Osmosis Investment Management launches Resource Efficient EAFE Value Strategy for Xponance

The Strategy delivers significant reductions in the ownership of Carbon, Water and Waste.

This post is issued by Osmosis (Holdings) Limited, a London based investment management group. For more information, please contact Lisa Harrison on 07716 912832 or [email protected]

Osmosis Investment Management launches Resource Efficient EAFE Value Strategy for Xponance, a leading US emerging manager of managers

  • The Strategy was developed through collaboration with Xponance and is based on research and historical analysis that evidences the versatility of the Osmosis Resource Efficiency Factor. The Strategy seeks to identify environmental leaders that trade at a lower price to fundamentals in every sector across the economy.
  • The systematically run value strategy complements Osmosis’ current suite of long-only investment strategies. It targets an outperformance of +2-3% above the MSCI World (ex-USA) Value Index subject to benchmark relative sector and country constraints.
  • The Strategy delivers significant reductions in the ownership of Carbon (78%), Water (65%) and Waste (87%) relative to the MSCI (ex-USA) Value Index. The portfolio excludes tobacco companies and any business that violates the standards of the United Nations Global Compact.

The Osmosis Resource Efficient EAFE Value Equity Strategy targets better risk-adjusted returns than the MSCI World (ex-USA) Value Index while significantly reducing exposure to Carbon, Water and Waste – resulting in a significantly lower environmental footprint. The Strategy is constructed utilising Osmosis’ proprietary environmental research, which objectively identifies those companies leading their sector peers in environmental innovation and sustainability practices. The Osmosis proprietary metric of Resource Efficiency measures corporate environmental impact relative to value creation, thereby enabling the construction of portfolios with companies that possess strategic and enduring competitive advantages derived from environmental leadership.

Osmosis’ research has found that Resource Efficient companies outperform their sector peers over the long run and that their performance is uncorrelated to other known common investment factors. This allows Osmosis portfolios to target an uncorrelated source of sustainable alpha.

The selection universe comprises those companies that are within the top tercile of their sector based on Resource Efficiency. Following the selection of the most Resource Efficient companies, the portfolio replicates the country, sector, and valuation of the underlying MSCI World (ex-USA) Value benchmark.  This results in a highly Resource Efficient portfolio that is significantly cheaper than the international equity universe.

ESG value strategies are few and far between, with high ESG scoring companies often trading at a premium and lower ESG scores correlated with discounted multiples. Traditional value sectors are often among the more carbon-intensive industries, e.g., utilities and energy. Osmosis’ quantitative approach seeks to address these concerns through its proprietary research, which can objectively compare the relative environmental efficiency of companies on a sector relative basis across the broader economy. Furthermore, Osmosis’ research demonstrates that in many cases, lower asset multiples imply the benefits of Resource Efficiency are yet to be fully reflected in a company’s share price. 

Combining a sustainable portfolio with a value approach provides investors with the additional flexibility to target alpha from a value style allocation while also significantly reducing their environmental footprint.

“Pressure continues to build on investors to address environmental risks across their portfolios, and consequentially we see growing demand in North America. We have recently seen an increased level of interest from investors seeking value-orientated, sustainably focused products. We are delighted to launch another Resource Efficient Equity Strategy with our long-time partners Xponance. The EAFE value version of our popular Resource Efficient EAFE equity is targeted at those investors seeking to benefit from a potential rebound in value style investing and who have also committed to, or are considering reducing, their environmental footprint relative to the benchmark. In launching this strategy, we endeavour to change the perception that you cannot apply a sustainable lens to value investing.”

Ben Dear, CEO, Osmosis iinvestment management

As of 4 January 2022, Osmosis’s total environmental assets under management were at $3.0bn, with over US$600m allocated to its suite of EAFE portfolios.

Share on linkedin
Share on email

Important Information

Global Investors (ex US). This report is issued in the UK by Osmosis Investment Management UK Limited (“Osmosis”). Osmosis is authorised and regulated by the Financial Conduct Authority “FCA” with FRN 765056. This document is a “financial promotion” within the scope of the rules of the FCA. In the United Kingdom, the issue or distribution of this document is being made only to and directed only at professional clients (as defined in the rules of the FCA) (“Professional Clients”). This document must not be acted or relied upon by persons who are not Professional Clients. Any investment or investment activity to which this document relates is available only to Professional Clients and will be engaged in only with Professional Clients.

This document is issued by Osmosis Investment Management US LLC (“Osmosis”). Osmosis Investment Management UK Limited (“Osmosis UK”) is an affiliate of Osmosis and has been operating the Osmosis Model of Resource Efficiency. Osmosis UK is regulated by the FCA. Osmosis and Osmosis UK are both wholly owned by Osmosis (Holdings) Limited (“OHL”).

Looking for investment insights, thought leadership and resource efficient case studies?

Once a month, we curate the best of our insights for our subscribers. Sign up to our newsletter here.