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.
Science is not only a foundation for humanity’s progress but also a critical driver for creating strong investment opportunities. By addressing global challenges through innovation, collaboration, and adaptability, science helps build a future that is cleaner, healthier, safer and ultimately more sustainable. This approach is not just a moral imperative; it also delivers robust financial returns.
The pale blue dot: a lesson in fragility
In 1990, a photograph taken by NASA’s Voyager 1 spacecraft reshaped our understanding of Earth’s place in the universe. The image, known as the “Pale Blue Dot,” captured our planet as a tiny speck suspended in the vast, hostile vacuum of space. This image emphasised Earth’s fragility and humanity’s dependence on its thin atmosphere, a protective layer delicately balanced by billions of years of life’s evolution.
The atmosphere’s composition has changed drastically over millennia, influenced by biological processes. For example, 2.4 billion years ago, cyanobacteria began producing oxygen through photosynthesis. Although this shift enabled the rise of oxygen-breathing organisms, it also triggered the ‘Great Oxidation Event’ − a mass extinction of oxygen-intolerant species.
The ozone crisis: a model for collaboration
This ancient lesson serves as a warning: altering the atmosphere is fraught with peril. Yet, humanity faced a similar challenge in the late 20th century, when Voyager took that photo, when the ozone layer, which acts as the planet’s natural sunscreen, began to thin. Chlorofluorocarbons (CFCs), a class of industrial refrigerants, were found to be the culprits, depleting ozone and allowing harmful ultraviolet radiation to penetrate Earth’s surface. The consequences included increased rates of skin cancer, cataracts, and DNA damage to living organisms. However, unlike ancient bacteria, humanity had the tools to address the crisis: science; government and society; and crucially for us as investors, profit-seeking businesses.
The solution to the ozone crisis exemplifies a powerful synergy between science, governments, and business. Scientific research identified the ozone layer’s function, uncovered the harmful effects of CFCs, and tracked the resulting ozone depletion over Antarctica. Governments then acted on this knowledge, drafting the Montreal Protocol in 1989, which mandated a gradual phase-out of ozone-depleting substances. Businesses, far from being adversaries, became crucial allies, developing and manufacturing safer alternatives to CFCs. The result is a remarkable success story: CFC concentrations in the atmosphere are now declining, and the ozone layer is on track to recover by mid-century.
CFC concentrations in the atmosphere
Source: S. J. Allin et al.: Chlorine isotope composition in atmospheric, CFC-11, CFC-12 and CFC-113. Emissions estimates for CFC-11 (gold), CFC-12 (green) and CFC-113 (orange), based on global tropospheric mole fractions (SPARC, 2013). Each species is represented by three lines. The two emissions estimates from this study (solid lines) are produced using the stratosphere–troposphere exchange flux calculations of Holton (1990) and Appenzeller et al. (1996), with the latter giving slightly higher emissions. These are compared to values from Velders and Daniel (2014) (dashed lines)
This collaboration between science, government, and business extends far beyond the ozone crisis. It has driven improvements in urban air quality, doubled life expectancy over the past century, and significantly reduced workplace fatalities. Businesses that innovate to solve global challenges are often characterised by rapid growth, strong market positions, and long-term profitability. These qualities make them attractive for investment, particularly for those focused on sustainable themes.
Advancing healthcare through genetics
Healthcare is one area where scientific advancement is revolutionising industries. Disease arises from a complex combination of genetic and environmental factors. Approximately 40% of diseases are driven primarily by genetics, while the remainder stem from a combination of the two. Advances in genomics have transformed our understanding of the genetic basis of disease. Faulty genes can produce malfunctioning proteins, disrupting bodily functions and causing illness. Sequencing the human genome, an achievement first made possible in the early 2000s, has unlocked new ways to diagnose, treat, and even cure genetic disorders.
The cost of genome sequencing has plummeted dramatically − from over $100 million in 2001 to less than $500 today − thanks to businesses scaling the technology and reducing unit costs. This affordability was critical in developing the Covid-19 vaccine, enabling researchers to sequence the virus, monitor mutations, and create vaccines at unprecedented speed. Beyond public health emergencies, genomics is enabling targeted therapies for inherited disorders, some cancers, and diseases like inherited deafness and blindness. Early diagnosis, made possible by genetic insights, is helping to detect and treat diseases more effectively, significantly improving patient outcomes.
