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    risks.

    The following risks may be materially relevant but may not always be adequately captured by the summary risk indicator and may cause additional loss: Concentration risk, Emerging market risk and Active management risk. Sustainability risks may lead to a significant deterioration in the financial profile, profitability or reputation of an underlying investment and may therefore have a significant impact on its market price or liquidity. The environmental, social, and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

    glossary.

    Circular Economy

    Investing in tomorrow’s nature-positive economy

     

    From regenerative agriculture to water, waste management and smart packaging – the Circular Economy strategy invests in companies embracing system changes within the bioeconomy and resource efficiency to benefit from the transition of our linear economic model towards a more circular one, favouring a nature-positive economy.

    Please note before 1 May 2023, the fund was named LO Funds – Natural Capital.

    50%

    of global GDP
    underpinned by nature1

    $750bn

    wood product market 
    by 2030

    7.5GtCO2

    potentially avoided by 2030 
    with repair and reuse

    1  World Economic Forum, ‘Nature risk rising’ report, January 2020. Other sources : LOIM Research projections.

    nature-positive
    nature-positive·our strategy·investment philosophy·why us?·investment approach·investment team ·get in touch·insights

    favouring a nature-positive economy.

    As escalating strain on natural systems becomes ever more difficult to ignore, shifts toward regenerating natural systems will transform how companies interact with the planet’s resources, moving from a linear, extractive model to one that prioritises circularity, resource efficiency and preservation.

    Leaders in resource-intensive and land-dependent sectors will unlock value by rethinking supply chains, shifting to closed loop systems, innovating with sustainable materials and embedding nature-positive practices into their operations.

    Breaching nature’s boundaries – such as biodiversity or freshwater – creates pain points which are catalysts for systems change. In turn, these move us to new economic systems comprised of solutions that shift profit pools and re-shape equity markets.

    our strategy.

    We see system changes taking shape around the bioeconomy and resource efficiency combined with smarter solutions, driving a move to a nature-positive and digitally-enabled economy. The Circular Economy strategy aims to identify beneficiaries in the equity market and deliver superior returns by:

     

    1

    Finding investment opportunities from the analysis of key system changes in the bioeconomy and resource efficiency, while including digitalisation as a key enabling technology

    2

    Seeking companies benefiting from these system changes that we identify as being mispriced, able to defy the consensus with resilient growth, capable of beating the fade and avoiding multiple compression

    3

    Constructing a portfolio that balances risk with return.

    How can investors benefit from the growth potential of companies that are harnessing the productive and regenerative power of nature via the circular bioeconomy and greater resource efficiency? Watch our video.

    investment philosophy.

    Protecting and restoring natural systems is vital for ecological balance, long-term economic resilience and growth. As we price nature’s risks and opportunities, and mitigate and adapt to its consequences, regenerative processes and principles will become embedded into our economic model and its value chains. The value of natural capital flows will unavoidably be priced into financial decision-making.

    In this changing context, companies relying on unpriced externalities, excess primary resource extraction, polluting processes, and with fragmented and unresponsive value chains will face structural headwinds. In contrast, companies utilising renewable or regeneratively grown input, closed loop processes, digital technologies for leaner processes, integrated and smart supply chains, as well as service-based business models are well-positioned to capitalise on the opportunities resulting from the transition towards a nature-positive economy.

    pricing nature’s risks and opportunities2

    System change investing asks where trends are leading to inescapable pain points, triggering inflection points towards superior economic systems that can economically outcompete while restructuring value chains, profit pools and equity markets. The Circular Economy strategy invests in the system changes taking shape around the bioeconomy and resource efficiency.

    the bioeconomy.

    The bioeconomy favours biobased products, for example timber, which serve as eco-friendly alternatives to resource intensive products, like cement and steel in construction. Smart farming technologies – such as precision agriculture and Internet of things (IoT) sensors – optimise resource use, reduce waste and lower the environmental footprint of agriculture. Additionally, closed-loop water systems recycle water within a system, minimising fresh water consumption and waste.

    For example, high-intensity agricultural food production damages natural capital. More than half of total agricultural land is degraded from practices that use freshwater intensively, promote deforestation, release greenhouse gas (GHG) emissions and drive biodiversity loss both on land and in water.3

    52%

    of total agricultural land is degraded

    70%

    of all fresh water is used for agriculture

    80%

    of global deforestation is due to agriculture

    29%

    of GHG emissions are released from the food system

    70%

    of terrestrial biodiversity loss is linked to drivers from food production

    50%

    of freshwater biodiversity loss is linked to food producers

    resource efficiency.

    As the population grows, demand is expected to surge for resources such as non-metallic minerals, metals and biomass materials. Resource efficiency means reduced inputs of virgin materials into our economic model, but also less output being consumed and more being reused. Better design, better materials, better processes, longer product longevity, sharing over owning and recycling are all attractive investment opportunities.

    Companies embracing such growth or productivity potential from smarter industrial processes, through to the many advances in lightweight and improved construction materials are likely to be the best positioned to capitalise from the transition towards a nature-positive economy. Rising nature-induced risk will drive a larger role for materials from regenerative, renewable and closed-loop recycled sources, alongside innovative performance materials.

    resource demand expected to surge (Giga tons per annum (GT pa by type, global))4

    digital enablers.

