Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.
In Tim Marshall’s excellent book Prisoners of Geography, he calls the Strait of Hormuz one of the world’s most strategically sensitive waterways, giving Iran disproportionate geopolitical leverage. We are seeing that leverage playing out today as the oil, gas and fertiliser-laden ships languish in the Persian Gulf, to the detriment of economies across the world.
There is little that can be done about geography, but there is much that can be done to lessen its strategic importance. In the UK there are two ideas: find our own gas in the North Sea; invest more in renewables and nuclear. You will not be surprised that we support the renewable path.
Access to energy is key to a successful modern society. This means energy that is affordable, secure and clean. Solving for these three is the energy trilemma. Renewables certainly deliver energy with minimal pollution, but are they any good at the other two? Ember Energy research[1] suggests that they are. Comparing the current gas price spike with the one in 2021, they calculate that the wind and solar installed in the last five years has saved £7 million a day due to a 39% reduction in the amount of gas-fired electricity. This is important as the price of gas has risen over 40% since the war started.
In Europe too, Jefferies note[2] that countries with a high renewable proportion have electricity prices with much lower correlations to gas prices. In Germany, gas sets the price only 40% of the time, and in Spain a remarkably low 15%.
Having more renewables has helped to make electricity more affordable and secure. Natural gas, whether from the North Sea or fracked in Texas, falls short on all three aspects of the energy trilemma.
For this reason, we continue to favour investments that support the transition to a cleaner electricity system. Electricity will dominate as the energy transmission medium, and renewables will dominate in the production of electricity.
Examples include:
National Grid – Sustainable investment theme: Enabling the energy transition
Siemens – Sustainable investment theme: Improving the efficiency of energy use
Exelon – Sustainable investment theme: Improving the efficiency of energy use
[1] Clean power fortifies Britain against gas price shocks | Ember
[2] Latest energy shock reminds Europe of its risky gas reliance | Ember
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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, in 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. 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.
- 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.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
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.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
