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Sustainability policies: shaping 2021 and beyond
Despite many viewing 2020 as the year of Covid-19, it can also be seen as the year when sustainability became a policy priority in major economies – confirming its place as a key long-term investment theme.
For the TerreNeuve strategy, 2020 was a pivotal year because of the regulatory forces that came into play in major investment markets. These forces have helped bring sustainable investing into the mainstream. Three developments we believe are significant tailwinds that will bolster sustainability themes for years to come are as follows:
We believe the EU Green Deal is a game changer for sustainable investing. The Green Deal provides a roadmap with actions, policies and financing tools designed to make the European Union (EU) climate neutral by 2050.
The Covid-19 pandemic and the resulting economic crisis have created additional circumstances for EU states to rally behind the Green Deal and use it simultaneously as the foundation for Europe’s economic recovery and a more sustainable future.
Finalised and published in 2020, this ground-breaking framework defines what ESG investing means for businesses, investors and their clients.
The Taxonomy is the European Commission’s attempt to define whether an economic activity is sustainable or not, with the intention to drive capital flows into the most sustainable activities. By redefining sustainable investing, the Taxonomy helps expose if a company is greenwashing. By December 2021, all financial products sold and created within the EU will have to disclose their exposure to activities in line with the Taxonomy.
We think that this will have key implications for asset flows towards sustainable companies and shrink their cost of capital, allowing these businesses to grow at a faster pace while adding pressure on companies deemed to be sustainability laggards. We believe EU Taxonomy vindicated our view of what sustainable investing means and are proud to see strong alignment of the TerreNeuve strategy to these standards.
President Biden’s USD 2.3 trillion plan involves fixing a range of economic, environmental and societal issues which the US currently faces. Building world-class infrastructure, combating unemployment rates, improving student education and environmental protection are some of the main goals in the plan.
From a sustainability point of view, we see Biden aspiring to make big changes that will benefit the country and its investment opportunities, such as modernising power generation to deliver clean electricity and maximising the resilience of land and water resources to protect communities and the environment. One of President’s Biden’s first moves when in office was re-entering the US in The Paris Agreement, and his recent virtual Earth Day summit outlined his desire to combat CO2 emissions by aiming for a 52% reduction by 2030.
We are interested to see what additional changes he makes to combat climate change and what other investments he puts towards this objective in the future.
At Lombard Odier Investment Managers, sustainability is a core conviction. We believe the economy is transitioning towards a CLIC™ model that is Circular, Lean, Inclusive and Clean. We are focused on enabling our clients mitigate the risks and capture the investment opportunities associated with the CLIC™ transition.
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To learn more about TherreNeuve, a long/short equity strategy, watch the replay of our webinar “The long and Short of Sustainability” from 3 June 2021. The webinar focused on how ESG is defined by asset allocators and managers perspective, as well as our thoughts on the next big sustainability themes. |
Watch the replay of our TerreNeuve Webinar:
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