In this tech-enabled financial world, choosing between the providers and products now available online can feel confusing and overwhelming – especially when an increasingly number of them claim to be ‘sustainable’ with your money.
In response to demand for more guidance on how to choose the right one for you (both for your pocket, AND your values), Good With Money has introduced ‘need to know’ reviews.
Here we look at Liontrust ESG Trust PLC (ESGT) – Liontrust’s first investment trust, which is aiming to raise £150 million in a share offer closing on June 29, 2021.
EDIT (July 2, 2021): Liontrust has announced it will not proceed with the initial public offering of ESGT. The company says that also the trust had received significant support from private investors, “overall demand has not been sufficient to meet the minimum of £100 million set out in the Prospectus.”
The deal
Liontrust has a 20-year track record of managing its ‘Sustainable Future’ funds, which regularly outperform mainstream benchmarks while also making a tangible positive impact on the wider world.
Now the asset manager has announced its intention to launch its first investment trust – Liontrust ESG Trust PLC (ESGT).
What is an investment trust? A beginner’s guide
Investment trusts allow you to pool your money with that of other investors to buy a wider range of assets than you could hold on your own. They are set up as companies and traded on the London Stock Exchange.
ESGT will have a portfolio of 25 to 35 sustainable companies around the world (mostly in developed markets) that it considers to have the biggest growth potential over the long term. Minimum investment is £1,000 (at £1 per share) and the share offer closes at midday on June 29.
The trust’s portfolio will be managed by Peter Michaelis, Simon Clements and Chris Foster, who are part of Liontrust’s highly experienced Sustainable Investment team.
ESGT will be managed using the same investment process as the Sustainable Future funds. This identifies companies “helping to create a cleaner, safer and healthier world.” Current trends that the trust will focus on include better resource efficiency, greater safety and resilience, and improved health.
User-friendliness
You can buy shares in ESGT through several online investment platforms; AJ Bell ‘YouInvest’, EQi, Hargreaves Lansdown, interactive investor, and Primary Bid.
While investing using these platforms can be straightforward – see our top sustainable investing platforms – you should consider whether an investment trust is right for you before you go ahead. ESGT is considered a ‘medium risk’ investment and you should be prepared to invest for the long term (over five years).
To avoid paying tax on any returns, you can hold your investment in a stocks and shares ISA or self-invested pension (SIPP).
Sustainable investing option
Liontrust believes that well-run companies with sustainable business models, that aim to make a positive impact on the planet and society, can generate strong returns for investors.
ESGT will have a concentrated portfolio that only holds companies with the highest sustainability scores, as determined by the Liontrust sustainable investment team. It defines ‘sustainable companies’ as those that will:
- capitalise on and help drive the key structural growth trends that will shape the sustainable global economy of the future;
- will provide or produce sustainable products and services;
- and have a progressive approach to the management of environmental, social and governance (ESG) issues.
Unique selling points
- ESGT is “closed-end”, which means it will raise a set amount of money only once, through an initial public offering (IPO) of a fixed number of shares. When all the shares have sold, the offering is “closed” – hence, the name. Liontrust says this structure enables a wider range of investors to access sustainable investing and its expertise.
- A trust enables managers to invest in businesses they believe have years of growth ahead and take advantage of dips in the market when they are trading below their perceived long-term worth.
The plus points
- Up to 10 per cent of ESGT’s 0.65 per cent management fee will be donated to research on, and development of, financial instruments to cover UN Sustainable Development Goals that are hard to focus on via investment. These include ‘no poverty,’ ‘zero hunger’, ‘life below water,’ and ‘life on land.’
- As publicly-listed companies, investment trusts must have a board of directors. This comprises a chairman, an accountant and various directors of different skills, who will ensure the manager fulfils their mandate and acts in the best interests of shareholders.
- Investment trusts can also pay dividends, making them an attractive way of generating an ongoing income stream for their investors.
Expert’s view:
John Fleetwood, of Square Mile Research, says: “This new investment trust is a welcome addition to the burgeoning number of Responsible Investment funds. Most significantly, it allows the fund manager to invest in smaller companies that have the greatest growth potential.
“Furthermore, up to 10 per cent of the management fee will be used to fund research to identify and develop financial instruments covering those UN Sustainable Development Goals that are currently uninvestable. The fund builds on the huge success of Liontrust’s open-ended funds and complements the existing range.”
Any drawbacks?
- Bear in mind that the price of shares in an investment trust can go up or down so you could get back less than you invested.
Cost of use
ESGT’s ‘ongoing charge’ to the investor (this includes the management fee, directors’ fees and auditing fees etc) is 1.07 per cent.
There will also be a fee to pay to the investment platform. This varies depending on which one you choose. For example AJ Bell charges 0.25 per cent, Hargreaves Lansdown is 0.45 per cent and interactive investor charges a flat annual fee of £119.88.
You will need to consider the size of your investment (as a general rule, fixed fee platforms tend to work out better for larger investments while those with a low percentage fee are better for smaller pots), as well as how easily you want to be able to access it (some platforms are better than others).
How does this cost compare with competitors?
Other investment trusts in the ESG sector include Jupiter Green, which has an ongoing charge of 1.41 per cent, Impax Environmental Markets, which charges 0.95 per cent, and Menhadem, which charges 1.96 per cent.
As with ESGT, you would also need to pay a fee to the platform.
Other options
Similar investment trusts worth considering are:
Are there any providers you desperately want us to go deeper on? Let us know here.
This article is in association with Liontrust.
Risk warning: Do remember that the value of an investment and the income generated from it can fall as well as rise and is not guaranteed. Therefore, you may not get back the amount originally invested and potentially risk total loss of capital.
