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Feb 13, 2023

Osmosis wins record ESG mandate

Asset owners face growing pressure to reduce environmental impact

ESG specialist Osmosis Investment Management has received an allocation of $4.5 bn from a Dutch pension fund in one of the largest ever sustainable investment mandates.  

Under the agreement, London-based Osmosis will run a global equity portfolio focused on resource-efficient companies for Pensioenfonds PGB, one of the top 10 largest pension funds in the Netherlands.

The new portfolio will cut carbon emissions, water consumption and waste generation by more than 50 percent compared with previous holdings, says Osmosis, as well as incorporate Pensioenfonds PGB’s list of excluded sectors.

The $4.5 bn allocation is thought to be the largest ESG mandate involving new flows to an investment manager, according to an article in the Financial Times.

There have been three larger allocations – two by Japan’s Government Pension Investment Scheme and one by the UK’s Universities Superannuation Scheme – but they saw existing funds reallocated, notes the article, citing data from MandateWire, an FT subsidiary.

The contract highlights the growing pressure on asset owners to reduce the impact of their investments on the environment. Last year, European regulators said the region’s pension funds are ‘materially exposed to transition risks’ following a climate stress test.

Founded in 2009, Osmosis identifies companies that make better use of resources and overweights them in its portfolios. The firm’s flagship Core Equity Fund has outperformed its benchmark, the MSCI World Index, by 7.5 percent since its inception in 2017.

‘Investors seeking to address the environmental risk in their portfolios to meet ever more pressing environmental reduction commitments are also cognizant that the active risk required to meet these goals should not lead to sub-optimal financial returns,’ Ben Dear, CEO of Osmosis, says in a statement.

The move by Pensioenfonds PGB follows its decision last year to launch a carbon action plan. ‘Our main short-term climate objective is to halve the carbon footprint of our investments by the end of 2030 at the latest. Or faster if possible,’ the pension fund says on its website.