Ossiam, the smart beta investment specialist and affiliate of Natixis Investment Managers, has today announced the listing of a new exchange-traded fund,
Bruno Poulin, CEO of Ossiam
the Ossiam Food for Biodiversity UCITS ETF, on the Xetra exchange in Germany.
Ossiam’s Food for Biodiversity strategy takes an active quantitative approach to tackling global biodiversity destruction. The strategy achieves a substantial and quantifiable reduction in the biodiversity footprint of the food and agriculture sector.
Bruno Poulin, CEO of Ossiam, said: “To address the increasing destruction of our natural environment, all sectors of the economy must contribute in numerous ways before it is too late. The Earth’s population is predicted to reach about 11 billion by the end of this century*, but if current food production methods and diets are not drastically improved, there are likely to be calamitous environmental, social and political outcomes. Mobilising capital and engaging with companies in the broad food and agriculture sectors is one way of making a positive contribution to the immense environmental challenges facing humanity now.”
Matthieu Maurin, CEO and co-founder of Iceberg Data Lab, also commented: “We are proud to have been selected by Ossiam as the data provider for this first-of-a-kind Food for Biodiversity ETF. The Corporate Biodiversity Footprint developed by Iceberg Data Lab captures the most material impacts of food companies and their value chain on ecosystems. This quantitative metric allows investors to assess corporates through their primary social contribution, food production and distribution, and their environmental impact, notably the change of land use and contribution to deforestation.”
Strategy, impact & engagement policy
The portfolio’s construction typically leads to a fund with a 99% reduction in negative biodiversity impact, which is equivalent to saving 218 km² of pristine habitat for 100 million USD invested, compared to an investment in the benchmark investment universe.
On the more conventional GHG and ESG measures, the portfolio features a lower carbon footprint than the global equity benchmark and higher ESG scores than the initial investment universe. The portfolio also improves the United Nations Sustainable Development Goals (SDG) score compared to the food sector (50% for SDG environment score, 20% for SDG social score, both based on ISS research) and is aligned with a two-degree scenario based on the World Resources Institute 2019 report.
Ossiam has implemented a dedicated engagement policy for this ETF. Its ESG analysts will engage with selected companies in the portfolio to make sure they identify, plan and pursue tangible outcomes aiming to:
Ensure the preservation and sustainable use of ecosystems
Mitigate the impact companies have on biodiversity and prevent the extinction of threatened species
Integrate climate change measures into policies, strategies, operations and products
Ossiam’s voting policy has ambitious expectations of boards’ oversight and actions regarding climate, which enhances the impact of this fund.
Ossiam’s research team partnered with Iceberg Data Lab to develop appropriate quantitative metrics for the strategy. Iceberg Data Lab provides issuer-level biodiversity metrics and assesses the impact of companies depending on their activities and the location of agricultural land use.
Biodiversity is measured using the Mean Species Abundance (MSA), an indicator of the biodiversity health of ecosystems. It represents the state of the current ecosystem compared to the undisturbed natural state. For example, a company’s impact that is equivalent to the destruction of biodiversity associated with 1 km2 of pristine forest has an MSA of -1 km².
Companies can improve their rating by advancing their practices on one of the four measured contributors: carbon emissions; land use which takes valuable space from natural habitats; pollution as nitrogen oxides (NOx) from fertilizers acidifies soils; and freshwater pollution. The measure encompasses a company, its suppliers and customers.
The strategy’s investment universe comprises large- and mid-cap equities active in the agriculture and food sector within a selected list of developed countries. All parts of the food supply chain are represented, including agriculture, manufacturers, retailers, distributors, restaurants, and packaging food producers.
Ossiam’s team applies a dedicated investment process using a systematic approach and ESG data from expert companies (Sustainalytics, Trucost, ISS, Iceberg Data Labs) to create an optimised portfolio to maximise the Mean Species Abundance under constraints. The initial investment universe of around 250 stocks is reduced to a portfolio of approximately 70 stocks, spread across different sectors of the food industry, with packaged food producers, restaurants and retail outlets being the largest represented sectors. As of December 31st, 2020, the strategy’s portfolio consisted of 66 stocks.
The fund is an actively-managed exchange-traded fund, which allows the investment manager the flexibility to ensure the eligibility of the portfolio’s constituents.
The ETF has been approved by the Central Bank of Ireland. It carries a maximum Total Expense Ratio of 0.75%, uses physical replication and is available in euro and dollar share classes. The ISIN is IE00BN0YSJ74 for the USD share and IE00BN0YSK89 for the EUR share.