Danish pension provider PKA has invested DKK5bn (€672m) in a customised version of global equity portfolio from manager Osmosis Investment Management which has a far lower carbon exposure than the market as a whole.
The Resource Efficient Global Core Equity strategy is 58% more “resource efficient” than the MSCI, according to Osmosis IM, and gives investors reductions in their relative ownership of carbon, water and waste of 50%, 57% and 67%, respectively, the asset manager said in a statement this morning.
The segregated account for PKA integrates PKA’s specific ethical exclusion screens, and excludes tobacco and companies in breach of the UN Global compact, according to Osmosis IM.
Michael Nellemann Pedersen, PKA’s CIO, told IPE: “We are trying to achieve a new approach to our ESG policy, and we saw that having Osmosis as a partner could be a part of that.”
The CIO said getting this new type of equities exposure through the Osmosis fund was part part of its efforts regarding the pension fund manager’s green transition targets.
“Our assessment it that Osmosis is a data-driven institution with a strategy we believe in; they’re aiming to make a portfolio without any bias in terms of industry exposure, but finding companies that are the most efficient in terms of waste, water and carbon,” Nellemann Pedersen said.
A key advantage of the investment was, he said, that PKA could maintain the risk-adjusted approach that characterised its equity strategy.
The low tracking error that Osmosis IM managed to achieve with the actively-managed fund relative to its benchmark of the MSCI World index was one of the reasons PKA invested in the fund, the CIO said.
The new global equities exposure represents around 3% to 4% of PKA’s overall listed equities allocation, which is 28% of its total assets. At the end of 2021, PKA managed some DKK400bn of pension assets in all.
Osmosis IM also said the portfolio involved carbon reductions which already met the 2030 Paris Agreement targets, and currently had a “temperature alignment score” of 1.96°C versus 2.51°C for the MSCI World index.
PKA manages four labour-market pension funds in Denmark, with a total of 350,000 members, mainly from the social services and healthcare sectors.
Ben Dear, chief executive officer of Osmosis IM, told IPE that one of the challenges his firm had seen regarding low-carbon investment products was that they often brought all kinds of biases into the portfolio – such as lower oil exposure and higher proportions of technology stocks.
“We don’t like taking unintended bets at Osmosis – we like to control the risk and target it toward delivering in better risk-adjusted returns,” he said.