We are deIighted to win the Boutique Manager of the Year Award for the second consecutive year!
NB: The Environmental Finance Sustainable Investment Awards is free to applicants and open to all organisations globally. These awards were given in June 2021 and February 2023 and relate to the annual period May 20-May 21 and Dec 21 – Dec 22 respectively.
Write up from Environmental Finance
Environmental Finance’s Sustainable Investment Awards judges singled out boutique investment manager, Osmosis Investment Management for the second year in a row, citing its “great fund” and “impressive performance”.
The UK-based environmental asset manager has tripled its assets under management to $10 billion over the course of the year, including winning a mandate for $4.5 billion from Dutch pension fund, PGB, described at the time as one of the largest ESG mandates
The Osmosis research process standardises unstructured corporate environmental data, enabling the construction of its Resource Efficiency Factor. It considers the significance of carbon, water, and waste data at a granular level enabling measurement of a company’s sustainable actions, rather than its intentions.
Osmosis is focused on delivering three levels of impact: better risk-adjusted returns, measurable environmental reductions, and an active engagement programme to promote better corporate environmental disclosure. The firm’s multi-environmental factor-based approach led to reductions in carbon of 57%, water of 66% and waste of 71% in its flagship Core Equity Fund, relative to the MSCI World as of 31 March 2023.
Ben Dear – CEO & Founder of Osmosis
“The team at Osmosis is incredibly proud to win the boutique investment manager of the Year award for the second year running. It’s a testament to the 14 years of work we have committed to proving that investing sustainably can also deliver better risk-adjusted returns. As our AUA scales beyond $10 billion, we may not be included in next year’s awards in this category, but we look forward eagerly to being judged amongst our peers in the larger manager category. I’d like to thank all our stakeholders but especially our clients for their continued trust and support and of course, my team for their enduring commitment to making Osmosis an industry-leading sustainable asset management company.”
A unique sustainable factor based on Resource Efficiency
Identification of a sustainable alpha signal is a challenge solved by only a few in the ESG space.
The Resource Efficient Core Equity Fund launched following extensive research, correlation and attribution analysis on our proprietary Resource Efficiency Factor. Developed over 13 years, our proprietary and objective environmental research process enables the identification of those companies that are better placed to deal with the increasing number of environmental challenges that lie ahead. At the same time, those companies that refuse to change or are too slow to adapt will continue to destroy shareholder value.
Managing active & environmental risk
All portfolios seeking a sustainable outcome will naturally bring in active risk relative to a market-cap-weighted benchmark. The Osmosis program is unique in that the active risk is controlled and targeted towards a sustainable alpha signal.
Our goal was to ensure that when investors seek to reduce their portfolio’s environmental footprints, the risk that they assume is not left unrewarded. Our core strategies aim to deliver better risk-adjusted returns than the respective benchmarks by tilting the portfolio towards stocks we have identified as more resource-efficient and thus more likely to outperform their sector peers. All the strategies deliver the main benefits of index investing by offering a highly diversified and cost-efficient portfolio.
Research has evidenced that Resource Efficiency is a return signal independent from traditional country, sector, size and style factors. The allocated risk budget is targeted towards resource efficiency through the idiosyncratic part of the risk models, risk that is usually diversified away. Through this smarter management of the active risk, the core strategy can replace the MSCI World without impacting existing exposures and enhancing the risk-adjusted return.
A broad economy approach
When we launched in 2009, we were the first sustainable asset manager to focus on a broad economy solution. We recognised that addressing supply was only meaningful in the context of addressing demand. This Fund was developed to appeal to investors from institutions to individuals who shared our conviction that a well-diversified global portfolio, targeting overweight and underweight positions to environmentally efficient and inefficient companies across the broader economy, would result in improved portfolio returns.
A significant environmental impact
The outcome of this sophisticated core replacement strategy is a significant reduction in the portfolio’s environmental footprint. The strategy delivers significant reductions in ownership of Carbon (57%), Water (66%) and Waste (71%) (as of 31 March 23) relative to the benchmark while remaining invested across the broader economy*.
Osmosis believes that the planet’s long-term sustainability demands a re-evaluation of overall resource consumption. Carbon, Water and Waste, are each subject to increasing regulation, cost pressure and social scrutiny. Companies focused on environmental impact need to address those aspects of consumption and pollution that are most relevant to their business model, which will often include the mitigation of resources other than Carbon. Osmosis’ research demonstrates that this three-factor approach also delivers a more reliable investment signal.
* The foot printing metrics above have been calculated using a Total Metrics approach, apportioning carbon emissions, water consumption and waste generation to the investor based on an equity ownership perspective. Calculating the “owned” emissions, water and waste from each position in the portfolio and benchmark, and adding those metrics yields the total impacts for the portfolio. The calculations have been based on metrics recorded in the MoRE DataBase where available, and industry averages have been used to estimate any gaps in the data coverage.
** As of 31 May 2023 – Osmosis Investment Management UK Ltd (“OIM UK”) is an affiliate of Osmosis Investment Management US LLC (“OIM US”). Osmosis Investment Management AUM includes discretionary assets under management of OIM US and OIM UK and assets invested in model programs provided by OIM US and OIM UK.
The MSCI World Index captures large and midcap representation across 23 Developed Markets. With 1,645 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.