Finding sustainable emerging market investments
Sustainable investing in emerging markets takes in-depth proprietary research. Lack of coverage by major providers of environmental, social and governance (ESG) information, together with lower levels of transparency, means on-the-ground insight is vital.
Building a sustainable portfolio
Emerging Markets Sustainable Equity Fund draws on the local knowledge of a 100-strong team to identify companies with effective governance, superior management of environmental and social issues, and a durable economic model. We use a four-step approach to build a sustainable portfolio.
Exclude unsustainable industries
We exclude certain industries based on norms and principles.
Exclude unsustainable companies
We exclude the stocks with the worst rankings on our risk profile.
Identify sustainable leaders
We invest in companies identified by our analysts as sustainable leaders, or as demonstrating improving sustainability characteristics.
Engage with companies
We engage to understand how companies approach ESG issues, influence behaviour and encourage best practice
Good governance pays off in a crisis
As long-term investors, we view governance as an essential driver of any investment decision. The Covid-19 crisis has highlighted the importance of a strong balance sheet and sound capital allocation decisions, which allow companies to continue to fund both day-to-day operations and the dividend, and put them in a position to come out of the crisis with a stronger position in their respective industries.
This drives us to three types of companies:
Stock exchanges: These de facto monopolies have low capital intensity, little or no debt, and are gateways for governance in their local market.
IT services: These businesses are more labour intensive but still capital-light, so are able to keep their labour forces intact without much strain on the business.
Consumer businesses: We like several strong consumer businesses with zero-debt balance sheets.
Prudent management of capital has always been important, especially in emerging markets. The crisis really highlights the difference between management teams that have paid lip service to this idea, and those that have tried to build a business for the very long term.