The year of the new normal: looking ahead at 2021

FT Rethink

The year of the new normal: looking ahead at 2021

Kristina Church - Head of CLIC™ (Sustainable) Solutions

Kristina Church

Head of CLIC™ (Sustainable) Solutions

The Covid-19 pandemic overshadowed 2020 by taking an unprecedented and unexpected toll on our personal and professional lives. But as hopes for a successful vaccine materialise and countries begin to emerge from tougher lockdowns, it is time to look at future trends and the opportunities that lie ahead in a “new normal”.

In our video with the Financial Times, Kristina Church, our Head of CLIC™ (Sustainable) Solutions, Lombard Odier Investment Managers, identifies key investment trends we expect to see in 2021. She also gives some insight into how new sustainability regulations will impact businesses.

…as hopes for a successful vaccine materialise and countries begin to emerge from tougher lockdowns, it is time to look at future trends and the opportunities that lie ahead in a “new normal”

Preparing for the future

We believe 2021 will be the year of economic catch-up. Sustainable investing will shine as investors begin to wake up to the returns. The transition to a Circular, Lean, Inclusive and Clean (CLIC™) model is already underway and as sustainability trends accelerate, businesses must adapt to the challenges. These challenges can come in the form of the transition to net-zero, the resilience of supply chains during a global pandemic or the need to evolve to a leaner, more circular industry and a greater focus on harnessing and preserving nature and biodiversity. Companies are understanding that sustainability is not just a box to tick but a long-term focus on resilience and adaptability.

Companies are understanding that sustainability is not just a box to tick but a long-term focus on resilience and adaptability

The pandemic has reinforced the importance of forward-looking active management and judgmental analysis of company business models. This is why, at Lombard Odier, we’ve developed a robust, science-based method called the LO Portfolio Temperature Alignment (LOPTA) Tool to pair portfolios with the companies best positioned to capitalise on the climate transition opportunity. It allows us to monitor where companies are positioned today in terms of their temperature trajectory and to see whether they are aligned with The Paris Agreement and net zero commitments.

It is vital to understand which companies are the most prepared and able to adapt to future sustainability challenges.

The key trends of the year

The pandemic has been a key catalyst in furthering sustainable engagement. But, digitalisation and technology are the also key enablers of sustainable investing, allowing for economies of scale and sustainable technology costs to come down. So, as going greener gets cheaper, we expect to see growth opportunities for companies that are leading in this space and returns for our clients in sectors such as infrastructure, electrification, micro-mobility and nature-positive projects.

Cities will have to adapt to this new normal where habits such as remote working and online shopping begin to take precedence. We have a strong conviction that 2021 will mark a point in time for cities to rethink the way they are structured and built. 

…we expect to see growth opportunities (…) in sectors such as urbanisation, electrification, micro-mobility and nature-positive projects

The rise of electrification will disrupt the way we think about mobility .And it is not just cars. We see great opportunities in micro mobility such as electric two wheelers, electric pods and electric tuk-tuks in developing markets.

Last but not least, we expect 2021 to be about nature. The pandemic has been a wake-up call showing the interdependence between nature, humans and the encroachment on natural habitats. We must broaden the concept of sustainability to not only focus on net zero emissions and greenhouse gas emissions, but also on what we are doing with our natural capital, how we can preserve it and harness its value.


Forces aligning

Luckily, 2020 did not see the Covid crisis putting a dampener on country or company ambitions towards net-zero. In 2021, we expect to see a greater focus on further investments into nature, especially given the clear linkage between transmission of zoonotic disease, climate change and the destruction of natural habitats as well as the importance of nature to healthcare and vaccines. We also expect climate issues to remain on the forefront of agendas.

The acceleration in regulation focused on a green recovery presents multiple, exciting investment opportunities in the sustainability space

With COP 26 scheduled for Glasgow, we will likely see new targets coming out globally, increased investment into green industry and further discussions on how to price carbon effectively. We’re expecting to see more regulations for companies on how they need to disclose on nature with the task force for nature related financial disclosure (TNFD) and COP 15 in Kunming, China.

The European Union’s (EU) Green Deal is highly focused on strategies that are synonymous with CLIC™, such as the circular economy, decarbonisation and nature. In 2021, we expect to hear more detail on the direction many of these elements will take, including the Carbon Border Adjustment mechanism. We have also seen the US re-enter the Paris Agreement, thus setting a large proportion of the global economy on a net-zero trajectory.

The acceleration in regulation focused on a green recovery presents multiple, exciting investment opportunities in the sustainability space.

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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