Tracker+ ESG Family

A sustainable approach to index tracking.

why choose a Tracker+ ESG?

•    Reduction in the carbon intensity and other extra- financial risks of the portfolio, without ethical or political bias 
•    Reduction in reputational risk for investors by reducing exposure to companies with severe controversies 
•    Implementation of an index tracking strategy through a Swiss domiciled fund optimized for Swiss investors 
•    Unique and proprietary materiality based ESG scoring model, allowing for maximal transparency and a thorough understanding of the extra-financial profiles of companies

Managing and reducing exposure to extra-financial risks with limited deviation from the benchmark index

Investors have a duty to gain a better understanding of their portfolio exposure to Environmental, Social and Governance (ESG) risks as well as any associated reputational risks. Additionally, in light of governmental targets to reduce greenhouse gas emissions, Swiss institutional investors might be required to publish the carbon intensity of their investments. Lombard Odier’s Tracker+ ESG range can help you manage and reduce your exposure to these risks without compromising on performance or diverging from your benchmark indices.
 

 Not all companies are equally exposed to non-financial risks

The nature of the business and the sector in which companies are active radically influences the type of financial and non-financial risks to which they are exposed. It is therefore important to be able to reflect this reality in the ESG analysis of portfolio companies. This applies not only to investment decisions, but also influences the engagements’ priorities and proxy voting decisions. Lombard Odier has developed a unique materiality based ESG scoring methodology that takes into account the specificities of the universe in which companies are active. The integration of ESG data into the management process is therefore much more accurate and pertinent.
 

Reducing ESG risks and the carbon intensity of portfolios

For more than 10 years, Lombard Odier has continued to develop a proprietary methodology that allows us to analyse companies and calculate the ESG scores of the companies in which we invest, based on the raw data provided by various providers. This in-depth knowledge of the extra-financial aspects of companies allows us not only to integrate all the extra-financial aspects of companies in function of the industry in which they are active, but also to provide a concrete and detailed basis for our engagement with their management (stewardship). This information is also integrated into our voting decisions (proxy voting). 

To reduce a portfolio’s risk level while staying very close to the benchmark index (tracking error: maximum 0.5% ex ante), we proceed in three stages: 
1. Securities of companies companies that produce, trade or store controversial weapons incompatible with Swiss legislation or in contradiction with international treaties signed by Switzerland (anti-personnel mines, cluster weapons, biological & chemical weapons) are excluded from the investment universe as well as companies that produce, trade or store white phosphorus and depleted uranium(basis: ASIR/SVVK recommendations/LO Policy). 
2. In the remaining universe, the weighting of companies involved in the major and severe controversies (level 4 and 5, on a scale ranging from 0 to 54) reduced by 0.30%, as are the securities of companies involved in unsustainable businesses (coal mining, coal power generation, unconventional oil & gas and tobacco. 
3. The remaining companies are classified according to their ESG materiality score and their carbon intensity, which to integrates all dimensions of greenhouse gas emissions (scopes 1,2 and 3). 
 
The active weight of the remaining companies is therefore based on a combination of their ESG materiality score and their carbon intensity. Securities of companies that are sub-par on both these metrics tend to be under-weighted up to a maximum deviation of -0.30%. Securities of companies showing a favorable combination of ESG materiality score and carbon intensity are overweighted (maximum 30 bps) while monitoring the tracking error ex-ante (which may not exceed 0.50%) and the financial characteristics of the fund’s portfolio. 
 
This management approach allows us to: 
    reduce exposure to the most controversial companies 
    reduce exposure to the most carbon intensive companies 
    reduce exposure to unsustainable businesses 
without otherwise deviating from the risk/reward characteristics of the benchmark index and without sectoral bias. Other risk indicators remain very close to the index.
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funds in the Tracker+ ESG Family.

 

Name

Benchmark index

Global Equities Tracker+ ESG

MSCI World ex Switzerland


Swiss Equities Tracker+ ESG

Swiss Performance Index (SPI) Total Return

important information.

1 Expected returns are estimates of hypothetical average returns of economic asset classes derived from statistical models. There can be no assurance that these returns can be achieved. Actual returns are likely to vary.

