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Lombard Odier

PRI reporting framework 2020

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Negative/exclusionary screening:

Products:

  • Controversial weapons (all funds). Tobacco (specific funds only).
  • Essential food commodities: soya, wheat, rice and corn (all funds),
  • Products among other categories (specific funds only):  Firearms  and GM

Activities: unconventional oil and gas in activities corresponding to Artic Drilling, Shale Oil & Gas and Tar sands, stem cell research (screened for some specific accounts). We currently follow 10 different non-ethical sectors and are in the process of adding 15 more.

Countries: Securities relating to any countries, companies, entities or individuals subject to sanctions by the UN, EU, US and/or Switzerland, as well as relevant local sanctions.

Environmental and social practices and performance: Child labor and child labor through suppliers (specific funds), high and severe social or environmental-related controversies

Corporate governance: high and severe governance-related controversies

This information is relfective of our asset management activities. Our private banking business applies the same criteria on discretionary managed mandates and on investment recommendations (i.e. investments that directly depend on Lombard Odier).

Screened by

Description

  • Environmental and social practices and performance: exclusion of the last quintile of worst ESG-scored companies (specific funds)
  • Corporate governance: exclusion of the last quintile of worst ESG-scored companies (specific funds)

This information is reflective of our asset management activities.  Our private banking business applies the same criteria on discretionary managed mandates and on investment recommendations (i.e. investments that directly depend on Lombard Odier).

Screened by

          The Ottawa Treaty on landmines, the Convention on Cluster Munitions, the Biological and Toxin Weapons Convention, The Chemical Weapons Convention
        

Description

  • Exclusion of companies involved in serious breaches of UN Global Compact Principles (specific funds). These controversies are graduated according to the seriousness of the facts: evaluation of the incident's impact, degree of the incident exceptionality (sector specific), recurrence level, assessment of the company response, consideration of the company response etc.
  • Exclusion of companies involved in proven breaches of International Labor Organization Conventions: Child labor and child labor through suppliers (specific funds),
  • Other: Exclusion of companies involved in producing or distributing controversial weapons: The Ottawa Treaty on landmines, The Convention on Cluster Munitions, The Biological and Toxin Weapons Convention, The Chemical Weapons Convention (all funds)

This information is refelctive of our asset management activities.  Our private banking business applies the same criteria on discretionary managed mandates and on investment recommendations (i.e. investments that directly depend on Lombard Odier).

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

We notify clients when changes are made through monthly, quarterly or bi-annual SRI dedicated reports, including information related to scores, positive, negative and norm-based screening. Detailed comments are systematically provided with our reports, together with research and more detailed explanations about companies that went through significant changes.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

The quality and robustness of our sustainability-related data is of paramount importance to us because it enhances our ability to identify risks and opportunities. We work with huge amounts of raw data and take the governance and maintenance of our sustainability datasets and tools very seriously. We are constantly working to ensure our research and analysis is based on robust, verifiable, cutting edge data and techniques to ensure we are fully capturing the complex, multi-faceted nature of sustainability dynamics, and using this to provide actionable intelligence to our portfolio management teams.

We use a wide range of in-house and external research techniques and sources to collect, verify, enhance and analyse large amounts of raw data at the most granular level possible. Our in-house research includes using advanced/alternative technological methodologies to collect and aggregate data from a wide range of sources including geospatial data, governmental and non-governmental organisations, international organisations, data aggregation platforms and the media, for example.

We also work in partnership with a number of external data providers to access raw data, including Exiobase, Sustainalytics, Trucost and Inrate. We are constantly reviewing the quality and scope of data available from external providers given the dynamic and rapid evolution of this space. We view this as a partnership because we also believe it is important to maintain open and regular dialogue with those providers to ensure the data they provide is as up to date and investment relevant as possible. Data from these providers is then fed into our proprietary frameworks and methodology.

Our proprietary technology platform, which is common to all our internal portfolio management teams, is used to aggregate sustainability-information and ensure all the necessary sustainability-related information is readily available to the portfolio management teams at all times. This information is also made available to the teams directly via their Bloomberg terminals. As a result sustainability is tightly coupled to our portfolio management and construction process: sustainability figures can be monitored precisely overtime and used to trigger investment decisions but also serve for reporting purposes.

Sustainability is a cross-team collaboration between our investment teams and our dedicated sustainability experts, which allows us to blend systematic and fundamental analysis at all levels of the investment process. This collaborative approach, and our innovative investment platform ensure that we are our investment team can make forward-looking investment decisions with the highest level of information and, therefore, conviction.

Our risk team provides additional oversight and has a good grasp of sustainability related issues and metrics.

These figures and information are reflective of our asset managment activities. Our private banking business is also able to leverage the information and inteligence produced by our dedicated sustainability teams. 


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

For our internally managed assets, we have strict policies and procedures in place with respect to the monitoring of funds criteria and restrictions, including ESG limits if any, across the funds and segregated mandates under our management.

Our compliance teams makes sure that all our investment teams respect our Group policy on controversial investment through the pre- and post-trade monitoring of the investment objectives and guidelines (both internal and external such as the fund prospectus and legal documentation).

Once an exception has been identified, it will be classified as either an active or a passive breach and escalated to the relevant investment team for correction.

In the event of a passive or active breach, the Investment Controlling team must notify the relevant portfolio manager of the breach via email, providing details regarding the fund and the violation (date, description, status, related rule). Typically, all passive breaches must be corrected within a 10-day period, whilst all active breaches must be corrected immediately. The Investment Controlling team monitors the breach until its correction, as well as potential reimbursements and the notification to impacted clients/ funds and/ or relevant regulators, where required. The Investment Controlling team will also document all instances of breaches in a log file used to generate statistics for management-reporting purposes, for identifying error trends and implementing corrective measures where applicable, or for reinforcing training within investment teams.

Where an active breach has occurred, this will be escalated to the following individuals within the Firm:

•           The Conducting Officer of the Management Company responsible for Risk and Compliance*

•           Head of Investment Controlling

•           Operational Risk Team

•           Head of Compliance

•           COO and General Counsel

*Only in case of French and Luxembourg based funds

 

06.3. Additional information. [Optional]

This information is reflective of our asset management activities.


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