Universities seed Osmosis fund addressing fossil fuel divestment risk

Australian and UK universities back fund

The University of New South Wales in Sydney Australia and Oxford University Endowment Management (OUEM) in the UK are seeding the fund launch of Osmosis Developed Markets Resource Efficient Core Equity ex-Fossil Fuels fund.

Available to wholesale investors, Osmosis has developed the product to address the risks and unintended bets bought into portfolios from fossil fuel divestment. A statement from the group said the portfolio addresses both the supply side of fossil fuel energy generation through fossil fuel divestment and the demand side of fossil fuel energy consumption by reallocating the active divestment risk to the most highly correlated resource-efficient companies across the economy.

More investors, said a statement, are reviewing their portfolios’ fossil fuel exposure due to the link between carbon emissions and the frequency and severity of climate related disasters.

The strategy will also protect investors from reflation in fossil fuel commodity prices and long-term risks of value destruction, they said.

Osmosis chief executive, Ben Dear, said: “Partnering with two leading global universities in the launch of this innovative ex-fossil fuels fund is an exciting development for the firm and a testament to the efficacy of the strategy.”

The universities have seeded the fund with $50m.

“The environmental challenges we face extend well beyond fossil fuel companies, and there is growing investor understanding that we need to reduce our reliance on natural resources in all sectors and geographical regions.

“Both the University of New South Wales and Oxford University Endowment Management share our belief that the efficient use of finite natural resources is critical to the future health and wealth of our planet and that addressing these externality risks at a portfolio level can not only reduce these environmental risks but also, if the allocation of risk is managed utilising our factor of resource efficiency, contribute to long-term economic returns.”

The fund launched on 26 September in a UCITS ICAV and will be launched later this month in an onshore Australian trust which will act as a feeder fund into the UCITS ICAV. Once the Australian trust launches, the fund will have an aggregate assets under management (AUM) of just over $100m.

Osmosis’ core equity range has $12bn in AUM.