Ossiam lists Food for Biodiversity ETF on Xetra
Ossiam has launched a new active fund with a focus on sustainable management in the agricultural and food sector on Xetra and Börse Frankfurt.
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.
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 per cent for SDG environment score, 20 per cent 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’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 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 sq km of pristine forest has an MSA of -1 sq km.
Companies can improve their score by improving their practices in one of the four measured contributors: carbon emissions; land use which takes valuable space from natural habitats; pollution as nitrogen oxides (NOx) from fertilisers 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.
The investment process uses a systematic approach and ESG data from specialist 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, 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.
Bruno Poulin, CEO of Ossiam, says: “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.”