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A sustainable finance milestone: looking back on Building Bridges Week
Following the conclusion of Building Bridges Week last Thursday, we reviewed some of the key moments from this unique gathering of representatives from the financial sector and beyond. Were its objectives met? We believe that the event helped to foster the necessary key inter-sector partnerships to make finance sustainable.
The Building Bridges Summit and a focus on innovation
Building Bridges Week began with its landmark event, The Building Bridges Summit, where Patrick Odier, Senior Managing Partner at Lombard Odier and President of Building Bridges, set the stage by calling on the financial industry to take immediate and substantive action towards sustainable finance. “Our economic model requires urgent change if we are to avoid points of no return surrounding many of today's negative climate shifts,” said Mr Odier. “This isn't about when. It's about now. It's not about who? It's about us. And it isn't about cost. It's about an existential necessity.”
The morning saw the announcement by Ueli Maurer, Federal Councillor and Head of the Federal Department of Finance of Switzerland's forthcoming 'climate score' that will enable measurement of financial companies' adherence to the goals of the Paris Agreement. We believe this initiative is leading the way to better collaboration between governments and the financial sector, and for deeper collaboration between them.
Other sessions at the Summit featured a speech by Amina J. Mohammed, Deputy Secretary-General of the United Nations; a call for more emphasis on the strong relationship between impact and financial returns from the World Bank Group’s Jan van Bilsen; a session exploring how greater transparency and disclosure can deliver more impact; and a reminder of the important role that startups and fintechs will play in the creation of sustainable finance solutions from the United Nations Development Programme’s Aiaze Mitha.
Tuesday marked the beginning of Building Bridges Week, which hosted more than 75 sessions exploring the technology, research and the metrics we need to make net zero a reality.
In a particularly hopeful development, Jörg Gasser, CEO of the Swiss Bankers Association (SBA), presented new SBA–Boston Consulting Group research, which found that the financial sector has a clear path to delivering the CHF 400 billion the Swiss economy needs to achieve net zero through lending and capital markets. Underscoring Mr Gasser’s remarks, Nathan Fabian, Chief Responsible Investment Officer at Principles for Responsible Investment, said, “The transition pathways for the highest-emitting sectors are clear, the technologies are largely available and expected to reduce in price, and the role of the banking sector in financing the economy is also well understood.”
Meanwhile, Lombard Odier and the University of Oxford unveiled 'Predictors of Success in a Greening World', a new report that analyses the global trade in complex green technologies and how countries are faring against their commitments to 'build back greener’. “Looking at the export of green products can offer valuable insights into which countries are progressing positively, such as Germany and China,” said Oxford University’s Dr Matthew Ives. “However, we also found that other countries, such as Brazil and Australia, are missing vital opportunities in the context of the green transition.”
You can read our full round-up from the first two days of Building Bridges Week here.
Working together
The focus shifted to collaboration on Wednesday, with sessions examining how diverse actors can work together to fund the transition to a sustainable, net-zero economy.
In Wednesday morning's key session, entitled 'Shedding light on the ESG jungle', representatives from the Asset Management Association of Switzerland (AMAS) and Swiss Sustainable Finance (SSF) spoke about closing the gap between investor expectations and the capabilities of product providers.
The session featured the announcement of an SSF roadmap to accelerate the Swiss financial sector's alignment with a sustainable, climate neutral world. “The setting of clear net-zero goals puts a special focus on climate issues,” said Sabine Döbeli, SSF's CEO. “Incorporating sustainability into lending practices and credit ratings is a concrete example of the kind of actions we recommended.”
Maxime Perrin, Head of Sustainability, Lombard Odier Asset Management, also explained during the session how rigorous, science-based investment strategies are central to our bank's success in the area of sustainable investment. “We have integrated the SSF–AMAS framework and recommendations into our net-zero strategies, which aim to decarbonise investment portfolios,” said Perrin. “To do this, we look for 'positive change' and ensure we select companies that are decarbonising quickly and credibly by measuring their temperature alignment. We examine financial performance by capturing opportunities and reducing risks. And we strive for value alignment through various exclusions and restrictions.”
On Wednesday afternoon, a session entitled 'Scaling private investments for impact: success factors of public–private collaboration' brought the exciting announcement of the Sustainable Development Goals Impact Finance Initiative, a new public–private partnership between Switzerland's State Secretariat for Economic Affairs (SECO), the UBS Optimus Foundation, the Credit Suisse Foundation, and the Swiss Agency for Development and Cooperation (SDC). The initiative is designed to mobilise up to CHF 1 billion in capital towards creating a positive social and environmental impact in developing countries while ensuring financial returns—another example illustrating the growing importance of 'blended finance'.
Towards a brighter future
The fourth and final day of Building Bridges Week asked delegates to turn their gaze to the future, in sessions exploring where we must go next to achieve a sustainable tomorrow.
In one of the day's central sessions, 'The race to net zero: How to decarbonise investment portfolios', representatives from Lombard Odier shared insights on how investors can reduce their exposure to climate-related risks.
Opening the session, Patrick Odier spoke about how science-based methodologies can help investors decarbonise in ways that enable them to tap into the opportunities and mitigate the risks associated with the transition. “When it comes to decarbonising portfolios, we do not have a choice. First, the world is not going in a direction that would allow us to deprioritise decarbonisation. And second, pressure is growing from authorities and regulators to do more in this area.”
Michael Urban, Deputy Head of Sustainability Research at Lombard Odier, spoke of the importance of looking beyond the low-carbon companies of today. “We can only achieve net zero if high-carbon industries, such as cement, steel and chemicals, play their part,” Dr Urban explained. “Investors should seek to invest across sectors and geographies with a forward-looking perspective that seeks credible yet radical decarbonisation prospects.”
To do this, Thomas Höhne-Sparborth, Lombard Odier's Head of Sustainable Research, urged the widespread adoption of more forward-looking metrics that can assess prospects for real emission reductions. Implied Temperature Rise (ITR) metrics are one example of this. “A business's temperature alignment indicates the level of warming that would follow if every company and economy were managing its emissions with a similar level of ambition,” said Dr Höhne-Sparborth. “The great virtue of this metric is that it allows for a direct comparison of a company’s or portfolio’s alignment with the physical consequences of climate change and the objectives of the Paris Agreement.”
Rebeca Coriat, Head of Stewardship at Lombard Odier, explained how the bank works with companies to raise awareness of the need to decarbonise. “We place a great deal of emphasis on joining organisations and undertaking stewardship in a collaborative way,” said Ms Coriat. “The underlying message encourages each business to pull together in the same direction.”
Another Thursday highlight was 'Aligning financial flows with SDGs 14 and 15: Life on land and below water', which focused on biodiversity loss. For Alina Donets, Portfolio Manager at Lombard Odier Investment Managers, “pressure on biodiversity is not only measurable from an environmental perspective; it also translates into economic risks”. “As asset allocators and investors, we are in a position to help shape the economy and accelerate the transition to a new economic model.”
Lombard Odier is proud to have participated in this landmark sustainable finance event, and we look forward to working with other organisations in the financial sector and beyond to help our industry play its part in the transition to our net-zero future.
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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