Scottish Mortgage reports increased market risk, stable ESG

LONDON - Scottish Mortgage Investment Trust PLC (LSE:SMT) has issued its Annual Report and Financial Statements for the year ended March 31, 2025, following the Final Results released on May 22, 2025. The report, which includes the Notice of Annual General Meeting, has been distributed to shareholders and is available on the Baillie Gifford website.

The Directors have affirmed the report as fair, balanced, and understandable, providing a true and fair view of the Company’s financial condition and a comprehensive review of its business performance, in line with UK Accounting Standards (FRS 102).

The assessment of principal and emerging risks indicates no significant changes from the previous year. However, the report identifies an increase in financial risk due to market volatility heightened by geopolitical tensions, including ongoing conflicts such as the Russia-Ukraine war and Middle East unrest. The risk associated with private company investments remains stable, with the Managers applying a robust valuation methodology and the valuations being reviewed by the Board semiannually.

Investment strategy risk has also increased, with market appetite for growth investing declining as investors move towards assets perceived as safer. Despite significant share buybacks, the discount of the share price to net asset value has widened over the year.

The company’s climate and governance risk is considered stable, thanks to the Managers’ ESG stewardship and engagement policies. The portfolio’s carbon intensity is reportedly 82.6% lower than the index, based on 68.6% of the equity portfolio that reports on carbon emissions.

Discount risk has risen, with the company buying back £1.71 billion of shares, representing 13.3% of the issued share capital at the start of the period. Although the average discount improved to 9.7%, the discount has widened over the year.

Regulatory, custody and depositary, operational, and leverage risks are all seen as stable, with effective control procedures in place. Cyber security risk remains elevated but stable due to ongoing geopolitical tensions and the potential for increased cyber threats in a hybrid working environment.

Political risk is increasing with the potential for further trade conflicts and sanctions due to geopolitical instability.

The report also highlights the interconnectedness of the global economy as an emerging risk, with supply chain constraints and economic sanctions posing potential challenges. The Managers maintain close links with investee companies to mitigate these risks.

This summary of Scottish Mortgage Investment Trust’s Annual Report is based on a press release statement.

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