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: Credit risk, Operational risk and risks related to asset safekeeping and Model 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.

TargetNetZero Fixed Income 

Decarbonise, diversify and drive the transition forward

 

Market forces are in action with 140 countries (accounting for 91 percent of greenhouse gas emissions) being subject to climate targets and unprecedented policy support for green technologies. 

Our TargetNetZero Fixed Income strategies enable clients to capture the opportunities and mitigate the risks being generated by economy-wide decarbonisation.

Source: BCG (2021) Unlocking the Potential of Carbon Markets to Achieve Global Net Zero, Credit Suisse, Caixa Bank, Bloomberg Green.

assessing climate exposure.

Climate change is altering the investment universe as we transition towards net-zero emissions. But assessing the climate exposure of a company is complex: the data are incomplete and there are no industry standards. 

At LOIM, we have developed an emissions-analysis tool to measure how well aligned a company is with the goals of the Paris Agreement to limit global warming to well below 2°C. The forward-looking temperature alignment metric, called Implied Temperature Rise (‘ITR’), assesses how a company’s (or portfolio’s) emissions are expected to evolve. It considers whether emissions are increasing, flat or decreasing and, if so, whether they are falling quickly enough. We translate this into a proprietary temperature alignment (‘LOPTA’) score that tells us what level of global warming would result if every actor in the economy were to be managing its emissions with the same level of ambition.

Our goal is simple: to design TargetNetZero strategies in different asset classes that maximise opportunities and reduce climate risk in a global economy in the transition to net zero. 
 

magnitude of the climate challenge.

Companies across all industries and regions need to wean themselves off fossil fuels during a multi-decade transition to meet net zero climate objectives. 
 


Source: LOIM analysis as at 31 March 2022; ClimateActionTracker. For illustrative purposes only. Values are approximate. Not drawn to scale.


This transition has already begun and is gaining speed, driven by powerful forces – policy and regulation, market forces, consumer demand, and the redeployment of capital.  

However, the decarbonisation imperative is yet to be fully reflected in credit markets, creating an opportunity for investors.

why invest?

Carbon footprints alone do not tell us the full picture of climate risks in a portfolio. We believe that maintaining a diversified portfolio that identifies companies on strong decarbonisation trajectories, irrespective of sector, will help accelerate the transition to net zero and potentially provide compelling returns for investors.

  • The net-zero transition will influence bond issuers and investors.
    Some sectors will find this shift easier than others. Companies committed to meeting the Paris Agreement already have a reduced transition risk, but high-emission companies with a clear decarbonisation strategy potentially offer return and diversification opportunities.
  • Access to potentially higher yielding opportunities.
    Forward-looking climate analysis provides us with greater confidence in our credit assessment of issuers, enabling us to identify potentially higher yielding bonds.
    Issuers with ambitious and credible decarbonisation strategies – Irrespective of their current carbon footprints – are more likely to retain access to capital markets and be favoured by investors, in our view.

our TargetNetZero approach.

We aim to decarbonise, diversify and drive the transition forward through the four steps of our TargetNetZero approach:
 

TNZ-FI-footprint.png

Baseline footprint. Assessing the current level of carbon emissions and carbon risk in portfolios, factoring in direct and indirect emissions

TNZ-FI-trajectory.png

Emissions trajectory. Plotting expected emissions trajectories and the necessary level of decarbonisation to align with the Paris Agreement

TNZ-FI-acceleration.png

Potential for acceleration. Considering internal, industry and regulatory developments that may accelerate decarbonisation

TNZ-FI-information.png

Leverage new information. Recalibrating our conviction by integrating new data, corporate and policy commitments


Source: LOIM. For illustrative purposes only. 

why us?

our strategy.

investment process.

investment team.

LOcom-AuthorsAM-Zufferey.png

Yannik Zufferey
Head of Fixed Income

LOcom_AuthorsAM-Parker.png
Ashton Parker
Head of Fundamental Fixed Income Credit Research and Senior Portfolio Manager
locomauthorsam-collet

Jérôme Collet
Head of Beta Portfolio Management

LOcom_AuthorsAM-Hohne-Sparborth.png

Dr Thomas Hohne-Sparborth, PhD
Head of Sustainability Research

 

 

more about our funds.

