The next economic revolution has begun. The Sustainability Revolution. It is our conviction that sustainable investing is the way to generate long-term returns and grow our clients’ prosperity in perpetuity. Through strategic partnerships with the University of Oxford and Systemiq we have developed a unique three-pillared approach to sustainable finance, which allows us to both minimise portfolio climate change risk exposure and capture the vast potential upside of the economy-wide disruption that is already underway.

    Long before worldwide focus turned to sustainability Lombard Odier acted along the lines of sustainable investing. In 1841, Alexandre Lombard warned against investing in southern US companies reliant on slave labour, setting out early our core values and investment principles.

    In keeping with that tradition, and with our independent ownership and roots as a family business, we pride ourselves on being the first global wealth and asset manager to be B Corp certified, demonstrating our strong commitment to making a positive environmental and social impact. We’re also proud to participate in “Building Bridges”, a Swiss summit that unites authorities, international organisations, academics, companies and financial actors in moving sustainable finance forward by accelerating the flow of private sector investment in building a net-zero world.

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    major systems changes.

    A transformation is underway as investor demands, changing consumer behaviour, cheaper technologies and new regulations become powerful drivers in the shift to a Circular, Lean, Inclusive and Clean (CLIC®) economy. This opportunity is re-shaping risk and return across all sectors. And in order to meet a 2℃ scenario, infrastructure investment will need to increase to USD 5.5 trillion per year until 2030. 

    We believe there will be major systems transformations that will be key to achieving a CLIC® economic model in Energy, Land and Oceans, Materials and Carbon.

    Energy: The energy needs of entire industries will be electrified, as we move from a 20% electricity supply to a 70% supply by 2050. Electricity production from renewable or other zero-carbon sources will be ramped up, fossil fuel power plants will be phased out.

    Land and Oceans: Food systems will transform to make more with less. Precision and regenerative farming will increase yields while boosting soil health, consumption will shift towards calorie sources that require less land and freshwater use, and distribution innovations will cut food waste. Pressure on agricultural land and forests will lift, allowing millions of hectares to be restored to nature.

    Materials: Less will be extracted, more will be recycled and re-used. Through innovative new materials, more efficient recycling, low carbon secondary materials and service-based business models we will break the link between production and resource extraction.

    Carbon: Carbon will be priced efficiently, and carbon markets will become more robust and more deeply embedded across sectors. Carbon credit schemes that fail to demonstrate their promised real-world impacts will fall from favour. Predictably increasing prices will incentivise the shift to low carbon technologies.

    We believe there will be major systems transformations that will be key to achieving a CLIC® economic model in Energy, Land and Oceans, Materials and Carbon

    how we select companies for portfolios.

    Companies are central in the shift towards sustainability. At Lombard Odier our specialty is in identifying those companies that will provide the sustainability solutions needed within and across sectors, and those that have the vision to adapt to this new CLIC® economy. When analysing companies we reach beyond traditional ESG metrics, which often focus too much on past performance and too little on a company’s future sustainability trajectory.

    Using proprietary industry and geospatial data, and academic and public sector research, we analyse a company’s business practices in light of sectoral shifts and changing regulatory frameworks, and measure alignment with the 17 UN sustainability goals and the goals of the Paris Agreement. We further analyse more than 100 data points in order to build a comprehensive sustainability trajectory and to assess exposure to controversies. 

    When analysing companies we reach beyond traditional ESG metrics, which often focus too much on past performance and too little on a company’s future sustainability trajectory

    Investors today are asking the same questions: what is the carbon risk inherent in my portfolio and how can I manage it? Through our deep in-house carbon expertise, and dedicated methodologies such as our Portfolio Temperature Alignment Framework, we are able to assess the future temperature trajectories of 23,000 companies and 120 countries, and calculate the extent to which a portfolio is exposed. This enables us to minimise carbon risk and capture performance upside in a decarbonising but increasingly carbon-damaged world.

    Using proprietary industry and geospatial data, and academic and public sector research, we build a comprehensive sustainability trajectory

    integrating sustainability as a core conviction.

    Our “core conviction” portfolios use sustainability as the main driver of outperformance, focussing on solutions providers to sustainability-related challenges and transition leaders within their sector or industry. We also offer portfolios that incorporate sustainability to mitigate risk and drive outperformance, and personalised sustainable portfolios, built around clients’ individual specifications.

    Our Sustainable Investment Research, Strategy and Stewardship team is comprised of economists, environmental engineers, scientists, financial and geospatial analysts. They are responsible for the rigorous methodology and scientific framework that underpins our investment decisions. We aspire to be at the cutting edge of innovation as the CLIC® transition unfolds. This is why we work with leading partners such as the University of Oxford fostering research on sustainable finance and investment. Through our partnership with Systemiq we identify thematic risks and opportunities before they crystallise and via our work with E4S (Enterprise for Society) we spearhead the transition towards a more circular economy. These collaborations validate our scientific assumptions, stress test our models and underpin our investment strategy.

    Our “core conviction” portfolios use sustainability as the main driver of outperformance, focussing on solution providers to sustainability-related challenges and transition leaders within their sector or industry

    our investment strategies.

    Investment risks can be expected to materialise amongst laggards in many industries but we believe that a considerable investment upside will be unlocked as opportunities shift towards solution providers and transition leaders. At Lombard Odier, we believe our fiduciary duty calls for us to grasp these opportunities whilst understanding and managing the downside risks related to the environmental transition. We do this via thematic and impact strategies. Our thematic strategies focus on “green alpha” and capture performance upside related to the environmental transition whilst our impact strategies focus on deploying capital in order to accelerate the transition via solutions that have high potential for scale.

