Osmosis enters ESG bonds via Dutch venture
A star team of former Robeco sustainable bond fund managers, led by the giant €200bn-plus Dutch investor’s long-standing chief investment officer for fixed income and sustainability, are poised to open the doors of their own firm.
Rotterdam-headquartered Osmosis Investment Management NL will begin operations imminently with “a couple of hundred million” euros in seed capital for its two initial funds (global investment-grade and high-yield corporate bond vehicles), according to Victor Verberk, chief executive and CIO.
The new firm also offers a private credit strategy in mid-market corporate loans.
OIM NL’s focus will be transition investing. “Instead of excluding them, maybe you want to invest in somewhat dirtier companies or companies with a [larger carbon] footprint if they do the right thing and make change towards a more sustainable economy. That is what we embrace,” Verberk said.
“Keep your universe as big as possible, but know what you own,” he said.
Accordingly, the firm will not exclude sectors such as fossil fuels. Instead, it will seek bonds that offer both performance potential and the support of a meaningful transition story.
Capital expenditure or mergers and acquisitions in support of transition can also create “interesting spread opportunities”, said Peter Kwaak, lead portfolio manager for investment grade credit.
“We also look at the financial impact that the transition has on the credit profile of a company,” he added, with the firm applying a transition framework that analyses current impact (including social factors), future impact (measured on green capex and revenue momentum in sustainable activities) and financial health.
Verberk cited a leading automotive company as an example of a transition story that fails to hold up under this analysis.
“That is a story that we think the company might do the good things, but we are not so certain in five or seven years [it] is still there in in the current situation with the same balance sheet and creditworthiness," he said. "So, you can question whether it is a good credit investment.”
Green and other labelled bonds will play a role in this, though Kwaak is more sceptical towards sustainability-linked bonds. Up to 10% of the funds could be held in green, social and sustainable use of proceeds instruments.
Kwaak also cautioned against opportunistic green issuance. “It would also have to show up in the business strategy of a company that they are actively moving towards a transition and not just hitting the market with one green bond because it reduces the cost of financing relative to a grey bond.”
While OIM NL will also offer “transition beta” variants to asset owners that want darker green strategies, its core products will compete with mainstream corporate bond funds. Both will be marketed as lighter green Article 8 vehicles under the European Union’s Sustainable Finance Disclosure regulation.
“We dare to do that because we think transition and sustainability supports alpha instead of costing alpha,” said Verberk.
Paris-aligned
Verberk left Robeco, where he was also deputy head of investments, in December 2023 after 16 years there. During his time the firm launched the first global Paris-aligned climate funds, RobecoSAM Climate Global Credits/Bonds (which use dedicated benchmark indices created with Solactive), as well as several United Nations Sustainable Development Goals strategies.
It also joined the University of Cambridge Institute for Sustainability Leadership’s voluntary Investment Leaders Group in 2020.
Verberk founded OIM NL after a career break during which he published a book, "Bias", on his investment philosophy. He and key team members such as Kwaak own the majority of OIM NL.
An institutional group comprising the holding company of sister firm Osmosis Investment Management UK, a US$18bn sustainable equity manager, plus the £7bn Oxford University endowment and Australia’s US$38bn Commonwealth Superannuation Corporation, holds what they describe as a “significant” minority stake.
The Oxford endowment fund is also a shareholder in Osmosis Holding, along with institutions such as Capricorn Investment and Nikko Asset Management. CSC has been a client of OIM UK since 2020.