• Lombard Odier Investment Managers has launched climate-aligned equity strategies focused on the United States and Japan.
• Its TargetNetZero platform now manages more than $6.8 billion across 11 pooled funds and bespoke investment solutions.
• The funds aim to cut portfolio emissions while retaining broad sector exposure, including companies in hard-to-abate industries.

Climate Strategies Enter Two Major Equity Markets

Lombard Odier Investment Managers is expanding its TargetNetZero platform with two equity strategies designed for investors seeking climate alignment without abandoning diversified market exposure.

The new TNZ US Equity and TNZ Japan Equity funds extend the global wealth and asset manager’s decarbonisation-focused franchise into two of the world’s largest developed equity markets. The expansion responds to investor demand for portfolios that combine conventional financial objectives with measurable progress toward net zero.

LOIM launched the TargetNetZero franchise in 2021. It has since grown to more than $6.8 billion in assets under management. The platform includes 11 pooled funds, alongside bespoke equity, fixed-income and cash solutions.

The strategy reflects a wider shift in sustainable investing. Asset owners increasingly want climate commitments translated into portfolio construction, risk management and corporate engagement. They also face pressure to preserve diversification and control tracking error against mainstream benchmarks.

Temperature Alignment Guides Portfolio Selection

LOIM describes its equity strategies as “benchmark aware.” They are designed to remain diversified while aligning portfolios with the Paris Agreement objective of limiting global warming to 2°C or below.

The TNZ US Equity strategy uses the MSCI USA Index as its benchmark. Its portfolio can hold between 300 and 350 companies. TNZ Japan Equity is benchmarked against the MSCI Japan Index and can hold between 100 and 150 companies.

Rather than relying primarily on sector exclusions, the investment process identifies companies that LOIM considers credible transition leaders. This approach allows the funds to retain exposure to hard-to-abate sectors, where emissions reductions may carry substantial economic and climate consequences.

Company assessments draw on LOIM’s proprietary Implied Temperature Rise methodology. The tool converts a company’s net zero alignment into a temperature metric expressed in degrees Celsius.

It examines whether projected emissions are rising, remaining flat or falling at a credible pace. LOIM then uses the results to construct portfolios that maintain temperature alignment below 2°C and materially reduce greenhouse gas emissions relative to their benchmarks.

This forward-looking approach differs from strategies based mainly on current emissions data. A business with a large carbon footprint may still qualify if it has a credible transition pathway. Conversely, a company with lower present emissions may appear less attractive if its trajectory is inconsistent with global climate objectives.

Capital Allocation Replaces Blanket Exclusions

Yannik Zufferey, Chief Investment Officer, Core Business at LOIM said: “The transition to net zero will not be driven by exclusions, but by directing capital towards companies that are credibly transforming. The growth of our TargetNetZero franchise reflects the increasing demand for solutions that support this transition without compromising diversification.”

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That position places corporate transition credibility at the centre of investment decisions. It also raises the importance of governance, emissions disclosure and capital expenditure plans. Investors need reliable evidence that corporate targets are supported by operational changes and accountable leadership.

For companies, inclusion in climate-focused portfolios may increasingly depend on the quality of transition plans rather than industry classification alone. Boards must show how climate targets influence strategy, investment budgets and risk oversight.

What Investors and Executives Should Watch

The US fund enters a market shaped by shifting climate policy and political scrutiny of ESG investing. The Japan strategy operates within an economy where industrial decarbonisation, energy security and corporate governance reform remain closely connected.

For institutional investors, the funds offer a route to climate alignment with lower deviation from established market indices. However, their effectiveness will depend on the credibility of emissions projections and the discipline applied when companies fall behind their stated pathways.

LOIM’s expansion also shows how net zero investing is evolving beyond simple divestment. Capital is increasingly being directed according to the pace and credibility of corporate transformation.

That model could influence stewardship priorities across global markets. As transition plans face greater investor and regulatory scrutiny, companies able to demonstrate credible emissions reductions may gain better access to climate-conscious capital.