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Lombard Odier is making a name for itself in tailored sustainable investment
Lombard Odier Private Bank
Article published in L'Agefi, January 3, 2019
The World Economic Forum is devoting its 2019 meeting on Tuesday to the economic, societal, environmental and political consequences of the fourth industrial revolution. Inclusiveness, the environment and sustainability – the major challenges facing humanity – are now integrated into the entire Davos agenda. In Geneva, meanwhile, the local financial centre aims to be recognised as one of the world leaders in sustainable finance. Interview with Stéphane Monier, Chief Investment Officer at the pioneering Bank Lombard Odier & Co Ltd.
Sustainable finance is on everyone’s lips, but what does it actually offer beyond marketing appeal?
At Lombard Odier, sustainability is a question of performance. The world has reached a critical point. It is undergoing drastic changes and we need to rethink our models of society in order to deal with the risks these changes entail. From a practical point of view, companies must adapt to survive. As a wealth and asset manager, we believe it is essential to invest in companies that are well positioned to take advantage of the current revolution, since they are more likely to generate sustainable returns in the future. It is these companies and trends that we strive to identify and integrate into our investment strategies as our economies transform.
As a wealth and asset manager, we believe it is essential to invest in companies that are well positioned to take advantage of the current revolution, since they are more likely to generate sustainable returns in the future.
How does Lombard Odier integrate the concept of sustainability into its portfolio management?
Our approach is based on three pillars: the sustainability of the financial model, the sustainability of the company’s practices and the sustainability of its business model. With regard to financial sustainability, we have a sophisticated investment platform that covers and analyses all asset classes. Concerning the sustainability of the company’s practices (editor’s note: ESG, i.e. its entire ecosystem of partners, including regulators, shareholders, employees, clients and suppliers, the environment and its local community), in 2012 we created our own “CAR” (Consciousness, Actions, Results) methodology based on 115 non-financial criteria to understand how companies promote environmental, social and governance aspects over the long term.
This allows us to identify companies whose ability to generate excess economic returns in the long run is underestimated by the market – a criteria that is not covered by external databases. This mechanism allows for a more effective analysis of the final ESG score. Our aim is to offer tailored solutions to meet the sustainable investment needs of private clients, each of whom has a very personal vision of how sustainability should be integrated into an investment portfolio. As for the sustainability of the business model, we carry out a prospective analysis to understand how the company in question is adapting its strategy to a changing global environment to exploit future opportunities, and whether its business model will be successful.
Our aim is to offer tailored solutions to meet the sustainable investment needs of private clients, each of whom has a very personal vision of how sustainability should be integrated into an investment portfolio.
What are the challenges facing your investment teams?
Today, we focus on providing customised solutions that closely match our clients’ sustainable investment needs and preferences on the basis of their individual philosophies. We apply sustainability filters to some asset classes in our investment universe. However, the rating of structured products or certain niche funds poses certain challenges, which is why it will take longer for the reporting of these instruments to take shape than that of more traditional asset classes.
According to a University of Zurich study published in September 2018, private banks are familiar with sustainable finance but do not talk enough about it with their clients. The study found that of the 15 banks analysed, only half offered their client advisors courses on responsible investment. What is the situation at Lombard Odier?
The Bank provides continuous training for its employees. Moreover, our expertise and commitment are recognised in the University of Zurich study. As far as I am concerned, meeting with the Bank’s clients to explain investment strategies is critical. Above all, we must understand their personal tendencies, vision and values in order to be able to reflect their personal philosophy in the proposed solution. This varies from one person to another, hence the importance of providing them with a tailored offering.
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.
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