Eagles and Ostriches: the future of sustainable investment

investment viewpoints

The sustainability revolution: the state of transition

Hubert Keller - Managing Partner

Hubert Keller

Managing Partner

We have arrived in an era of socio-environmental ‘crisis’ in which our social and economic structures are no longer fit for purpose. These issues are feeding into slower global growth and financial market volatility. Sustainability is now a central issue for investors that will increasingly determine which companies will win or lose over the long-term, and will drive future returns for investors.

At the heart of the sustainability challenge is the complex interplay between human development, economic growth and the planet. Economic growth is absolutely essential to improving human well-being and addressing societal challenges. However, for an economy to be sustainable, that growth needs to be inclusive, and cannot have a negative impact on the environment and natural resources we all rely on to survive.

Our current economic model is not sustainable. Over the past few decades, the gains of economic growth have benefitted a relatively small proportion of the global population, and have had a disproportionate impact on the planet, which is now experiencing a changing climate and rising inequality. 

We urgently need to decouple economic growth from our social and environmental footprint. 

In today’s digital age, characterised by transparency and disruption, there is already enormous and growing pressure to address the long-term consequences our traditional economic model has created. These pressures are driven by policy makers through significant re-regulation, by corporate innovation, and by changing patterns of consumption. 

Essentially, they are forcing us to change our established norms and patterns of behaviour, and to rethink how we use natural resources to generate economic growth. This is particularly pertinent as the global population continues to change in size and shape. The rise of the middle class coupled with a rapid increase in the number of households, for example, could exponentially increase our footprint unless our economic and consumption models evolve. 

The transition to a more sustainable economic model requires that we fundamentally change how we operate across every sector, from healthcare to energy, food systems to mobility. In other words, we have to transform our economies. We have to break the link between economic development and environmental deterioration by finding new, more resource-efficient ways of generating genuine and inclusive economic growth. Companies will have to anticipate and react to transition on a massive scale, which will inevitably create risk – those who are unwilling or unable to change will face mounting challenges. But it will also drive very attractive long-term growth opportunities.

At Lombard Odier, we believe there are two main types of companies in this new world : Eagles, which are forward-looking and embrace the strategic importance of sustainability; and Ostriches, which have their heads in the sand and ultimately face existential risks.

Our role as asset managers, on behalf of our clients, is to capture the opportunities and manage the risks of the transition. This means we have to put sustainability at the heart of our investment process so we can identify whether a company is an Eagle or an Ostrich. We believe opportunity is on the side of the Eagles - responsive companies that embed sustainability into their core mission and will be working to deliver on a clear set of objectives to address challenges that are particularly material to their sector. We believe these companies will have healthy business practices and a business model that is built to thrive in the long term and will be better placed to deliver superior financial performance.

This is the Sustainability Revolution and we believe it is the most significant investment opportunity in modern history.

important information.

This document has been issued by Lombard Odier Funds (Europe) S.A. a Luxembourg based public limited company (SA), having its registered office at 291, route d’Arlon, 1150 Luxembourg, authorised and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended; and within the meaning of the EU Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD). The purpose of the Management Company is the creation, promotion, administration, management and the marketing of Luxembourg and foreign UCITS, alternative investment funds ("AIFs") and other regulated funds, collective investment vehicles or other investment vehicles, as well as the offering of portfolio management and investment advisory services.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document  nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Funds (Europe) S.A prior consent. ©2019 Lombard Odier IM. All rights reserved.