First State Investments has launched a Global Emerging Markets Sustainability fund. The new fund, managed by David Gait, the lead manager of the First State Asia Pacific Sustainability fund, is benchmarked against the MSCI Emerging Markets Free index and aims to capitalise on the growth in sustainable business practices in emerging markets.
The fund, launched on April 8, focuses on companies with business models that are positioned to benefit directly from new opportunities in areas including renewable and cleaner energy, energy efficiency, water management, waste and pollution management, environmentally aware consumer products and services, and broad sustainable development.
“We have got a team of 19 analysts and will meet about 2,000 companies every year in order to identify the 50 or 60 best companies with the strongest sustainability [mandate],” Gait says.
In terms of geographic allocation, 55% of the portfolio is invested in Asia, 23% in Latin America and 20% in emerging Europe, the Middle East and Africa.
While the fund does not formally employ negative screening, it is unlikely to invest in companies operating in “high risk sectors” such as armaments or tobacco because of the environmental, social and governance risks such companies face. Gait adds that positive engagement is also part of the investment strategy.
Until 2050, Gait says, the population is expected to raise by 2.5 billion people. And 98% of that increase is going to be in emerging markets.
“Emerging markets have to have sustainability,” he highlights. “If everybody in Brazil and China lived the same lifestyle we do, we would need three planets.”