Cambridgeshire and Northamptonshire pension funds in the UK have partnered with sustainable investment manager Osmosis Investment Management to implement two customised global equity portfolios based on the firm’s Resource Efficient Core Equity Strategy.
The strategies form part of an ongoing commitment by both pension funds to reduce the global environmental impact of their respective passive equity exposures, it was announced.
The selection and implementation of both strategies have been consultant-advised and align with the individual climate objectives of the local government pension schemes.
The strategies will be constructed by Osmosis with UBS Asset Management acting as investment manager, under the current Local Government Pension Scheme (LGPS) Framework for Passive Investment Management Services.
The two LGPS funds have more than 177,000 scheme members and over 690 employers from across the not-for-profit, private, and public sectors.
Both funds have initiated ambitious decarbonisation pathways, towards which these two mandates represent a significant step. Cambridgeshire and Northamptonshire schemes form part of the ACCESS LGPS pool.
The Osmosis Core Equity Strategy replicates the style and risk exposures of the MSCI World Index and targets the active portfolio risk towards the firm’s proprietary Factor of Resource Efficiency; a sustainable return signal that is the main driver of return in Osmosis’s portfolios.
On a sector-relative basis, the strategy overweights companies identified by the Osmosis research programme as resource-efficient while underweighting those companies identified as resource-inefficient.
The strategy has delivered significant reductions in ownership of carbon (61%) water (67%) and waste (65%) relative to the benchmark (average since inception) while remaining invested across the broader economy.
These allocations will see Osmosis assets under management reach approximately $10bn, while investment in Osmosis’s Core Equity range has now surpassed $9bn, the firm disclosed.
Alison Whelan, chair of Cambridgeshire pension committee, said: “As part of our vision to make Cambridgeshire greener, fairer, and more caring, this investment will not only support us in our work to change the Cambridgeshire fund to a lower carbon, sustainable portfolio, which meets our environmental objectives but maintain strong returns for our scheme members.”
Malcolm Longley, chair of Northamptonshire pension committee, said: “This strategy was chosen to deliver reliable returns through investment in a wide range of resource efficient companies, thus enabling us to make significant progress on our decarbonisation journey and ultimately benefiting both scheme members and the environment.”
Ben Dear, chief executive officer of Osmosis, said: “To partner with two more UK government pension schemes is a testament to the efficacy of our approach which delivers immediate and significant environmental reductions while targeting better risk-adjusted returns. Our core strategies enable our clients to meet the long-term funding requirements of their customers through a highly diversified, cost-efficient, and liquid portfolio that encourages mainstream adoption of sustainable investing.”