Cost per human genome
Source: National Human Genome Research Institute, Cost per genome data – 2021
The healthcare revolution has also created valuable investment opportunities. Companies producing laboratory equipment for genetic research are essential to the industry’s progress. For instance, ThermoFisher Scientific, a major player in this space and a company held under our Enabling innovation in healthcare investment theme, exemplifies how such businesses thrive by meeting the demands of cutting-edge research. Pharmaceutical giants like Roche are integrating genetic components into their diagnostics divisions, further advancing early disease detection. Additionally, companies specialising in drug delivery systems, such as West Pharmaceutical Services, are developing innovative solutions for administering complex therapies.
The energy transition: science tackles climate change
Another transformative area is the energy transition, where science is helping reduce carbon emissions and mitigate climate change. Global average temperatures have risen steadily since the Industrial Revolution, with human activity now recognised as the primary driver of climate change. To avoid catastrophic impacts, emissions must be halved every decade − a daunting challenge. Yet science offers reasons for optimism. Energy efficiency alone could reduce greenhouse gas emissions by 40% while lowering energy costs.
Renewable energy technologies, particularly wind and solar, have experienced remarkable cost reductions due to learning curves: for every doubling in solar capacity, costs have fallen by 20%. Wind energy has followed a similar trajectory. Unlike fossil fuels, renewable energy sources have no fuel costs, meaning technological advancements directly translate into lower costs and greater adoption. These dynamics have driven an exponential increase in renewable energy deployment, displacing coal and nuclear power as primary energy sources.
Electricity from renewables became cheaper as we increased capacity – electricity from nuclear and coal didnot
Source: IRENA 2020 for all data on renewable sources; Lazard for the price of electricity from nuclear and coal – IAEA for nuclear capacity and Global Energy Monitor for coal capacity. Gas is not shown because the price between gas peaker and combined cycles differs significantly, and global data on the capacity of each of these sources is not available. The price of electricity from gas has fallen over this decade, but over the longer run it is not following a learning curve. OurWorldinData.org – Research and data to make process against the world’s largest problem.
The transition to renewable energy also includes advancements in electric vehicles, where battery costs are rapidly declining. The energy shift extends to almost every sector of the economy, creating vast investment opportunities. Vestas Wind Systems, a Danish wind turbine manufacturer, exemplifies the potential for growth. Since its listing in 1999, the company has installed 181 gigawatts of turbines, growing its market capitalisation tenfold. Meanwhile, infrastructure investments, such as modernising aging electricity grids, are becoming increasingly critical. Companies like National Grid and Greater Gabbard – whose bonds are held in our corporate bond strategies – are investing billions to support the electrification of energy systems, enabling them to meet the demands of a decarbonised economy.
A bright future for sustainable investment
The lessons from these industries underscore the immense potential of aligning investment strategies with scientific and technological advancements. By focusing on companies driving positive change, sustainable investment funds can deliver strong financial returns while addressing global challenges.
Looking ahead, the interplay of science, society, and business innovation will continue to reshape the global economy. Climate change, perhaps the most pressing challenge of our time, requires the same collaborative approach that solved the ozone crisis. While the task of decarbonising the economy appears daunting, it is far from insurmountable. Technologies that enable renewable energy and energy efficiency are already commercially viable, and their adoption is accelerating. Indeed, the declines in emissions from some developed countries such as the UK, appear to be following an exponential path – just as CFCs did as a consequence of the Montreal Protocol. We believe this is an early sign that the global transition to low-carbon energy is poised to gain momentum.
The future of sustainable investment is bright. Scientific progress shows no signs of slowing, and governments and businesses remain committed to creating a better world. Companies leading the way in healthcare innovation, renewable energy, and energy-efficient infrastructure will continue to grow, delivering both financial returns and tangible benefits to society.
By harnessing these opportunities, sustainable investment strategies not only provide strong returns but also ensure that Earth − our fragile “pale blue dot” − remains a thriving home for future generations.
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KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
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.
The Funds managed by the Sustainable Future 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. Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. May be exposed to Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. 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 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.
The risks detailed above are reflective of the full range of Funds managed by the Sustainable Future 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.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. 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.
This 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. It contains information and analysis that 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 of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
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