Real Assets
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Objective
For Daikin to exit from its business supplying weapons containing white phosphorus.Â
Background
We sold our position in Daikin in the Resource Efficiency theme in Q4 2023.
Daikin is a leading provider of high-quality, energy-efficient heating, ventilation and air conditioning (HVAC) solutions for the residential, commercial, and industrial sectors. The company has a long track record of profitable growth and developing innovative new products. Our investment thesis was that its energy-efficient HVAC solutions would drive market share gains over time.
We learned that the company was involved in the production of white phosphorus weapons and therefore divested. Weapons containing white phosphorus are widely considered to be controversial because of their incendiary characteristics.
Having consulted with WHEBâs independent Investment Advisory Committee, we decided to include white phosphorus in our definition of banned and controversial weapons where we apply a 0% revenue threshold1.
Actions
We engaged Daikin on this matter with the aim of having the company exit the business supplying white phosphorus containing weapons.
In our communication, we outlined both our own concerns, as well as those of our investors. We also explained that any company with any activity involving armaments and white phosphorus is a prohibited investment and that we would ultimately sell our position in Daikin if it remained committed to this activity.
Unfortunately, we were unable to get any reassurance that the company was thinking about exiting the business so we sold our shares in Daikin in Q4 2023 and disqualified it from our investment universe.
Progress/Outcomes
M4 â It was recently announced that Daikin has decided to exit the production and sale of artillery shells containing white phosphorus that it supplies to Japanâs Ministry of Defense. While fulfilling existing orders through to the end of 2025, Daikin has stopped accepting new orders as of this year.
Although Daikin still faces several challenges, including an inventory surplus, rising global competition, and recent management disruption, this move signals a commitment to ESG priorities and addresses ESG concerns raised by us and other stakeholders.
Important information
Foresight Group LLP does not offer legal, tax, financial or investment advice and the information on this website should not be construed as such. We recommend investors seek advice from a regulated financial adviser. The opportunity described in this document may not be suitable for all investors. Any such investment decision should be made only on the basis of the Fund scheme documents and appropriate professional advice.
Foresight Group LLP acts as investment manager and is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 198020 and has its registered office at The Shard, 32 London Bridge Street, London SE1 9SG.
OEICs
An investment in FP Sustainable Future Themes Fund, FP Foresight Global Real Infrastructure Fund, FP Sustainable Real Estate Securities Fund, FP UK Infrastructure Income Fund or FP WHEB Sustainability Impact Fund and Liontrust Diversified Real Assets Fund (together the âFundsâ) should be considered a long-term investment that may be higher risk. Portfolio holdings are subject to change without notice.
The Authorised Corporate Directors FundRock Partners Limited (registered office at Hamilton Centre, Rodney Way, Chelmsford, England, CM1 3BY) and Liontrust Investment Partners LLP (registered office 2 Savoy Court, London WC2R 0EZ), are authorised and regulated by the Financial Conduct Authority with Firm Reference Numbers 469278 and 518552 respectively. The Funds are incorporated in England and Wales.
ICAVs
An investment in the WHEB Sustainable Impact Fund and the WHEB Environmental Impact Fund (together the âFundsâ) should be considered a longer-term investment that may be higher risk. Portfolio holdings are subject to change without notice.
The Manager of the Funds is FundRock Management Company S.A., authorised and regulated by the Luxembourg regulator to act as UCITS management company and has its registered office at Airport Center Building, 5, Heienhaff, L-1736 Senningerberg, Luxembourg.
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