Aligning forces: preserving Natural Capital to build a sustainable economy

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Aligning forces: preserving Natural Capital to build a sustainable economy

Nature is the most productive asset of our economy.

Hence why, we, at Lombard Odier, launched our Natural Capital Investment Strategy, on Monday 16 November 2020. In light of this momentous occasion, His Royal Highness The Prince of Wales hosted a live event with our Managing Partner, Hubert Keller, as a keynote speaker. Our Natural Capital strategy was directly inspired by His Royal Highness and developed in partnership with the Circular Bioeconomy Alliance, which was established under His Royal Highness’ Sustainable Markets Initiative. Today, our WILD (Wasteful, Idle, Lopsided and Dirty) economic model fails to take appropriate stock of Natural Capital - all of the resources from nature that have value but no price.

In light of [the launch of our Natural Capital Investment Strategy], His Royal Highness The Prince of Wales hosted a live event with our Managing Partner, Hubert Keller, as a keynote speaker

This strategy aims to drive transformational change to build a Circular, Lean, Inclusive and Clean (CLIC™) economic model. By investing in sustainable public companies that leverage the regenerative power of nature, the Natural Capital Strategy identifies untapped investment opportunities that will not only deliver strong returns for investors but help accelerate the transition to a more sustainable economy.

We were honoured to discuss the risks and opportunities of Natural Capital and a Circular Bioeconomy with thought-leaders and industry representatives Göran Persson, former Prime Minister of Sweden, Marc Palahí, Director of the European Forest Institute, Jennifer Holmgren, CEO of Lanzatech, a carbon recycler and Stefan Doboczky, CEO of Lenzing AG, a fiber producer for textiles and non-woven applications.

By investing in sustainable public companies that leverage the regenerative power of nature, the Natural Capital Strategy identifies untapped investment opportunities

Harnessing the power of nature

His Royal Highness The Prince of Wales opened the panel discussion with crucial remarks on the central role of nature in our economic model. Today our economy is unsustainable and has been living off Natural Capital for too long. We must rethink and sustain the services that nature provides.

Often, we wrongly assume that our natural resources exist in infinite quantities. Our WILD unsustainable economic model is slowly undermining the productive quality of our soils, ecosystem processes such as pollination, and the natural protection that forests and other ecosystems provide to us.

Marc Palahí, who coordinated the Circular Bioeconomy 10-point action plan on which the strategy’s narrative is based, discussed the vast opportunities that a Circular Bioeconomy can offer. For example, he shared that “wood can be transformed into a totally new range of bio-based solutions that can replace fossil produce for a wide range of sectors. It can capture carbon while reducing emissions.”

“With emerging technologies, such as nanocellulose, we can transform biological resources into a new range of bio-based solutions that can replace and environmentally outperform fossil products from a number of industrial sectors such as construction, chemicals, transport or textiles”, shared Palahí. “The transition to a global circular bioeconomy is an unprecedented challenge but also the greatest business opportunity of the XXI century. And this is what the Circular Bioeconomy Alliance has established”, he concluded.

“The transition to a global circular bioeconomy is an unprecedented challenge but also the greatest business opportunity of the XXI century”, shared Marc Palahí

And investors understand this. Our Managing Partner Hubert Keller shared that “At Lombard Odier, we strongly believe in economic growth but also that this leaner economic framework needs to close the loop. It needs to be fully circular and coexist with nature.”

A profound transition is underway, one that puts climate transition and nature at the centre stage.

”Natural Capital is the bedrock of our economy and it is often forgotten. Without nature, we do not have an economy as more than 50% of GDP relies directly or indirectly on Natural Capital”, explained Keller. We need to shift part of our industrial activity into the bio-based economy, harness the power of nature for economic activity and move to a leaner economy by using our resources more efficiently.


Connecting investors to sustainable, investable solutions

How can we harness the power of nature? Investments, technology and green public policies are key to scaling up and building a CLIC™ economic model that not only prospers in harmony with nature but is also powered by nature.

“Without nature, we do not have an economy as more than 50% of GDP relies directly or indirectly on Natural Capital”, explained our Managing Partner Hubert Keller

The investment industry represents approximatively $ 120tn of capital and its duty will always be to find returns. For our Managing Partner, Hubert Keller, we are at an inflection point. “A lot of investors today are moving away from companies that are exposed to natural depletion and climate change…mainstream capital is being redeployed into companies with business models aligned to this new sustainable, nature-positive economic framework.”

For Göran Persson, there will be winners and there will be losers of this transition. “There’s a competition around the world on how to respond to climate change. Those who come too late in this process will be punished by history. Those who take this opportunity, innovate and invest in this shift will be saluted by the next generations.”

Holmgren added that innovation from the investment community is key to speeding up change and moving the dial. “We need to implement regulations that are looking forward. I ask all for you today to be bold and courageous”, she stated.

Political consensus and green regimes are also key to defining what matters and the way to do it. For Persson:  “European politicians need to agree on a framework to protect our forests and agriculture by restoring it, investing in it and most importantly using its resources”. “By doing so we can scale up, have large-scale agriculture and be aligned with nature and protect it”, he shared.

“A lot of investors today are moving away from companies that are exposed to natural depletion and climate change…mainstream capital is being redeployed into companies with business models aligned to this new sustainable, nature-positive economic framework.” Hubert Keller, Managing Partner

Stefan Doboczky shared that communication and transparency are central and “the initiative of Lombard Odier is excellent as it brings the industries closer.”


The great reset

Now more than ever, we are at a tipping point. In the midst of a pandemic with unspeakable impact on the economy, we must reset our economy and, as Persson stated, this restart must be green.

Evidently, we need to reset the way we do business as companies will accelerate the transition to a sustainable future and will prove the power of investing in nature is a key driver of opportunities.

This is not wishful thinking according to Hubert Keller. “This transition is being pushed by strong market forces.” “If you take nature, innovation in technology, we unlock wonderful opportunities. It has created business models and new opportunities – this is where we can deploy capital”.

Many opportunities already exist today; others are just beyond the horizon representing some of the greatest opportunities of our time

“This transition might take years…but we know we’re moving in that direction. And markets and investors understand this shift. This is why it is crucial to align portfolio and investment”, concluded Hubert Keller.

The launch of the first-of-its-kind Natural Capital Strategy aims to support innovative change, committed sustainable companies and investors as we transition to a CLIC™ economy underpinned by Natural Capital. Many opportunities already exist today; others are just beyond the horizon representing some of the greatest opportunities of our time.

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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