Engagement is a core part of the Sustainable Future process. During the quarter, the team made 77 requests for change across issues ranging from workforce disclosure to ethical AI.
Harriet Parker: Engagement is an essential part of our sustainable investment process. It's the way we hold investee companies accountable and how we help to effect positive and lasting progress. Over the third quarter of 2025, the team made 77 specific requests for change on key environmental, social, and governance issues. Now, most of these requests related to us asking companies to disclose more information about how they manage their employees and workers in their supply chains through the Workforce Disclosure Initiative. But activity over the quarter also included the team raising topics such as supply chain sourcing arrangements, discussing the Net Zero Banking Alliance, asking questions of banking companies' investments in the oil and gas sector, and we also continued our engagement on the Ethics of AI.
Here, we're encouraging the adoption of policies and practices that ensure companies properly map their use of AI systems and use it responsibly. Here, we spoke to PayPal, the global digital payment company on this topic, meeting with investor relations and leaders across the business. This engagement was in collaboration with other investors and a part of our initiative from the World Benchmarking Alliance on Ethical AI.
We also met with Core & Main in an effort to encourage the company to produce more information on its sustainability impact and mitigation efforts. Core & Main is a major distributor of water pipes and storm drainage products in the US and it fits neatly into our sustainable investment theme of 'improving the management of water'. Although the company's product suite is very strong, it has a lower than average management quality rating, so we focused our meeting on suggesting areas where we'd like to see more information. Specifically, we asked it to report on Scope 1 and 2 emissions and to establish clear reduction targets. The company explained that it has completed its carbon assessment, it's routinely tracking its Scope 1 and 2 emissions and it will update us about its plans to publish all this once it's been evaluated and agreed internally. We also requested that Core & Main disclose a policy on supplier and raw material sourcing and improve the gender diversity of its board given we notice this has dropped to 30% from 37% last year.
Over the quarter and outside of our engagement figures, we also took the time to ensure that companies were aware of how we'd voted at recent AGMs where we'd either abstained or voted against proposals. Addressed to the company secretary, we sent 87 companies detailed emails with our voting rationale, reminding them of our expectations on key governance topics such as board gender diversity, board independence and remuneration. Although active ownership our voting and engagement efforts is resource intensive, we think it's well worth it. We believe it helps to drive positive change, and it means we gain deeper insights into how these businesses operate, helping us to select and invest in high quality companies and make considered investment decisions.
KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The Funds managed by the Sustainable Investment team:
- Are expected to conform to our social and environmental criteria.
- May hold overseas investments that may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of a Fund.
- May hold Bonds. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay.
- May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
- May invest in smaller companies and may invest a small proportion (less than 10%) of the Fund in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, the fund may not be able to sell a position for full value or at all in the short term. This may affect performance and could cause the fund to defer or suspend redemptions of its shares. May invest in companies listed on the Alternative Investment Market (AIM) which is primarily for emerging or smaller companies. The rules are less demanding than those of the official List of the London Stock Exchange and therefore companies listed on AIM may carry a greater risk than a company with a full listing.
- May, under certain circumstances, invest in derivatives, but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead. The use of derivative instruments that may result in higher cash levels. Cash may be deposited with several credit counterparties (e.g. international banks) or in short-dated bonds. A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Do not guarantee a level of income.
The risks detailed above are reflective of the full range of Funds managed by the Sustainable Investment team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
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It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
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