In February 2021, Baillie Gifford officially took over as the investment managers for what was the Keystone Investment Trust plc. In doing so, the trust expanded its UK equity mandate to a global remit and applied a dual investment objective. Renamed the Keystone Positive Change Investment Trust, the trust has two equally important objectives: to generate attractive investment returns over the long run AND to contribute towards a more sustainable and inclusive world.

Its managers, Kate Fox and Lee Qian, have been running the Baillie Gifford Positive Change Fund for the past four years. However, the investment trust has the added advantages of being able to borrow money to invest (gearing) and invest in smaller cap and private companies. These capabilities fit well with the trust’s investment philosophy that capital thoughtfully and responsibly deployed can be a powerful mechanism for change, and the managers anticipate many exciting opportunities to do so.

Making a Difference
Both Fox and Qian strongly believe that inclusive capitalism is part of the solution to addressing the numerous environmental and social challenges that our world is facing. Rather than simply excluding companies that cause harm from the portfolio, they are proactively seeking exceptional companies whose core business activities address global challenges and have the potential to significantly improve lives. These companies should enjoy rising demand for their products and services. However, only a select few – between 30 and 60 companies – that can demonstrate the potential to double over the next five years, with significant growth opportunities thereafter, will be considered for the trust.

With so many ways in which businesses can support the transition to a more sustainable world, four impact themes will measure the trust’s impact. Latin America’s largest ecommerce platform, MercadoLibre, is also a leader in the region’s financial technology industry and sits in the social inclusion and education theme. By making it easier and cheaper for businesses to trade, its services help to reduce some of the barriers to socio-economic development in Latin America. Coming under the environment and resource needs theme, Deere uses innovative precision agriculture technology to help farmers lessen their environmental impact, while still increasing the amount of food they produce for the world’s population. Within the healthcare and quality of life theme, Dexcom’s innovative continuous glucose monitoring systems enable over 650,000 diabetics to manage their condition more effectively. The base of the pyramid theme refers to people on the bottom growth rung of the global wealth ladder. Within this category, Safaricom’s M-Pesa mobile money system has over 22 million monthly users and is driving financial inclusion in Kenya.

The Search for Growth
The Positive Change Team has an integrated approach to considering the investment and impact potential of every company, with both investment managers and impact analysts carrying out the proprietary research. They are supported in this endeavour by over 100 investors and a well-resourced Governance and Sustainability Team from across the wider firm.

As an independent investment partnership, Baillie Gifford can afford to be resolutely long term in its investment horizon: five to ten years. This is particularly relevant for Positive Change, where the scale and complexity of the societal and environmental challenges being addressed demands patient and engaged investors.

Positive Change is unlike its benchmark and, as a result, those who invest in it can expect this to drive significantly different performance. The portfolio is truly active: the aim is to hold a small number of exceptional businesses in meaningful sizes that reflect the team’s convictions.

The trust is focused on growth and on finding exceptional, high quality businesses. These will be run by committed management teams whose visions extend to years, not quarters, and where there appears to be a strong competitive advantage over the long term. Where purpose complements profit.

Companies can play a significant role in providing innovative solutions to support our evolving world. Baillie Gifford’s depth of research, it’s long-term horizon and focus on identifying companies with substantial growth potential means that investors can have a positive impact with their capital as well as generating attractive returns.

Keystone Positive Change Investment Trust has embraced a radical change of direction. Perhaps, the world also requires a radical change of direction to secure a safe and healthy future for all?