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Liontrust Investment Partners LLP

PRI reporting framework 2019

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

The Sustainable Investment team also screens to exclude the following businesses from its Sustainable Future fund portfolios; the team has thresholds on the revenues that companies can derive from unsustainable and unethical activities and still be included in their funds. From July 2018, all funds managed by the team moved from a threshold of 10% of revenues from activities such as tobacco, gambling, intensive farming, weapon systems and nuclear to 5%.

https://www.liontrust.co.uk/handlers/DownloadDocumentsHandler.lion?itemids=fc1bfe8f-110d-495b-8051-f448e9602d98

The team's UK ethical fund also:

excludes all companies that derive 5% of turnover from the production, distribution and/ or sale of alcohol products; and avoids investing in any company involved with animal testing. https://www.liontrust.co.uk/handlers/DownloadDocumentsHandler.lion?itemids=f8d69848-d58b-4ba3-9d12-4b3eed35501f

Occasionally, positive benefits may be considered to outweigh the negative activities outlined in the team's screening criteria. In these cases, a balanced judgement is made on the recommendation of the sector specialist with oversight from the independent external advisory committee.

 

Screened by

Description

The team screens to exclude the following businesses from its Sustainable Future funds: companies that are directly involved in the construction of large dam projects in developing countries if those projects have not met best practice standards; and companies involved in the building of large scale infrastructure projects such as roads, airports or dams unless they are viewed as leaders within their sector with respect to stakeholder dialogue, environmental management and social and environmental impact assessment.

 

Screened by

Description

The team screens to exclude the following businesses from its Sustainable Future portfolios:

  • companies judged not to be addressing serious allegations (narrowly interpreted) of violations of international human rights laws and standards including the OECD Guidelines for Multi-National Enterprises (2000) and the UN Global Compact (2000), among others and
  • companies judged not to be addressing serious allegations (narrowly interpreted) of breaches of labour standards such as those on child labour, forced labour, discrimination, union rights, working hours and health safety.

Occasionally, positive benefits may be considered to outweigh the negative activities outlined in the team's screening criteria. In these cases, a balanced judgement is made on the recommendation of the sector specialist with oversight from the independent external advisory committee.

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

The Sustainable Investment team reviews its screening criteria for the Sustainable Future funds in collaboration with its independent external advisory committee. Any change to the screening criteria is notified to clients and/or beneficiaries via the Insight section on our website (https://www.liontrust.co.uk/what-we-think/blogs?blogtype=Fund+manager+views). In July 2018, all funds managed by the team moved from a threshold of 10% of revenues from activities such as tobacco, gambling, intensive farming, weapon systems and nuclear to 5%. This was publicised on our website https://www.liontrust.co.uk/what-we-think/blogs/How-our-themes-are-evolving. The following extract from the aforementioned update in July summarises details of the screening revision:

As part of the review, we have tightened thresholds for the revenues that companies can derive from unsustainable and unethical activities and still be included in our portfolios. From July, companies have been able to generate 5% of revenues from activities such as tobacco, gambling, intensive farming, weapon systems and nuclear rather than the previous threshold of 10%. This has been done to better communicate the low exposure to these activities across the funds the team manages as well as to reflect increased interest from clients in more stringent criteria.

If the team needs to adjust its portfolios owing to a change to its screening criteria, it has six months from the change to sell the relevant securities.

The Sustainable Investment screening criteria are disclosed and publicly available on our website https://www.liontrust.co.uk/handlers/DownloadDocumentsHandler.lion?itemids=fc1bfe8f-110d-495b-8051-f448e9602d98 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

The Sustainable team has an independent external advisory committee which the team consults regarding its screening practices at meetings that take place three times throughout the year.

The Sustainable team relies on its own considerable experience in sustainable investing to peer-review stocks through their Sustainability matrix rating at team meetings. All potential investments for the Sustainable Future funds go through this process.

The Sustainable team pay considerable sums for the best possible ESG data to help us in our ESG analysis. The team employ the services of Ethical Screening to validate a potential investment in a company as being in compliance with out publicly stated negative screening criteria, as well as review holdings on a quarterly basis to ensure these companies remain in compliance.  The team currently use Sustainalytics, ISS and Ethical Screening to provide initial analysis of sustainability factors.

Liontrust continue to work on providing all our investment teams with more and better ESG data to include in their investment processes. This is being further developed in 2019 with controversy monitoring, more detailed ESG analysis services on a portfolio by portfolio basis and carbon reporting.

In addition to the Sustainable Investment team's robust screening process, some of the segregated mandates managed by the other investment teams apply controversial weapons/cluster munition screens.   

 

 


LEI 06. Processes to ensure fund criteria are not breached (Private)


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