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Resource efficiency fund outperforms benchmark

An investment fund that backs resource efficient companies has consistently outperformed a traditional benchmark, figures have revealed.

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The MoRE World Resource Efficiency Fund was launched in August 2011 by London-based Osmosis Investment Management. The fund size is currently around $120m (£77m).

The fund invests in the stocks of resource efficient companies around the world, including L’Oreal and Procter & Gamble. Gerrit Heyns, chief executive at Osmosis Investment Management, told MRW the fund is the first to use a quantative method to select resource efficient companies.

Metrics derived from a company’s energy consumption, water usage, and waste creation relative to revenues are used to identify resource efficient companies.

The parameter for waste considers the costs of managing waste arising during companies’ operations in terms of landfilling, incinerating and recycling.

“Our objective is to gain an understanding of the waste intensity of a business, so we want to know how much waste is created in the productive process,” said Heyns.

“We are trying to understand those companies that are able to create more value for the amount of waste that they create,” he added.

According to data provided by Osmosis, the fund has consistently outperformed the MSCI World, a stock market index often used as a benchmark for world stock funds.

The fund’s annual returns were 8.68 percentage points greater than the returns of the MSCI World (excluding financial institutions) in 2012, and 0.06 this year to May 2013 (see above graph). Retrospective data starting from 2005 confirm the trend of better performance of MoRE World even at the peak of the global financial crisis.

Figures suggest that the divergence between MoRE World and the MSCI World returns is widening, Hayns told MRW.

The reason for this is resource efficient companies are better at turning resources into revenue and deliver greater shareholder value, he said.

“Our belief is that the resource efficiency of a business is an indicator of how well a company is managed,” he added.

MoRE World Resource Efficiency Fund’s holdings include:

  • BAYER
  • CVS CAREMARK
  • INDITEX
  • PROCTER & GAMBLE
  • BHP BILLITON
  • STATOIL
  • SCHLUMBERGER
  • L’OREAL

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