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Osmosis Investment Management

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

Other description (1) Resource Efficiency: The Osmosis Model of Resource Efficiency ("MoRE") systematically identifies relative resource efficiency amongst global large-cap companies. MoRE uses publicly available data on resource consumption to identify those companies that are producing more revenue while using less resources and is updated on a monthly basis.
Other description (2) Osmosis works in conjunction with underlying clients in order to implement specific client ethical screens, these range from social exclusions to faith based approaches.

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

We live in a world of growing constraint, characterised by rising demand from population growth and rising living standards, converging with accelerating resource depletion. Companies that are measuring, managing and reducing their resource consumption while capitalising on this rising demand will deliver greater shareholder returns over the longer term.

Osmosis' investment approach objectively analyses corporate sustainability data which allows us to identify an uncorrelated source of alpha in publicly listed companies. This informational advantage when applied to a systematic quantitative approach creates investment portfolios that seek to deliver superior risk-adjusted returns over the long-term while significantly reducing their draw on natural resources. This results in potfolios with a much lower environmental footprint relevant to market benchmarks.

We are convinced that objectively identifying resource efficiency within global large cap companies allows us to target those who have addressed the issues of resource constraint and executed a sustainability program that has delivered to the bottom line. Our research allows us to identify companies whose sustainability programs have not only increased environmental performance but also delivered greater value to shareholders.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

With world populations forecast to reach 7.8 billion by 2050 ( source UN ) and the global middle class expanding by approximately 150 million people  per year ( source Brookings Institute ) demands for goods, products and services will continue to grow.  All economies benefit from global GDP growth and we do not seek to penalise firms delivering sustainable growth. Such an insatiable demand must be met with the finite resources available.  Those companies able to deliver greater value from more efficient use of resource to service this demand will emerge as the most economically and environmentally sustainable.

Core to the Osmosis philosophy is to target investments across the breadth of the economy. Addressing supply is a myopic and a fruitless endeavour unless demand is also equally addressed. Consumption is not confined to a single section of the economy.  The Model of Resource Efficiency portfolios address both the supply and demand side of the consumption equation as they target the most efficient corporates throughout each step of the value chain across the breadth of the economy. 

This philosophy is ultimately self-fulfilling.  When capital is allocated in significant scale through a process of natural divestment from the most inefficient to the most efficient companies, we believe that markets will force up the cost of capital for those inefficient companies.  This should ultimately pressure change from management to adapt their business models or they will risk being further downgraded by the market.  We aim to ultimately prove that the capital markets will play an important role in transitioning the world’s corporates to become more sustainable.

Critically, Osmosis identifies the results of management behaviour, using only objective data, rather than focusing on the bluster of management intent.  Identifying action over intent positions the Model of Resource Efficiency portfolios to those management teams who are successfully implementing a more sustainable approach.  The Osmosis data evidences that such behaviours are rewarded by the markets for their proven ability to aggregate greater value from their resources.

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk

01.6 CC. Indicate whether your organisation has identified transition and physical climate-related risks and opportunities and factored this into the investment strategies and products, within the organisation’s investment time horizon.

Describe the identified transition and physical climate-related risks and opportunities and how they have been factored into the investment strategies/products.

The Osmosis Model of Resource Efficiency seeks to identify those companies that are creating more with less and who will lead a just transition to a more sustainable future. The model encourages an all economy approach which aims to facilitate mainstream adoption of sustainable investment principles. While our model does not originate from a risk management approach, but rather from a believe that efficient comapnies will outperform their innefficient peers, putting key environmental data at the heart of our investment process has benefits for transition and physical climate-related risks and opportunities. This is not limited to our investment time horizon. 

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

Describe why your organisation has not yet assessed the likelihood and impact of climate risks

The Osmosis Model of Resource Efficiency seeks to identify those companies that are creating more with less and who will lead a just transition to a more sustainable future. Our systematic approach focuses on the consumption of natural resources linked to economic productivity, and is integrated into all of our products. Our approach is not a risk-management approach, but stems from a believe that efficient companies will perform better than their innefficient peers. We believe that this concept holds true across the entire model, and therefor we do not believe there is a need to assess likelihood or impact of climate risks.

01.8 CC. Indicate whether the organisation publicly supports the TCFD?

01.9 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

The Osmosis Model of Resource Efficiency seeks to identify those companies that are creating more with less and who will lead a just transition to a more sustainable future. Our systematic approach focuses on the consumption of natural resources linked to economic productivity, and is integrated into all of our products. Our approach is not a risk-management approach, but stems from a believe that efficient companies will perform better than their innefficient peers. We believe that this concept holds true across the entire model, and therefor we do not believe there is a need to assess likelihood or impact of climate risks.

1.10 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

URL/Attachment

URL/Attachment

Other description (1) Resource Efficiency: The Osmosis Model of Resource Efficiency ("MoRE") systematically identifies relative resource efficiency amongst global large-cap companies. MoRE uses publicly available data on resource consumption to identify those companies that are producing more revenue while using less resources and is updated on a monthly basis.

URL/Attachment

02.3. Additional information [Optional].


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Osmosis is majority owned by its directors and employees with a small number of external investors (who have no access to the investment decisions of Osmosis or its clients). Osmosis does not hold capital for proprietary investment and undertakes no dealing activities on its own account. Osmosis has a stringent personal dealing policy which requires prior approval of any dealing activities that might give rise to a conflict and such approval is unlikely to be granted even if there is only a perceived or potential conflict. This policy is applied to all members of staff who are required to make an annual statement including disclosure of all brokerage accounts (and private equity holdings). Those employees who undertake personal dealing activities are required to provide contract notes (typically direct from a broker) and quarterly brokerage statements. This robust approach is designed to avoid any conflicts arising in the dealing activities of Osmosis and its staff.

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

The Model of Resource Efficiency monitors companies’ revenues as well as resource efficiency when creating a resource efficiency score for each company. Incidents occurring within portfolio companies could result in a change of the company resource efficiency score which would automatically lead to the exclusion of the company from the portfolio if the impact is negative either in terms of financial or resource efficiency performance or both.


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