Lombard Odier’s Wranegard on biodiversity as the ‘hot new topic’

The two Article 9 funds have recently hit their one year anniversary and have “a climate objective to decarbonise that is represented by the strategy at all times having a temperature below two degrees, and an aim to reduce greenhouse gas emissions by 50% by 2030, and be net zero by 2050”, according to Wranegard in conversation with Investment Week.

When examining the sector, she said that “biodiversity is currently where climate change was two or three years back”. As the sector develops, she is seeing more and more opportunities for fixed income to get involved.

One example she gave focused on petrochemicals: “We had a really interesting discussion last week with a chemical analyst talking about how to close the loop within the petrochemical industry, and that you could actually have the inputs creating petrochemicals being plastic waste. So, you would be reducing the gap or closing the loop by reducing its scope three emissions, as well as potentially having a positive impact on biodiversity.”

However, she warned that “we do not see that many clear business strategies combining the transition to net zero and biodiversity,” given the space is so new.

Other major changes within the ESG finance universe have been the US market rapidly “catching up” to other developed nations in terms of their ESG offerings, along with the Russian invasion of Ukraine.

Wranegard said: “The unfortunate geopolitical crisis that we have seen has actually sparked a much larger debate, and we see that this could be an opportunity where policymakers have the ability to accelerate the transition to net zero.”

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She explained that within the portfolio, their goal is to “identify the companies which have a credible decarbonisation strategy and are implementing that throughout their corporate strategy and business model”.

Furthermore, she added: “We are not only interested in companies that are becoming more energy efficient and improving their energy intensity, but we want to see absolute remissions targets, so that is included in the model as well”.

However, it is important to look to “regional specifics”. She gave the example that “the decarbonisation strategy for a steel company in Europe will not be the same as the decarbonisation strategy for a steel company in Asia”.

Nevertheless, she stressed: “Just because a company is identified as having a transition strategy in line with the Paris Agreement it does not mean that we buy it – it still needs to be a key alpha generating source for our investments”.