trends in wealth management industry - intax group€¦ · a spiraling global population, social...

November 2019

Karen Aslanian

The Sustainability Revolution

Trends in Wealth Management Industry

1 · Investment Solutions - 2019Please read the important information at the end of the document

LOMBARD ODIER


"Rethink Everything"A philosophy that makes us different

We’ve grown stronger through 40 financial crises, not by standing still and

waiting for them to pass, but by re-evaluating and rethinking the world around us.

We’ve used imagination and innovation to create a different perspective on the world

for our clients and ourselves.

It’s this ability and desire to constantly rethink that brings stability.

That is what makes us different.

LOMBARD ODIER. RETHINK EVERYTHING.


2018 at a glance – Financial highlights as at 31 December 2018 (in CHF)


A solid business model: one of the best-capitalised banks in the world


THE IMPORTANCE OF SUSTAINABLE INVESTMENT


Welcome to the Sustainability RevolutionWe believe that the seismic shift we are facing is the greatest investment opportunity

A spiraling global population, social inequality and finite resources demand a new approach to investment.

By switching to a more sustainable strategy, we believe financial models can secure future prosperity, both for investments and the planet.

Today’s short-term economic models are failing our future generations.

By adopting a more sustainable approach to investing now, we aim to secure a prosperous future for all. Investment is changing.


The sustainable revolutionWe are living profound changes that will drive our lives tomorrow but our investments today


9.7bn people by 2050+2.4bn versus today

-10% to -25% crop yields decrease until

2030

Plastic pollution in EM countries and in the ocean

Ocean depletion with industrial fisheries

Agricultural soil exhaustion

• Increased recycling costs

• Increased R&D/capex

• New production processes

• Lower use of pesticides

• Regulations against plastic use

• Innovative biodegradable plastics• Innovative food (algae, insects)• Innovative irrigation systems (drip

irrigation) • New packaging materials like

bamboo• Focus on more sustainable

agriculture: Carrefour «Act for Food» facilitating access to bio

• Waste management: USD 200bn market

Sectors affected : chemicals, retail, agro-business

Source : BAML, Financial Times, LOFor illustrative purposes only

demographics. natural resources.

climate change. inequality. digital

revolution.

Resources scarcitySustainable Investment will drive innovation


Climate change Sustainable investment will help reaching the COP 21 target of +1.5°C

Desertification More extreme weather conditions

Changes in the eco-system

+4% in 2100 if nothing done

• Axa : at +4° the world will no longer be insurable

• 25mios people displaced every year since 2008 by climate disasters

• Increasing regulations

• Higher Co2 cost

• New business to exploit : renewables, LED & Lightning, energy-efficient buildings…

• Public spending boosting GDP: Chinese «one road, one belt» , European EUR500bn infrastructure plan

• Private opportunities to double to USD 8tr between now and 2030

Sectors affected: autos, transport, construction, materials & equipment…

Source : BAML, Le Parisien, GreenpeaceFor illustrative purposes only



revolution.


DigitalisationSustainable investment will fight cybercrimes and for education

758mios illiterate adults

Transformation of working/educational

environment

263 mios children out of schools

Cybersecurity: 90mios attacks per

year

• Average cost of cybercrimes: USD 12.7 mios per US company in 2014.

• Failure to act on education for all could cost USD1.8tr in global GDP by 2050

• 100 y education gap between DM and EM

• Robotisation & automation to put at risk up to 2bn jobs by 2030

• Pre-primary school global market to grow by USD60bn between 2015 and 2020

• 50 education companies have listed since 2010, 1/5 in China and India

• Every USD1 invested in education generates up to USD10 in economic returns

• Cybersecurity market forecasted to reach USD170bn by 2020

Sectors affected : Insurance, banks, manufacturing, retailTechnology…

Source : BAML, UnescoFor illustrative purposes only



revolution.


What are the pressures driving changes?

61%53%

29%

15% 27%

48%

23% 20% 24%

Under35

35-54 Above54

I am apathetic to my investment being socially responsible

A socially responsible investment process is nice to have, but not essential

I expect my wealth management firm to screen investments based on ESG* factors

Sources: Factset – Scorpio study 2016.Source in the middle : ASLO*Environment, Social, Governance**On disclosure of non-financial and diversity information by certain large undertakings and groups

• European Directive 2014/95/EU** requires 6000 large European companies to disclose publicly on: environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, diversity on company board

1%

27%

46%

26%

Decrease

Stay the same

Increase a little

increase a lot

35-54

10%45%

45%

- 35

1%

61%

28%

10%55+

ESG/impact allocation in the next 5Y is expected to :

• Timeline of major international climatechange agreements


Our core belief: Sustainability, the driver of future returns

We believe structural trends will have a transformative effect on economies and the companies that drive them

We have the ability to adapt, innovate and rethink our approach to investment

Transition creates risk and great opportunities

1bn more people expectedby 20301

1/3 of arable land lost in the last 40 years2

Record insurance lossesof USD137bn in 20173

½ world’s population still lacks access to essential health services4

65% of children will have jobs that don’t yet exist5

demographics. natural resources. climate change. inequality. digital revolution.

