasingly important theme for today’s consumers, who want what they wear, eat and even drive to both benefit themselves and have a positive impact on the world around them.
This is fundamentally changing businesses, from the high street retailer through the industrials and even down to commodity producers. There are significant investment opportunities for companies that can meet these changing demands.
Sustainable investment is a broad term - it can cover ethical or socially responsible - but at its heart is the very simple belief that companies can be more successful than their peers by hitting these trends.
In our fast-changing world we believe the companies that will thrive are those that improve people’s quality of life, increase the efficiency of resource use and create safer economies.
Current examples include the companies making our food healthier, our cars more durable and less likely to be involved in accidents, and our online activities safer through cybersecurity.
Companies with products or services that provide such solutions are likely to grow and, where these positive attributes are overlooked by the market, they can be good investments.
In contrast, we feel companies whose interests are misaligned with those of society and the environment will simply not last the course, leading to steep losses for those invested in them.
As well as not investing in such firms, we believe actively encouraging companies to change and improve their practices via shareholder engagement is key.
So how can investors go about discerning which companies are, indeed, sustainable? At Liontrust, we use a thematic approach to identify and invest in the key structural growth trends that will shape the global economy of the future. We do this by looking at broad sustainable themes such as climate change and energy efficiency, quality of life (including education and life-saving healthcare), sustainable consumption (eco-efficiency including water, waste and pollution reduction) and resilience.
Key factors influencing the way business is done and driving a greater shift toward more sustainable and responsible corporate behaviour include:
• Consumer pressure – 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.
• Financial sense – 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.
• Political climate and regulation – 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 competitive landscape for businesses. Regulation influences company behaviour and typically favours more sustainable or resilient companies.
Ultimately, we believe investors will do well to seek out well-managed companies that are set to benefit from any or all of these changes, and can profit from swimming with the tide of sustainability.
Neil Brown is co-manager of the Liontrust Sustainable Investment Team.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here