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Lombard Odier

PRI reporting framework 2020

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Outputs and outcomes

FI 17. Financial/ESG performance

17.1. Indicate whether your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or performance.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
We measure whether incorporating ESG impacts portfolio risk.
We measure whether incorporating ESG impacts portfolio returns.
We measure the ESG performance/profile of portfolios (relative to the benchmark).
None of the above

17.2. Describe how your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or ESG performance. [OPTIONAL]

Our proprietary technology platform means we are able to conduct analysis of our ESG scores,  controversy indicators and impact metrics to better understand the relationship between these metrics and investment outcomes, and to optimise our portfolio construction accordingly.

For example, our analysis conducted in 2019 demonstrated that debt markets are not accurately pricing in carbon risk. Based on our analysis, two thirds of carbon emissions were generated by two sectors (Utilities/Oil and Basic Industry) that account for 30% of credit issuers. Reducing exposure to these sectors would, however, likely create significant biases in a portfolio. By contrast, reducing exposure to the most carbon intensive issuers within sectors was shown to be significantly more impactful, reducing carbon intensity of an example portfolio by up to 67%, with limited impact on the overall credit rating or spread (and retaining the ability to engage and improve the laggards). In our view, this demonstrates that it may still be possible to significantly increase the resilience of a portfolio for the low-carbon transition without meaningfully changing the risk or return profile.

17.3. Additional information.[OPTIONAL]

This information is reflective of our asset management activities.


FI 18. Examples - ESG incorporation or engagement (Not Completed)


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