It comes as quite a shock that Liontrust Asset Management (LIO) has scrapped plans to launch an ESG (environmental, social and governance) investment trust.

It might have been more understandable if Liontrust was a newbie to the world of sustainable investing, but it has built a rich pedigree in the discipline, managing ESG funds for over 20 years and having more than £10 billion of assets under management in the space.

Last year the sustainability investment team won three awards, including Harriet Parker who was named ESG fund manager of the year at the Women in Finance awards.

Poor institutional interest meant Liontrust failed to raise the £100 million required to launch the investment trust despite nearly 2,000 private investors applying to buy shares in the launch offer.

Sustainable funds attracted £1.3 billion in May alone according to the Association of Investment Companies, which suggests that demand for ESG investment has not peaked.

A better explanation for the failure of Liontrust ESG Trust is that there are already plenty of global investment trusts in the ESG space trading at discounts to net asset value such as Keystone Positive Change (KPC), now run by Baillie Gifford, on a 3% discount, while Jupiter Green (JGC) is trading on an 8% discount.

Liontrust ESG Trust joins Buffettology Smaller Companies Trust and Tellworth Recovery & Growth Trust in the list of failed launches in the past few years due to a lack of investor demand. Shares is also aware of a China-focused investment trust launch which was recently pushed back.

According to the AIC, investment trust stock market listings in the first half of 2021 raised £1.2 billion, the most since the first half of 2017.

As the economic landscape evolves so does the demand for different investment products and solutions, which might explain why investors are being pickier with the new trusts they decide to back.

Two of the biggest issues facing investors today are the lack of income, emanating from historically low interest rates and the increasing threat of inflation. Products purporting to address these issues should in theory be better received than a new investment trust already targeting a crowded market such as global equities, for example.

Examples of trusts that have launched in the past few years include Round Hill Music Royalty Fund (RHM) and JP Morgan Global Core Real Assets Trust (JARA), pitched respectively at investor needs for income and inflation protection.

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