After record inflows into sustainable funds during 2020 and 2021, last year was a rockier time for sustainable investments. With the vast majority of the ESG fund market not invested in oil, strategies struggled to outperform and sentiment in the US took a nosedive, with some states banning ESG investments for being ‘woke’.
Yet the Liontrust Asset Management sustainable investment team, who have been managing these types of funds for more than two decades, are more excited about the prospects for investing sustainably than they have been for years.
“I am very confident about the future prospects for these strategies,” Peter Michaelis, head of sustainable investment at FTSE 250-listed Liontrust, tells ESG Clarity.
“We’ve been running portfolios for more than 20 years now and that sort of experience allows us to have the perspective that gives us confidence.
“A legitimate challenge to our approach would be to ask whether our sustainable investment themes have run their course. This would only be the case if we had solved every problem and satisfied every need; we are a long way from that. There’s still plenty of growing to do for sustainable companies.”
Add to this “a more sluggish general economic backdrop” with higher inflation and interest rates no longer at zero, and Michaelis says the volatility of the past year has been an opportunity for the team, who run £11.2bn – a third of Liontrust’s total assets (as at 16 January 2023). They have been taking advantage of the market sell-off by adding to companies the team “have long admired in every aspect except valuation”.