Solactive Partners with Osmosis to Launch Resource Efficient Core Equity Ex-Fossil Fuels Global Equity Index, with £200m Seed Investment from East Sussex Pension Fund
Over the last few years, investors have been increasingly considering aligning investment decisions with ESG values. Last year, this focus increased as the entire world watched heads of states’ debates on effective actions against climate change at the UN Climate Change Conference (COP26) in Glasgow, Scotland. Now, Solactive is pleased to announce that East Sussex Pension Fund has partnered with sustainable investment manager Osmosis to launch a £200m global equity ex-fossil fuels portfolio linked to Solactive Osmosis Resource Efficient Core Equity Ex-Fossil Fuels Index.
The index aims to track the performance of large-mid cap global developed market securities operating in accordance with certain market standards on ESG controversy screens. It excludes companies that generate more than 5% of their revenue from fossil fuels or from nuclear power. Companies that produce nuclear weapons, controversial weapons or civilian firearms are also excluded, as well as tobacco companies and those that breach the UN Global Compact Principles.
At the same time, the index targets companies that are efficient in their productive use of resources, delivering reduced carbon emissions, water consumption and waste generation, relative to economic output. The Resource Efficient Ex-Fossil Fuels Index addresses the supply side of fossil fuels through divestment but also, uniquely, the demand side through the targeting of resource-efficient companies across the rest of the economy. This dual approach seeks to protect investors from potential value destruction, as regulatory and financial pressures on the fossil fuel industry intensify, while also limiting the economic impact of potential energy price reflation in a post-Covid recovery.
This approach forms part of East Sussex’s ongoing commitment to address the investment challenges presented to their passive holdings by the energy transition. East Sussex Pension Fund’s consultant Isio has supported the development of an investment strategy aligned with the Fund’s objectives. The equity strategy will be advised by Osmosis Investment Management with UBS Asset Management acting as Investment Manager, under the current Passive Service Agreement, as set out by the National LGPS (Local Government Pension Scheme) Frameworks Team.
Timo Pfeiffer, Chief Markets Officer at Solactive, comments: “Solactive’s longstanding innovative strengths in ESG indices root from our commitment to provide our clients with the most seamless and fitting ESG solution as well as from our clients commitment to tilt their portfolios in this direction. We are happy that Osmosis Investment Management have chosen us as their index provider of trust, and we are pleased that, with our indices, investors have the chance to make the world a greener place.”
Ben Dear, Osmosis’ CEO says: “We have seen a rapid increase in funds managed against our suite of Core Equity strategies, and, through this partnership with Solactive, we are now able to offer our ex-fossil fuel strategy as index to the broader investment community but in particular to the LGPS utilising their existing passive service agreements under the UK national framework. Assets against our core equity range have passed $2 billion, and demand is growing as investors seek to mitigate the environmental risks in their portfolios while managing and targeting the active risk towards a source of sustainable return.”