The fund has not yet been launched. If such a strategy is offered it may be offered under a different name and under different terms and would be subject to legal and regulatory approvals. The information contained herein is subject to completion and amendment.

FOR QUALIFIED INVESTORS ONLY.
This document is issued by Lombard Odier Asset Management (Switzerland) SA, a Swiss-based management company, having its registered office at 6, av. des Morgines, 1213 Petit-Lancy, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).
Lombard Odier Investment Managers (“LOIM”) is a trade name.
The fund mentioned in this document (hereinafter the “Fund”) is a Swiss contractual fund. The Fund is authorised and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”) as another fund for traditional investments within the meaning of the Collective Investment Scheme Act of 23 June 2006, as amended. The management company of the Fund is Lombard Odier Asset Management (Switzerland) SA (hereinafter the “Management Company”), a Swiss-based public limited company (SA), having its registered office at 6, av. des Morgines, 1213 Petit-Lancy, authorised and regulated by FINMA. The Fund will not be, nor will its shares be, registered for public offering in any jurisdiction. This document is not a recommendation to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy the Fund’s shares, nor shall there be any sale of the Fund’s shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. Consequently, the offering of the Fund’s shares may be restricted in certain jurisdictions. Prospective investors must inform themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on in connection with, any contract to purchase or subscribe to the Fund’s shares. Any such acquisition may only be made on the basis of the official documents of the Fund, each in their final form. The prospectus and fund contract, the Key Investor Information Document, and the most recent annual and semi-annual reports are the only official offering documents of the Fund’s shares (the “Offering Documents”). They are available on http//:funds.lombardodier.com or can be requested free of charge at the registered office of the Fund or of the Management Company, or from the distributors of the Fund. An investment in the Fund is not suitable for all investors. Making an investment in a Fund is speculative. There can be no assurance that the Fund’s investment objective will be achieved or that there will be a return on the capital. Past or estimated performance is not necessarily indicative of future results and no assurance can be made that profits will be achieved or that substantial losses will not be incurred. This document does not contain personalised recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before making an investment in the Fund, an investor should read the entire Offering Documents, and in particular the risk factors pertaining to an investment in the Fund, consider carefully the suitability of such investment to their 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 consent of LOIM. It is not intended for distribution, publication or use in any jurisdiction where such distribution, publication or use would be unlawful. This document contains the opinions of LOIM as at the date of issue. The information and analysis contained herein are based on sources that are believed to be reliable. However, LOIM does not guarantee the timeliness, accuracy or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions may change without notice. The contents of this document are intended for persons who are sophisticated professional investors and who are either authorised or regulated to operate in the financial markets or who have been vetted by LOIM as having the expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has received an assurance that they are capable of making their own investment decisions and understanding the risks involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed as being appropriate recipients of this document. If you are not a person falling within the above categories, you are kindly asked to either return this document to LOIM or to destroy it and are expressly warned that you must not rely upon its contents or have regard to any of the matters set out in this document in relation to investment matters and must not transmit this document to any other person. 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 organised or existing in any state, territory or possession of the United States of America, a corporation organised 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.
Sources: Unless otherwise stated, figures are prepared by LOIM.
Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of a fund. The performance of a benchmark shall not be indicative of past or future performance of any fund. It should not be assumed that the relevant fund will invest in any specific securities that compromise any index, nor should it be understood to mean that there is a correlation between such fund’s returns and any index returns.
If the funds are denominated in a currency other than that in which the majority of the investor’s assets are held, the investor should be aware that changes in rates of exchange may affect the value of the funds’ underlying assets. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result in a disproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular investor is made.
The 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. LOIM does not provide accounting, tax or legal advice.
No part of this document may be (i) copied, photocopied or duplicated in any form or (ii) distributed to any person other than an employee, officer, director or authorised agent of the recipient without the prior consent of Lombard Odier Asset Management (Switzerland) SA. In Switzerland, this document constitutes a financial promotion and has been approved by Lombard Odier Asset Management (Switzerland), subject to the regulation and supervision of the Swiss Financial Market Supervisory Authority (FINMA).
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