It’s all about the data

Patrick Odier Senior Managing Partner

The big topic so far at this year’s World Economic Forum is the ‘Fourth Revolution’, essentially the digitalisation of our world. Whether it’s Narendra Modi’s comments that data is the biggest asset today, and that it creates the biggest challenges and the biggest opportunities, or Anne Richards’ suggestion that information infrastructure could be the source of the next systemic crisis, all eyes are focussed on the impact digitalisation is likely to have on our societies and our economies.

Will the next big crisis start with data? What would happen if banks were unable to trade for a few days? Or if the cloud ‘went down’? Just as a small number of banks became ‘too big to fail’ in the lead up to 2007, much of the technology infrastructure and ownership of data today falls into the hands of a very small number of people. Perhaps this warrants closer attention by regulators, capital markets and the other global authorities.

We at Lombard Odier are certainly keeping a close eye on this to make sure we understand the implications this has for generating returns and preserving capital in a portfolio.

But digitalisation is not just a source of financial opportunity and risk. It also poses great opportunities and threats to society. Again, investors can play a role in ensuring the future moves more towards the former and guards against the latter.

Just as it is with capital, the gap between the data ‘haves’ and ‘have-nots’ is a key challenge for society.
 

Importantly, digitalisation is its own self-checker because it also provides us with unprecedented visibility. It has given civil society, for example, the kind of transparency and accountability it needed to drive a very meaningful and significant global shift towards a more environmentally and socially responsible agenda.

In this way, digitalisation and the world of Big Data can really work for us, and for society.

It does this by empowering us to gather and analyse a plethora of new metrics to better understand the world we all live and work in, and the impact our lives and businesses have on wider society and the environment. In turn, we, as investors, can begin to understand the links between social and environmental metrics and the behaviour of our portfolios.

We have been using that visibility to build methodologies for integrating environmental, social and governance criteria into our investment process for more than two decades. By doing so, we can choose to allocate capital to companies that behave ‘better’, which has an indirect impact on the societies and environment in which they operate. We can also use that visibility to measure business output and invest in companies that are creating genuinely positive outcomes for society.
 

To that end, digitalisation is not really the problem. It is what we choose to do with it that determines the outcome for society and investors. 

At Lombard Odier we take this responsibility very seriously.