Pensioenfonds PGB, the €28bn Dutch multi-sector pension scheme, has awarded a passive €4.5bn ESG global equity mandate to Osmosis Investment Management. The move is part of PGB’s goal to halve its carbon emissions.

According to market data, it is the largest new ESG mandate ever awarded to an asset manager. Japan’s government pension fund and the UK’s Universities Superannuation Scheme have awarded larger mandates but these were merely retooled existing mandates.

PGB is not Osmosis IM’ first pension fund client. Others include Danish pension provider PKA and Australia’s Commonwealth Superannuation Corporation.

Resource Efficiency

The new portfolio is based on Osmosis IM’s bespoke Resource Efficiency strategy, whereby companies that have relatively low carbon emissions, waste generation and water consumption relative to value creation are overweight.

At the same time, companies identified as resource-inefficient are being underweight. The PGB mandate also includes a 50% reduction of the carbon footprint compared to the existing portfolio.

The move to transfer a third of its global equity portfolio to Osmosis IM is part of PGB’s goal to halve its carbon footprint by 2030, a spokesperson for the fund told IPE. The PGB deal doubles Osmosis IM’s assets under management in one go to some $9bn.

According to Frans van Veen, executive board member at PGB, the concentration risk associated with this is not as large as it may seem. “In fact, we are buying intelligence from Osmosis in the form of their Resource Efficiency methodology,” he explained. ”The associated trading will continue with UBS AM.”

According to Osmosis IM, Resource Efficiency can be used to target excess returns while having a low correlation to other common factors. The firm claims that companies that are more resource-efficient are able to deliver a greater return on equity.

Van Veen assures that the “marginal” rise in investment costs associated with the move to Osmosis IM will be more than compensated for by higher expected returns.

Since its founding in 2009, Osmosis has generated a solid outperformance on all its regional sub-strategies. Since inception in 2017, the firm’s Core Equity Fund, on which the PGB mandate is based, has beaten the MSCI World Index by 8 percentage points.

Osmosis IM’s model only includes companies that disclose sufficient data on carbon emissions, water use and waste production. According to a spokesperson for the firm, this is currently the case for about half of the MSCI World Index constituents.

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