    We have developed a series of strategies that we believe will enable us to transition to a CLIC® economy:

     

    planetary transition.

    In March 2020, we launched our Planetary Transition Strategy. This actively-managed strategy invests in a high conviction portfolio of 40-60 firms positioned to grow in a carbon-constrained and carbon-damaged world, including those in hard-to-abate industries. We focus on activities aimed at adapting to a climate-damaged and carbon-constrained world, such as flood defences, insurers and firms providing efficiency solutions and renewables.

    circular economy.

    Through our Circular Economy Strategy we look to rethink the role of nature – the world’s most valuable industry – in our economy, by targeting small and mid-cap companies that both harness nature’s untapped potential and preserve its value through a leaner form of industry.

    Our Circular Economy Strategy embraces opportunities focussed on both the circularity of industry and the circular bioeconomy. We aim to identify companies in North America, Europe and Asia that are already profitable and well-positioned to take advantage of four unstoppable growth opportunities: the circular bioeconomy, resource efficiency, outcome-oriented consumption and zero waste.

    The strategy is focussed on identifying companies that are already profitable and well positioned to take advantage of four unstoppable growth opportunities: the circular bioeconomy, resource efficiency, outcome-oriented consumption and zero waste

    our Net Zero Investing Strategies.

    Our range of Net Zero Investing Strategies seek investments that are resilient to, and positioned to benefit from, the seismic shocks of a net-zero world, and focus on companies already aligned with the goal of net zero and those with the potential for acceleration. These strategies embrace every sector, not just the low emitters, and reflect our belief that there are no ‘good’ or ‘bad’ companies, only those in transition: moving fast, slowly, or not at all.

    Crucially, these strategies are forward-looking. A granular understanding of how companies are approaching their decarbonisation pathway helps us evaluate the structure of their future cash flows and the likely impact on their valuations. We call this approach Climate Value Impact. By taking a science-based approach to achieving a 50% carbon emission reduction by 2030, and 100% by 2050, we are able to deploy capital across all sectors and regions of the global economy without bias.

    Through these strategies investors can maintain portfolio integrity while supporting the companies that are driving the net-zero transition. Built to cover both global and European markets, our strategies are Paris-Aligned and contribute to a reduction in global CO2 emissions.

    These strategies take a science-based approach to achieving a 50% carbon emission reduction by 2030, and 100% by 2050

    food systems.

    Our food systems strategy seeks to capture the upside of a food systems transformation that is already underway, as we move towards a model that can feed a growing population while operating within, or even helping to restore, our planetary boundaries.

    This strategy invests in a high conviction portfolio of 35-50 companies, focussing on sustainable food production and consumption, and on enabling solutions that will improve the efficiency of production and distribution. Through our partnership with Systemiq we identify thematic risks and opportunities before they crystallise, in a transition that we believe will unlock USD 1.5 trillion of opportunities by 2030. 

    carbon markets.

    Our carbon markets opportunity strategy seeks to invest in the currency of decarbonisation. Carbon prices need to significantly increase in order to achieve climate goals. Our Global Carbon Opportunity offers unique portfolio construction benefits as it captures the upside participation in both established and emerging carbon markets.

    Focussing on the highest environmental and social integrity, this strategy invests in carbon allowances and carbon credits across both compliance and voluntary markets. Offering a hedge against climate transition risks and inflation, the strategy offers a zero-emissions investment opportunity with a positive impact on climate, people and the planet.

    energy systems.

    Our Future Electrification strategy aims to capture the “green alpha" generated as we transition from 20% economy-wide electrification to 70% by 2050. This shift is well underway, with many crucial tipping points already reached, driven by rapid efficiency gains and plunging costs in both the supply and demand sides of the switch from fossil fuels to zero-emissions electricity. In power infrastructure we are seeing a shift from centralised to de-centralised energy production and storage; in transport we are quickly moving away from petrol and diesel; heavy industries are gearing up to transition from fossil fuels to clean hydrogen produced using renewable electricity; and in the buildings sector, natural gas boilers are fast being replaced with electric heating systems.

    Through this strategy we aim to “follow the capex", identifying the USD 24.5 trillion of capex investment that is being deployed between now and 2030 to take advantage of the efficiency gains that electrification is making possible. Our focussed, high-conviction strategy seeks out opportunities in both supply and demand, and the many physical and digital solutions that will enable this historic shift to carbon-free, zero-marginal-cost renewable power.

    nature's regenerative power.

    We believe that nature is the most transformative technology on Earth. Today, nature is becoming an entirely new asset class, creating value, cash flow and returns. Nature-based solutions, including the protection, restoration and sustainable management of our land systems, provides an opportunity for investors to diversify portfolios and minimise their climate-risk. At Lombard Odier, we believe that investing in nature-based assets such as high-quality coffee, cocoa, cosmetic ingredients and carbon neutralisation and building Regenerative Value Chains will accelerate the transition to a net-zero, nature-positive economy whilst creating social and environmental benefits for local communities and nature where it is most at risk.

    where we are.

    Our heritage is Swiss, yet our outlook and mind set are resolutely international. With over 25 offices globally, we are able to serve our clients all over the world.

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