Past performance is not a guarantee of future results. 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.

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insights.

Cutting emissions: a tale of two targets from the steel and shipping industries
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Cutting emissions: a tale of two targets from the steel and shipping industries

We profile two companies from emissions-intensive industries, drawing on analytical and engagement experience to discern which is more likely to fulfil its decarbonisation target. 
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Watch our webinar: ‘Rethink net zero’

Watch our webinar, ‘Rethink net zero’, which explores investment approaches to the climate transition and the outcomes on multi-asset portfolios.
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Webinar | Net-Zero investing

How can investors prepare for this transition? Our TargetNetZero webinar will try and answer this question. Register, and join us to find out more.

3 years of TargetNetZero investment-grade credit
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3 years of TargetNetZero investment-grade credit

Three years since launching our high-conviction, net-zero-focused credit strategies, we assess the progress made towards their financial and climate objectives.

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Cooling high-carbon sectors with corporate bonds
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Cooling high-carbon sectors with corporate bonds

Our net-zero bond strategy uses our temperature alignment metric to identify transitioning companies with credible plans to decarbonise.

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Targeting net zero: 5 reasons to rethink portfolio decarbonisation

Policy, the pitfalls of short-term, high-carbon exclusions and the need to look towards 2050 are among the five reasons why we believe many investors should rethink net-zero alignment. 

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Webinar | rethink net zero: decarbonise, diversify and help drive the transition

Investing in quality credit for net zero
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Investing in quality credit for net zero

We review Q1 policy for net-zero bond investors, including our quality focus on ice cubes, primary market issues and our outlook for the real-estate sector.

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How the ECB’s climate tilt favours ice cubes

The ECB will tilt its corporate bond holdings to favour climate-aligned issuers. How is our TargetNetZero strategy positioned to capture the opportunities?

Why forward-looking decarbonisation is critical to achieving net zero
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In the race to net zero, using forward-looking decarbonisation metrics is critical to building a climate aligned porfolio for a net zero future.

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Moving with the times? Fiduciary duty and climate change

As an LOIM event for consultants, we explored why climate change should be an essential concern for pension trustees as part of their fiduciary duty.

important information.

This document is a Corporate Communication and is intended for Professional Investors only

This document is a Corporate Communication for Professional Investors only and is not a marketing communication related to a fund, an investment product or investment services in your country. This document is not intended to provide investment, tax, accounting, professional or legal advice.

This document is issued by Lombard Odier Asset Management (Europe) Limited (hereinafter the “Company”). The Company is authorised and regulated by the Financial Conduct Authority (the “FCA”), entered on the FCA register with registration number 515393. 

This document is approved at the date of the publishing. The Company is clustered within the Lombard Odier Investment Management Division (“LOIM”) of Lombard Odier Group which support in the preparation of this document and LOIM is a trade name.

Any opinions or forecasts provided are as of the date specified, may change without notice, do not predict future results and do not constitute a recommendation or offer of any investment product or investment services.

This document is the property of LOIM, is provided for information purposes only and is addressed for the recipient exclusively for its personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. It is not intended for distribution, publication, or used for any other purpose without the prior written permission of LOIM. 

The contents of this document are intended for persons who are professionals and who have been vetted by LOIM and assessed as suitable to 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. This document contains the opinions of LOIM, as at the date of issue 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 as well as the prices indicated may change without notice.

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The information and analysis contained herein are based on sources believed to be reliable. While LOIM uses its best efforts to ensure that the content is created in good faith and with greatest care, it  does not guarantee the timeliness, accuracy, validity, reliability or completeness of the information contained in this document, neither does it warrant that the information is free from errors and omission not does it accept any liability for any loss or damage resulting from its use. All information and opinions as well as the prices indicated may change without notice. Particular contents of third parties are marked as such. LOIM assumes no liability for any indirect, incidental or consequential damages that are caused by or in connection with the use of such content. 

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