TargetNetZero equity

TargetNetZero equity

The net-zero challenge encompasses managing the transition, physical and liability risks and opportunities related to efforts to limit global warming to 1.5°C above pre-industrial levels, in line with the Paris Agreement. 

We believe businesses and assets that are on a viable pathway to achieve carbon neutral status and successfully manage transition risks resulting from regulatory, technological and behavioral change. These businesses stand to benefit from premium valuations versus their peers and may enjoy cheaper and more plentiful access to capital. We believe they will also successfully compete for the business of other actors that are racing to net zero while attracting and retaining the best customers and talent. 

Aligned to the Paris Agreement upon launch, with an implied temperature rise of no more than 2°C, the strategies will progressively accelerate the rate of decarbonisation of their constituents to target Net Zero CO2 emissions by 2050, aligned with the more ambitious objective of the Paris Agreement of limiting global warming to 1.5°C.

 

LOIM’s net-zero transition process

The net-zero transition is integral to our core sustainability conviction: the transformation of our economy to one that is Circular, Lean, Inclusive and Clean (CLIC™). It is the focus of select strategies such as Climate Transition, integrated more broadly across our investment range and forms the principal focus of our innovative new range of TargetNetZero strategies.

At Lombard Odier Investment Managers, we believe the best way to identify and manage a portfolio’s decarbonisation journey is through our four-step net-zero transition process:

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  1. Assess the level of carbon emissions and level of carbon risk in portfolios today across both direct (scope 1) and indirect (scope 2 and 3) emissions.
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2. Assess not only the current emissions of a company or portfolio, but also their expected trajectory and the necessary level of decarbonisation the company must achieve. We evaluate the expected emissions trajectory of investments using in-house capabilities that have been profiled as a leading approach by the Task Force on Climate-related Financial Disclosures’ (TCFD) Portfolio Alignment Team1.

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3. Consider the evolution of internal, industry and regulatory pressure that may lead a company to accelerate its climate commitments.

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4. Leverage new information, ranging from new company and government commitments to new carbon data received, to continually re-assess our views of the trends across the wider economy and the investable universe, to implement appropriate portfolio adjustments.

Source: LOIM. For illustrative purposes only.

We recognise that a carbon footprint alone does not equate to financial risk and must involve a further assessment to assess temperature trajectories and thereby understand the likely direction and rate of future carbon emissions for companies, sectors and even portfolios.  

why invest?

The TargetNetZero Global and European core equity strategies focus on companies with temperature trajectories declining towards 2050 net-zero targets. 

The TargetNetZero ‘passive-plus’ equity strategies leverage the net-zero transition process described above, focusing on companies able to contribute to the transition towards net-zero across all sectors rather than penalising companies in some of the most climate-relevant sectors that may still have high CO2 emissions today.

    • Access the net-zero theme through a low tracking-error core equities strategy, that aims to immediately reduce actual carbon footprint relative to the benchmark by at least 30% but also targets rapid decarbonisation
    • Innovative climate equity solution which adjusts exposure to its constituents depending on their alignment to a rapid reduction in global CO2 emissions and their potential to contribute to the eventual achievement of net zero CO2 emissions by 2050. It aims to capture opportunities and reduce risk emerging from climate transition.
    • Leverage individual and collective engagement to further accelerate the transition, alongside company-level, industry-level and regulatory pressure.
    • Enhanced passive approach with target ex-ante tracking error of 0.5%-1%, with controlled factor/style, sector, and country bias

*Target performance/risk are portfolio construction goals and cannot be guaranteed.


a knowledge powerhouse in sustainable investing.

The strategy draws on the expertise of our Sustainable Investment Research, Strategy and Stewardship (SIRSS) team, who identify the key sustainable risks and opportunities across all investment sectors. This enables our analysts and portfolio managers to make informed decisions when assessing whether companies could be well-positioned to thrive through sustainability challenges. SIRSS has developed research which analyses the scientific, technological and regulatory forces underpinning the investment proposition.

As signatories of the Net Zero Asset Managers initiative, Lombard Odier Investment Managers is committed to the development of new solutions that enable clients to position capital to capture value and hedge the risks that lay ahead.

 

stewardship.

The SIRSS team also works alongside the portfolio managers and analysts to exercise active ownership, engagement and stewardship. Companies are encouraged to set clear, measurable objectives addressing financially material ESG issues and align with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).

 

investment team.

 

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Laurent Joué
Head of Systematic Alternatives & Equities 

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Nicolas Mieszkalski
Portfolio Manager – Systematic Equities
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Alexey Medvedev 
Deputy Portfolio Manager – Systematic Equities

Sustainability team

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Christopher Kaminker PhD FRGS 
Head of SIRSS

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Maxime Perrin 
Head of Sustainable Investment
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Kristina Church
Head of CLICTM (Sustainable) Solutions

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Dr Thomas Hohne-Sparborth PhD
Senior Sustainability Analyst

Source: LOIM, May 2021.

 

important information.

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