from WILD to CLIC™.

At Lombard Odier, we believe that The Sustainability Revolution is no longer a mere ideal and is already affecting every sector and every industry. We can see no development more significant or more urgent than the need for a fundamental redesign of our economic model, which is currently unsustainable. We must evolve and transition to a more sustainable, regenerative alternative – a future based on a Circular, Lean, Inclusive and Clean model. We call it the CLIC™ economy.

The CLIC™ economy will affect every single sector, creating a USD 5.5 trillion investment opportunity annually

From WILD…

Human activity has pushed us across many of the planetary boundaries that define the biophysical safe space within which society can flourish1. Current government policies place us on track for over 3°C of global warming before the end of the century, significantly above the target of the 2015 Paris Agreement that aims to limit warming to well below 2°C and to pursue efforts to limit the temperature increase even further to 1.5°C. Missing this benchmark will bring calamitous effects on the economy - which is itself a subset of the earth’s biophysical systems.2

The root of the problem is our ever-growing level of material consumption, which has led to unprecedented rates of resource extraction, pollution, and waste. This model is WILD (Wasteful, Idle, Lopsided and Dirty).
 

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Today, we are Wasteful. Recycling rates remain low with uneven progress in sectors. We disregard the finite nature of our resources. Take plastic for example. 79% of plastics produced have ended up in landfills and across all materials, only 43% re-enters the economy through water treatment, composting, land application, recycling and other forms of recoveries. This behaviour is pushing the regenerative ability of our ecosystem to the brink.

79% of plastics produced have ended up in landfills

Our economy is too Idle. We consume and accumulate goods in excess. Passenger cars sit idle an estimated 92% of the time, while office spaces are vacant 50-65% of the time3. Similarly, government equipment is estimated to remain unused 70% of the time. This linear model of “Take, Make, Waste” drives demand for unsustainable and inefficient products.

The world is Lopsided. Prosperity has been unevenly distributed, with swathes of the global population increasingly disenfranchised and without access to affordable healthcare. This has resulted in increased inequalities which drive social tensions. The bottom half of all adults in the world collectively own less than 1% of global wealth. What’s more, the middle classes are feeling the squeeze, and racial and gender inequality prevents society from reaching its full economic potential.

A carbon-intensive, Dirty economy is putting our ecosystem at risk. There is untold pressure on arable land due to climate change and increased food requirements. Supply chains are complex leading to additional transportation and energy requirements. Excessive use of chemicals, including fertilisers and pesticides, has caused land degradation and threatens human health, biodiversity and the planetary food chain. Neither our extraction of material resources nor our rates of emissions and waste can continue at present rates.

… to CLIC™

However, we believe our economy is already transitioning towards a model where growth decouples from its negative social and environmental footprint using a series of value-seeking strategies to achieve this goal. We refer to this as the CLIC™ model – one that is Circular, Lean, Inclusive and Clean.

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To transition to a better future we must create a Circular economy. One focused on reduced demand for goods, on the extension of product life, and on the reduction of waste. This model would only return outputs such as water and compost to the environment as they can be readily re-absorbed. Circularity refers to the re-design of products and business models to promote the reduction, repair, re-use, re-distribution, and recycling of products. We have to change the way we produce. Plastic serves as a good example. There are numerous opportunities to reduce, reuse and manage plastic waste such as clean-up projects, improving stock management, introducing smart packaging and the use of technology in sorting and processing waste.

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Learning to be Lean will be essential to this new economy. Lean focuses on efficient production and consumption, and on extracting only the natural resources that can be sustained or regenerated. In this light, we can aspire to produce better quality products with fewer resources. This future will see models moving away from personal ownership and towards a sharing-based economy including ride-, home-, and office-sharing. Mobilising idle assets via the sharing economy is a key step in moving to more rational forms of consumption and production.

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Building an Inclusive economy means we can deliver affordable solutions to all. This implies that businesses have a triple bottom-line comprised of people, planet and profit.  Now is the time for productivity gains to be shared with employees via fair wages and opportunities for advancement. Governments must invest in education, offer access to health and public services, and create green urban systems. Technologies such as Artificial Intelligence (AI) will act an as enabler to maintain and build smart solutions and change the face of the workforce.

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Creating a Clean economy is essential. Falling costs, increasing unsubsidised competitiveness of renewable energy and the dawn of electrification in mobility are crucial first steps. In order to reach a net-zero emission future, we need to bolster this with a monumental improvement to: energy efficiency, pollution controls and carbon pricing, policy alignment and market design overhauls, removal of wasteful and inefficient subsidies, sustainable food and land-use systems and negative emissions technologies. A cleaner economy mitigates climate risks, reduces the massive socio-economic costs of pollution and creates investable opportunities linked to demand for low-carbon products and infrastructure. The transition to a clean economy requires a move to lower emissions as well as a more sustainable relationship with nature.

Rather than detracting from prosperity and growth, the CLIC™ economy thrives on efficiency and innovation to boost growth, in synergy with the wider environment.  New, disruptive business models offer unprecedented opportunities while critically working to reduce our impact on the environment and deliver prosperity on a broader and more equitable basis.

The CLIC™ economy is one that puts us on a pathway to a zero-emissions, zero-waste economy, with a footprint contained within our environment’s regenerative capacity, while still driving advances for our growing population. We are at a tipping point and companies face a choice. There are significant opportunities for green growth, disruptive business models, and innovative solutions. Companies with strong, forward-looking management and the vision to understand and exploit the underlying trends driving the transition, will prosper. 

Powered by a positive feedback loop of economic and market forces, we believe the transition will continue to accelerate. It will affect every single sector, creating a USD 5.5 trillion investment opportunity annually. Capturing these opportunities requires that we rethink the traditional approach to excluding carbon-intensive sectors. The global economy cannot grow without them, even when net-zero emissions is achieved.

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Our belief

At Lombard Odier, we embrace carbon-reduction solution-providers as well as transition candidates from carbon-intensive, but economically-vital sectors. Focusing on an unadjusted carbon footprint can be misleading. This is why we focus on “additionality” to identify carbon-intensive companies that avoid or capture carbon in other parts of the supply chain. We also look for companies that benefit from the need to adapt to an increasingly carbon-damaged world.

Our priority is to meet our clients’ long-term objectives while fostering the adoption of economic models that are fully consistent with the UN Sustainable Development Goals. It is our duty to help our clients mitigate the risks and capture the opportunities as the transition to a CLICTM economy unfolds.


1 Potsdam Institute for Climate Impact Research (2015). Four of nine planetary boundaries now crossed. Accessed at https://www.pik-potsdam.de/news/press-releases/four-of-nine-planetary-boundaries-now-crossed
2 OECD (2020). Beyond Growth: Towards a New Economic Approach. Accessed at https://www.oecd-ilibrary.org/economics/beyond-growth_33a25ba3-en;jsessionid=UCdHj6LwRFmv9cM-s0gYPISS.ip-10-240-5-108
3 Ellen Macarthur Foundation (2015). Towards a Circular Economy: Business Rationale for an Accelerated Transition. Accessed at: https://www.ellenmacarthurfoundation.org/assets/downloads/TCE_Ellen-MacArthur-Foundation_9-Dec-2015.pdf
4 See PDF “CLIC™” Mobility: A Climate Transition for Transport in a Post-COVID World

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