    Digitising the physical world through technologies like IoT, AI and big data analytics enables the creation of digital solutions that optimise resource use and reduce waste. For instance, precision agriculture uses sensors and data to enhance crop yields while minimising environmental impact. In industrial processes, digital solutions, such as advanced manufacturing and prototyping play a crucial role. Technologies such as 3D printing, digital twins and AI-driven automation enhance production efficiency, reduce material waste and improve product quality.

     

    These innovations are pivotal in driving the sustainability transition and operational excellence in the manufacturing sector. They also contribute to a lower environmental footprint and foster a nature-positive economy.

    skyrocketing amount of data from billions of interconnected devices5

    why us?

    In contrast with competitors, our Circular Economy strategy focuses on small and mid-cap sized companies that are helping drive the economic transformation to a nature-positive economy. It also includes digitalisation as a key enabling technology and focuses on idiosyncratic active risk.

    Forming part of our holistiQ range of solutions, the strategy is a key pillar in our global systems change strategy, together with our climate strategy that seeks to benefit from the transition to net zero. The depth and quality of research from our holistiQ research team combining system change and fundamental analysis sets us apart. The research and investment teams are dedicated to translating our science-based, quantitative and qualitative research into potentially superior returns for our clients.

    Our research partnerships6 include:

    investment approach.6

    key characteristics

    •    A high conviction portfolio comprised of about 45-75 companies
    •    Focus on small and mid-caps: USD 1 bn - 40 bn
    •    Expected tracking error of 5 to 7%
    •    Invests in mispriced stock opportunities to find players that will beat the consensus growth fade 
    •    Offers resilient valuation where price:earnings multiples do not normalise over time

    investment team.7

    portfolio manager.

    LOcom-AuthorsAM-Walsh.png
    Conor Walsh
    Portfolio Manager
    Circular Economy and New Food Systems

     

    supported by.

    locom/_legacy/images/experts/LOcom_AuthorsAM-MacDonald-Brown
    Nicholette MacDonald-Brown
    Head of Sustainable Equities
    LOcom-AuthorsAM-Menges.png

    Pascal Menges
    Client Portfolio Manager

    Find out more about our Circular Economy Fund.

    more information

    contact us.

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    sources

    2 Source: LOIM. For illustrative purposes only.
    3 Source: United Nations Convention to Combat Desertification, 2022. The Global Land Outlook, second edition. UNCCD, LOIM analysis.
    4 Source: LOIM analysis based on data from the World Resources Institute (2024): Global Resources Outlook.
    5 Source: LOIM. For illustrative purposes only. IoT stands for Internet of Things: the interconnection via the Internet of computing devices embedded in everyday objects.
    6 Source: LOIM. For illustrative purposes only.
    7 Source: LOIM. Data as of 21 May 2025. Teams are subject to change

    insights.

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    Throwaway culture is going out of fashion

    The growing popularity of second-hand fashion is leading to more circularity in retail – an investment opportunity aligned with our strategies. 
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    Sustainable cities in the spotlight at Davos 2025

    At Davos 2025, sessions devoted to sustainable ‘circular construction’ and the growth of new business models saw experts explore how a focus on achieving a positive impact on nature and society is creating new avenues for business growth
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    Forming convictions in circularity

    Sustainability challenges are interconnected and complex. So are the opportunities. Our Transition Investment Summit engaged the audience to pinpoint investment areas advancing circularity.

    Petrochemicals in insulation: a conundrum for sustainable investors
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    Petrochemicals in insulation: a conundrum for sustainable investors

    For investors seeking net-zero alignment, do the carbon-payback periods for insulation products justify their use of petrochemicals?

    LOIM Circular Economy: three years of investing in the power of nature
    equitiesInstitutional
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    LOIM Circular Economy: three years of investing in the power of nature

    This anniversary insight assesses the performance of the strategy since inception, current growth drivers in its universe and the growth outlook for the investment themes.

    COP28: delivering on food, nature and energy
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    COP28: delivering on food, nature and energy

    Our key takeaways from COP28 include significant agreements on nature, food and energy systems, plus insights from Lombard Odier’s re-NATURE hub.

    The TNFD: harmonising standards for stewardship on nature
    sustainable investmentAsset Management
    sustainable investmentAsset ManagementDCDBBanksCircular economyOfficial institutionsSustainabilityCircular EconomyWholesaleThird party asset managersInsuranceConsultantsGeronne IndependantsFund of fundsInstitutionalEndowments

    The TNFD: harmonising standards for stewardship on nature

    In this Q&A, LOIM’s stewardship team looks at the implications of the Taskforce on Nature-Related Financial Disclosures framework for engagement.

    The TNFD: bringing nature onto the balance sheet
    equitiesAsset Management
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    The TNFD: bringing nature onto the balance sheet

    In this Q&A, Alina Donets outlines what the Taskforce on Nature-Related Financial Disclosures (TNFD) framework means for companies and investors.

    The TNFD: a framework for nature-positive investing
    sustainable investmentAsset Management
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    The TNFD: a framework for nature-positive investing

    In this Q&A, LOIM’s Chief Nature Officer considers why the Taskforce on Nature-Related Financial Disclosures (TNFD) framework promotes nature-positive investing.

    Petrochemicals in insulation
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    Petrochemicals in insulation

    How can we reconcile the negative attributes of petrochemical products and society’s demand for them? 

    more insights

    important information.

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