Sustainability at Lombard Odier I Lombard Odier

sustainability will drive returns.

A major sustainability transition is currently underway: it will radically alter the global economy, how companies do business and how individuals consume. It is fuelled by unstoppable forces including government policy, technological innovation, consumer behaviour and market influences. We see it accelerating to deliver change on the scale of the industrial revolution at the speed of the digital revolution.

This new reality will transform the parameters for investing, necessitating a specific set of investment skills and framework to capture new sources of alpha and pools of profit while assessing previously latent risks. Using a science-based and forward-looking approach, we are adapting portfolios to this new economic landscape and creating novel strategies centred on nature-positive and climate-aligned goals.

Sustainability is today one of the most important drivers of risk and return. This core investment conviction at Lombard Odier Investment Managers fundamentally shapes our ethos, our investment approach and our solutions.

safe operating limits.

Our current economic model is pushing the world beyond safe operating limits, creating an environmental emergency. Developed by Professor Johan Rockström, Director of the Potsdam Institute for Climate Impact Research, planetary boundaries define the thresholds within which humanity can survive, develop and thrive for generations to come. Crossing these thresholds increases the odds of large-scale and/or irreversible environmental changes, destabilising the Earth’s vital systems. With each planetary boundary crossed, risks and costs increase.

our planetary boundaries.

Sources: LOIM analysis; based on Rockstrom et al (2015), updated based on Transformation is Feasible Report by Randers, Rockstrom et al (2018). For illustrative purposes only. 1) IPCC Global Warming of 1.5C report (2019). 2) World Wildlife Fund and Boston Consulting Group (2015). 3) BBC/EPA. 4) FAO (2015). 5) UNEP (2016). 6) Living Planet Index. 7) OECD (2016). 8) Trucost (2013).

a nature-dependent economy.

Transgressions of planetary boundaries create enormous risk for the global economy, threatening our greatest source of wealth: at least USD 44 trillion worth of GDP – or 51% of global economic activity - is moderately to highly-dependent on nature.¹If the planet reaches a tipping point, so too does everything it supports. A healthy planet is essential for economic prosperity: trillion dollar industries depend critically on natural capital and are put at risk by the degradation of nature.

Adapting our economic model to a sustainable, bio-based model is not an aesthetic or ethical pursuit: it is necessary for the stability and sustainability of economic processes. In order for policymakers to effectively regulate, and for businesses to adopt sound corporate strategies, a stable planetary context is essential.

To respect and preserve the planet’s resources and ecosystems, we must move the economy away from a ‘take-make-waste model’ that takes more than is sustainable, makes more than we need, and wastes most of what we produce. We must transition instead towards a regenerative, circular bioeconomy that combines nature-centric value creation as well as better economics. This new model preserves nature through resource efficiency and outcome-oriented business models, while closing the loop towards zero-waste.

We call it the CLIC® economy because it is circular, lean, inclusive and clean.

Sources.

[1] World Economic Forum, 2020.