Liontrust’s top 10 ethical stocks

TL;DR

Liontrust selects ethical stocks by backing companies aligned with a cleaner, healthier, and safer world while avoiding tobacco, arms manufacturing, fossil fuels, and gambling. Peter Michaelis highlights holdings including Kingspan, Prudential, and Smurfit Kappa, and says Liontrust’s funds were top-quartile performers over the previous 10 years. Read on to understand the selection criteria and why these companies qualify.

Transcript

with me today I have Peter Michaelis who runs the line trust UK Ithaca fund hello Peter hi Emma ethically investing is come a long way in the past few years there's more popular than ever but why do you think that is well I think finally people are making the link that you know the way they invest matters and it affects the world and so just as peo... Read More

Key Insights

• 🌍 Ethical investing is driven by individuals who want to align their investments with their values and make a positive impact on the world.
• ↩️ Evidence suggests that ethical investing does not compromise returns and may even outperform mainstream strategies.
• 🌍 Sustainable strategies focus on companies that contribute to a cleaner, healthier, and safer world, benefiting from societal changes and consumer preferences.
• ✋ Ethical investing avoids sectors with high negative costs on society, such as tobacco, arms manufacturing, and fossil fuels.
• ❓ Traditional companies can be considered ethical investments if they have a positive impact, such as improving energy efficiency or contributing to a circular economy.
• 🎴 Insurance companies, like Prudential, play a significant role in providing security and mitigating risks, especially in regions with low insurance penetration.
• 🥺 Increasing consumer awareness and demand for sustainable packaging, like cardboard, may lead to further growth in companies like Smurfit Kappa.

Questions & Answers

Q: Why does Liontrust consider its top holdings ethical stocks?

Liontrust looks for companies aligned with structural trends toward a cleaner, healthier, and safer world. Examples include Kingspan’s energy-efficient insulation, Prudential’s insurance services in Southeast Asia, and Smurfit Kappa’s recycled-cardboard packaging.

Q: How does Liontrust define ethical investing?

The fund invests positively in businesses providing benefits such as pollution-control equipment, vaccines, and cybersecurity. It also avoids companies whose activities create high negative costs for society or the environment.

Q: Does ethical investing require sacrificing returns?

Peter Michaelis says the evidence from Liontrust’s funds is to the contrary. Over the previous 10 years, all its funds were in the top quartile, and the firm says its approach has outperformed mainstream strategies and benchmarks consistently.

Q: Which sectors does Liontrust avoid in its ethical funds?

Liontrust avoids tobacco, arms manufacturing, fossil fuels, including coal, oil, and gas, and gambling. Michaelis says these industries have high external costs and face a more challenged growth outlook.

Q: Why is Kingspan considered a sustainable investment?

Kingspan makes thermal insulation that improves buildings’ energy efficiency. Michaelis says its sales grew by more than 15% per year on average over 25 years, while its products save energy equivalent to four times London’s annual use.

Q: Why does Prudential qualify as an ethical investment?

Prudential provides insurance that helps people manage the financial consequences of death, injury, and healthcare needs. Liontrust particularly values its Southeast Asian operations, where more than 40% of healthcare spending is paid out of pocket, compared with under 9% in the UK.

Q: Why is Smurfit Kappa included among Liontrust’s ethical holdings?

Smurfit Kappa uses recycled cardboard for packaging, supporting a circular economy and reducing plastic waste. Growing consumer awareness and demand for sustainable packaging may support the company’s continued growth.

Q: Why has ethical investing become more popular?

Michaelis says people increasingly recognize that how they invest affects the world. Investors are bringing the same principles used when choosing food and clothing into their investment decisions.

Summary & Key Takeaways

• Ethical investing has become more popular as people recognize that their investment choices can shape the world.

• Contrary to previous beliefs, evidence suggests that investing ethically does not lead to reduced returns.

• Sustainable strategies focus on companies that contribute positively to a cleaner, healthier, and safer world.