Asset Management

LODH & Generation Partner for Sustainable Investment

Paul Adams, Geneva, 12 March 2008

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Al Gore, Partner and Chairman, Generation Investment Management and Thierry Lombard, Senior Partner, Lombard Odier Darrier Hentsch & Cie have unveiled the nature of their collaboration in sustainable investing.

Al Gore, partner and chairman, Generation Investment Management, an independent, private owner-managed partnership with offices in London and Washington DC, and Thierry Lombard, senior partner, Lombard Odier Darrier Hentsch unveiled the nature of their collaboration in sustainable investing at a meeting held in Geneva yesterday.

Mr Gore said that the goal of creating public awareness to the problems caused by global warning has been achieved. "Now it is time to take on the challenge of finding solutions even in the current difficult period for the equity markets," said the former US vice president. He believes that this may best be achieved through the financial markets recalling that "more funds are allocated by the global markets in one hour than all the governments in one year".

Noting that "sustainable development will be the primary driver of industrial and economic change over the next 50 years" Mr Lombard added that "the context of business is changing, and therefore so is investment and we are convinced that sustainable development and financial performance are complementary".

After one year of discussions based on a shared vision that sustainable investment is emerging as a major theme in long-term investment, the two companies agreed to work together in November 2007. At that time LODH became the sole partner for the distribution of Generation’s global equity strategy in Europe.

It has now been agreed that the two firms are to share research on opportunities in areas such as renewable energy, carbon markets, energy efficiency, cleaner fossil energy and sustainable agriculture, all of which will contribute to solving the current climate crisis. "There are many companies that are rapidly developing technologies that will have a significant impact on the world’s ability to manage the climate crisis. Our collaboration intends to identify the companies most likely to succeed in these areas," said David Blood, managing partner of Generation.

Generation started its investment fund three years ago and will close it when it reaches $5 billion under management as this is the maximum amount that the company can manage effectively. This figure will be achieved shortly, according to the company. Most of the investors are institutional clients with 45 per cent in Europe, 25 per cent in Australia and the rest in US.

While declining to give details on the grounds of client confidentiality, Mr Gore said that "the fund, which was started with the partners' own money, had done very well over the last three years".

Natacha Guerdat, Thematic Portfolio Manager at LODH, explained to WealthBriefing that the bank has established its own fund that forms part of Generation’s total assets under management. It is believed that this will be closed to new investors when it reaches a total of $300 million. "But there still remains some room for additional investors," Ms Guerdat said.

Established in November 2007, the bank’s fund has proved to be an attractive long-term (minimum five years) investment tool for both institutional and private clients. Ms Guerdat said that among wealthy family clients senior members were attracted to the fund as a means of both preserving wealth and ensuring a healthy planet for their future generations. Also, younger family members concerned about global warming saw this as an opportunity to demonstrate their concerns for the health of the planet.

The joint long-term investment philosophy implies identifying companies with an enduring capability to create value and sustain competitive advantage. Generation’s investment process is centred around a deep level of fundamental research to produce high conviction ideas.

Ms Guerdat explained that with this approach to sustainability, research is systematically integrated into their basic equity analysis where an issue is a material risk and/or an opportunity. This differs from other sustainable development funds where equity researchers adopt a two-tier approach. First they examine the particular sector of sustainable development then they analyse the company operating in that sector.

Generation Investment Management employs an integrated team of 27 people, including 14 investment professionals and its advisory board consists of global thinkers who help them anticipate the changing context of business. Five per cent of annual profits are allocated to the Generation Foundation.

The company is authorised and regulated in the UK by the Financial Services Authority.

LODH has long been a supporter of sustainable development and established a team of analysts dedicated to socially responsible investment as early as 1997. Its three-pillar methodology is based on an analysis matrix combing financial, social and environmental risks. Since 2002, the group has applied this methodology systematically to calculate the risk premium for each company within its investment universe.

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