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Now is the time to invest in our sustainable future
Creating a sustainable tomorrow is in all of our interests– societies, economies and individuals. That's why on 7 December, Geneva brought together academics, thought leaders, investors and policy makers to debate and highlight innovative and leading trends in sustainable finance at the Geneva Summit on Sustainable Finance.
Our Head of Solutions at Lombard Odier Investment Managers, Carolina Minio-Paluello was part of a panel discussing sustainable finance on the ground or, in other words, “stories from the field." It was here she discussed Lombard Odier's sustainable journey and our positioning. Guido Fürer the Group Chief Investment Office at Swiss RE1 also sat on the same panel and discussed how all stakeholders “have a certain responsibility to make the world more resilient".
Carolina echoed this view but drove the debate further by describing what we are living through right now as a “sustainable revolution".
What is sustainable investing?
To define sustainable investing, Carolina mentioned that lots of firms offer green investment vehicles but they are really only scratching the surface and it's not often the first thing proposed to clients.
The difference between those investment offerings and what Lombard Odier offer to clients is fundamentally different.
Carolina explained that we see that “there are major structural changes in the economy which are going to have a transformative effect." These include changing demographics, climate change, scarcity of natural resources, the digital revolution and inequality.
It's clear that there will be rewards for those who are tackle these challenges, those who are proactive, those who innovate and those who meet the future head on.
Carolina cautioned that, of course, “transition creates risks" but on the other hand it offers “great opportunities" that will drive returns.
There are major structural changes in the economy which are going to have a transformative effect. These include changing demographics, climate change, scarcity of natural resources, the digital revolution and inequality.
How can we consolidate our efforts?
At Lombard Odier, we want to encourage companies to transition to more sustainable practices. But it goes beyond that. Carolina detailed our unique methodology to assessing the risks and opportunities within companies - our three-pillar approach. We look at a company's financial models, strength of its business practices and the sustainability of its business models.
In the world of sustainable finance, there is a lot of talk surrounding ESG (Environmental, Social and Governance) and whilst it certainly plays a role in selecting companies for portfolios, for Lombard Odier, sustainability means a lot more than that.
Carolina also described the challenges associated with ethical exclusions. Choosing not to invest in tobacco or alcohol, for example, reflects the preferences of investors. Although it can be effective, investor values differ so the impact of ethical exclusions does not always have the desired effect on that sector. In short, the effort is not coordinated.
Carolina stated, “We integrate sustainability into the heart of our investment processes and we believe it's a key driver of performance." She added, “We believe transition to a sustainable economic model will affect every asset class in every investment portfolio."
We integrate sustainability into the heart of our investment processes and we believe it's a key driver of performance... We believe transition to a sustainable economic model will affect every asset class in every investment portfolio.
But how can we create a sustainable future together?
What we need is the full weight of the financial community. For example, climate risk is a risk for financial market stability. This needs to be addressed imminently as well as the incentives that drive short-term decision-making.
We need to focus on the long-term and everyone has a part to play. Sustainable investing is no longer a niche… it has entered into the mainstream.
And it's now or never.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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