COVID-19 As Change-Maker – View From Lombard Odier

Several trends have gathered pace as a result of the pandemic and one such is what goes under the broad umbrella term of “sustainability”, argues the Swiss private bank.

The following article from Lombard Odier, the private bank, examines how COVID-19 has boosted the sustainability trend. The bank explains how the pandemic struck at the core of global production chains, where one estimate warned that the disruption at Chinese factories would affect 17,600 different types of consumer goods even before the outbreak had reached the US. Lombard Odier said it expects to see an increased focus on supply chain resilience and adaptability as industries start to recover. Companies that stay nimble or which

are able to adapt will prove more resilient to future shocks and are more likely to gain market share as the world evolves.

In addition, the virus has affected the fashion industry, potentially accelerating the shift towards sustainable goods, away from fast fashion while clothing rental, sharing, repair and resale, grow in popularity. This reflects a concept of what is sometimes called the “circular economy”.

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Our economic model is inefficient. It relies on fossil fuels, virgin newly-extracted raw materials and under-used assets, disregarding the value of diversity and equality. 

In contrast, the Circular, Lean, Inclusive and Clean (CLIC™) economy is geared towards the creation of value, by rethinking the way we consume, produce and organise our lives. At Lombard Odier, we advocate the need for a more sustainable economic model. The transition is already underway but we see COVID-19 as providing a further reason for change and an investment opportunity. We believe that our focus on sustainability as a core conviction has provided a strong defence for our portfolios during the current uncertainty. 

We believe that resilient business models and adaptability will be key in addressing our current sustainability challenges. This allows us to identify the industries and companies that stand to outperform over the coming years.

The pandemic has forced many companies to adapt their business models and consumers to change their habits. While some of our choices and habits may revert to business-as-usual, the crisis offers us a chance to evaluate our previous lifestyles. Many are trying out new ways of exercising, consuming and travelling while customers are demanding more social and environmental responsibility from brands. Companies that stay nimble or are able to adapt will prove more resilient to future shocks and are more likely to gain market share as the world evolves.

Remaining resilient

COVID-19 struck at the core of global production chains – one estimate warned that the disruption at Chinese factories would affect 17,600 (1) different types of consumer goods, even before the outbreak had reached the US. The decline in air and sea freight came after they were already impacted by global trade tensions. 

The electronics manufacturing industry was particularly badly affected. Foxconn, a supplier of Apple, Intel and Sony, saw its profits fall by almost 90 per cent in the first quarter. Auto companies, which rely on just-in-time inventory management and the electric vehicle supply chain which relies heavily on Asia for supply, have seen significant short-term disruption to supply chains. 

As industries start to recover, we expect to see an increased focus on supply chain resilience and adaptability. Transportation disruption could lead European automakers to localise battery manufacturing at their electric vehicle assembly plants, even if production costs are higher in the region.