LIONTRUST SUSTAINABLE FUTURE EUROPEAN GROWTH 2

Investment Process

The investment process begins by identifying whether a company is aligned with Liontrust’s sustainable themes, which include resource efficiency and a healthier & higher quality of life. The Sustainable Futures sustainability matrix is then used by the fund managers to look at a company’s quality of management and the policies and practices they have put in place for managing its ESG risks. Companies are given a score between one – the best result they can receive - and five. The team also consider the sustainability of a company’s products/services. An A rating means the company contributes to sustainable development such as renewable energy, whilst an E rating would be tobacco stocks. Those firms with a C3 score or higher are considered for portfolio inclusion. The managers then undertake a bottom-up analysis of a company’s business fundamentals, such as a high barrier to entry and recurring revenues. In the next stage they look at valuations, measuring companies on free cash flow, return on equity and sales growth. They use historic multiples to create a three-year future predicted stock value. This leaves around 100 to 150 stocks for portfolio construction. The managers select 40-60 stocks of these, aiming to give the portfolio diversification across sectors, regions, and growth themes. The portfolio is reviewed by an independent advisory committee, which meets at least three times a year to monitor its social and environmental impact.