Sources: 1 United Nations, 2 The University of Sheffield’s Grantham Centre for Sustainable Futures, 3 Munich Re, 4 WHO / World Bank Universal Health Coverage Monitoring Report 2017,


Source: Lombard Odier1 CAR is the ESG rating methodology that owns Lombard Odier. SDG refers to the United Nations' sustainable development objectives.

Sustainability of a company’s …

Sustainablefinancial model

Sustainablebusiness practices

Sustainablebusiness models

Assess financial strength through excess economic returns method

Equity: generate excess economic returns

Credit: maintain credit quality and solvency

Assess broader set of stakeholder

Long-term metrics: ESG, CAR, SDG scores1

Short-term metrics: controversies

Impact metrics: carbon emissions, water consumption

Assess ability to resist/benefit from transformative long-term structural trends

Mega trends expressed as transformative themes likely to create significant opportunities for entire sectors

Opportunities translated into investment themes, based on sectors impacted

1 2 3

The three pillars of sustainabilityPerspective across all asset classes


Sustainable business model United Nations Sustainable Development Goals (SDGs)

* Sustainable Development Goals

• The 17 goals reflect a renewed commitment to a set of universal priorities ranging from ensuring the availability of water and sanitation for all, ensuring food security and achieving gender equality, to ensuring access to affordable and sustainable energy by 2030

• SDGs are planting conditions for governments and companies to favour innovations, quality and productivity.

• They create common grounds for private and public cooperation’s to seize new opportunities : renewables, self-sufficient infrastructures, education…

SDGs are taking sustainability to the next level


Sustainable business model: Impact InvestingWe believe impact investing has an important role to play in ensuring that the SDGs are met and in building a sustainable future

• Impact investing refers to investments «made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.»

• To qualify as impact, the investment needs also to have additionally ie it has to have a different effect compared to a traditional investment from the company or individual & should not replace it.

• Lately, impact investing has been getting out of its traditional niches: microfinance, private equity or project financing.

• It is going mainstream with investments ranging from listed equities to fixed income, single lines or funds

• Example of impact investing helping to answer some SDGs requirements: Forest investments (SDG 13), Sustainable fisheries (SDG 14), Drop irrigation system financing (SDG 12)...

Source: social impact hub


Sustainable business model: implications of structural trendsHow well is the company positioned to take advantage of the opportunities the transition presents?

natural resources.

demographics.

climate change.

inequality.

digital revolution.

STRUCTURAL TRENDS AREAS OF IMPACT FORWARD ASSESSMENT ON COMPANIES

Solution?

Risk of disruption?

Exposure to regulation?

Ability to transition?

Within each of these megatrends, we map the likely path of future development to better understand which sectors will

be affected and how. This enables us to define thematic investment opportunities.

Digitalisation

Safety & privacy Big data, artificial intelligence,

machine vision, machine learning

Data storage & cloud Shared economy

Cities Transport Construction Power Manuf.

Cost Access Solutions Lifestyle

Healthcare Agriculture Food quality Food distrib. Waste

Food systems

Cashless E-banking Blockchain Access

Finances

Source: LOIMFor illustrative purposes only.


Sustainable business model: MegatrendsThematic approach to explore the megatrends we identified

1 – Sustainable solutions

Understanding of the impact of long-term Megatrends to reveal investable opportunities

2 – Long term investment

“The stock market is a device for transferring money from the impatient to the patient» Warren Buffet”

3 – Being early and investing in the whole value chain

Multiple sectors exposure and being early in the chain to extract long term value

Example of Thematic investingat Lombard Odier

The corner stones


Important information

This marketing communication is issued by Bank Lombard Odier & Co Ltd (hereinafter "Lombard Odier"). It is notintended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would beunlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketingcommunication. This marketing communication is provided for information purposes only. It does not constitute anoffer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains theopinions of Lombard Odier, as at the date of issue. These opinions and the information contained herein do not takeinto account an individual’s specific circumstances, objectives, or needs. No representation is made that anyinvestment or strategy is suitable or appropriate to individual circumstances or that any investment or strategyconstitutes personalised investment advice to any investor. Each investor must make his/her own independentdecisions regarding any securities or financial instruments mentioned herein. Tax treatment depends on theindividual circumstances of each person and may be subject to change in the future. Lombard Odier does notprovide tax advice. Therefore, you must verify the above and all other information provided in the marketingcommunication or otherwise review it with your external tax advisors. Some investment products and services,including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis.The information and analysis contained herein are based on sources considered reliable. Lombard Odier uses itsbest effort to ensure the timeliness, accuracy, and comprehensiveness of the information contained in thismarketing communication. Nevertheless, all information and opinions as well as the prices, market valuations andcalculations indicated herein may change without notice. Investments are subject to a variety of risks. Beforeentering into any transaction, an investor should consult his/her investment advisor and, where necessary, obtainindependent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accountingconsequences. The investments mentioned in this marketing communication may carry risks that are difficult toquantify and integrate into an investment assessment. In general, products such as equities, bonds, securitieslending, forex, or money market instruments bear risks, which are higher in the case of derivative, structured, andprivate equity products; these are aimed solely at investors who are able to understand their nature andcharacteristics and to bear their associated risks. On request, Lombard Odier will be pleased to provide investorswith more detailed information concerning risks associated with given instruments. Past performance is noguarantee of current or future returns, and the investor may receive back less than he/she invested. Thevalue of any investment in a currency other than the base currency of a portfolio is subject to the foreign exchangerates. Exchanges rates may fluctuate and adversely affect the value of the investment when it is realised andconverted back into the investor’s base currency. The liquidity of an investment is subject to supply and demand.Some products may not have a well-established secondary market or in extreme market conditions may be difficultto value, resulting in price volatility and making it difficult to obtain a price to dispose of the asset. This marketingcommunication is not issued by the organisational unit of the Bank Lombard Odier & Co Ltd responsible forthe production of financial research, as defined under the Swiss Bankers Association Directives on theIndependence of Financial Research. Consequently, it is not prepared in accordance with the provisions of thereferred Directives or any other legal requirements designed to promote the independence of the production offinancial research. Opinions expressed in this marketing communication may differ from the opinions expressed by

other divisions of Lombard Odier, including Bank Lombard Odier & Co Ltd’s Research Department. Nevertheless, ifopinions from financial analysts belonging to the Research Department are contained herein, such analysts attestthat all of the opinions expressed accurately reflect their personal views about any given instruments. In order toensure their independence, financial analysts are expressly prohibited from owning any securities that belong to theresearch universe they cover. Lombard Odier may hold positions in securities as referred to in this marketingcommunication for and on behalf of its clients and/or such securities may be included in the portfolios of investmentfunds as managed by Lombard Odier or affiliated Group companies.European Union Members: This marketing communication has been approved for use by Lombard Odier (Europe)S.A in Luxembourg and by each of its branches operating in the following territories: Belgium: Lombard Odier(Europe) S.A. Luxembourg • Belgium branch; France: Lombard Odier (Europe) S.A.• Succursale en France; Italy:Lombard Odier (Europe) S.A. • Italian Branch; Spain: Lombard Odier (Europe) S.A. • Sucursal en España; andUnited Kingdom: Lombard Odier (Europe) S.A. • UK Branch. Lombard Odier (Europe) S.A. is a credit institutionauthorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg.Notice to investors in the United Kingdom: Lombard Odier (Europe) S.A. • UK Branch is authorised in the UK bythe Prudential Regulation Authority (PRA) and is subject to limited regulation by the Financial Conduct Authority(‘FCA’) and the PRA. Details of the extent of our authorisation and regulation by the PRA / regulation by theFCA are available from us on request. UK regulation for the protection of retail clients in the UK and thecompensation available under the UK Financial Services Compensation Scheme does not apply in respectof any investment or services provided by an overseas person.In addition, this marketing communication has also been approved for use by the following entity domiciled withinthe European Union: Spain: Lombard Odier Gestión (España) S.G.I.I.C., S.A.U., an investment managementcompany authorised and regulated by the Comisión Nacional del Mercado de Valores (CNMV), Spain.Switzerland: This marketing communication has been approved for use in Switzerland by Bank Lombard Odier &Co Ltd Geneva, a bank and securities dealer authorized and regulated by the Swiss Financial Market SupervisoryAuthority (FINMA).United States: Neither this document nor any copy thereof may be sent to, taken into, or distributed in the UnitedStates or given to any US person.This marketing communication may not be reproduced (in whole or in part), transmitted, modified, or used for anypublic or commercial purpose without the prior written permission of Lombard Odier.Data protection: You may be receiving this communication because you have provided us with your contactdetails. If this is the case, note that we may process your personal data for direct marketing purposes. If you wish toobject to this processing, please address your objection to the Group’s Data Protection Officer: Bank Lombard Odier& Co Ltd, Group Data Protection Officer, 11, Rue de la Corraterie, 1204 Geneva, Switzerland. E-Mail: [email protected]. For more information on Lombard Odier’s data protection policy, please refer towww.lombardodier.com/privacy-policy.© 2019 Bank Lombard Odier & Co Ltd – all rights reserved. Ref. LOCH/LOESA-MWNPR-en-062019.

trends in wealth management industry - intax group€¦ · a spiraling global population, social...

Documents