Active engagement from investors in emerging markets companies can help to improve sustainable growth across geographies, according to investment house Ninety One.
Emerging market investment has always had some question marks over environmental, social and governance issues - partly because of a lack of transparency and ability to interrogate companies fully as a result.
But fund management groups are making inroads to apply an ESG lens to emerging market investments, using their knowledge and analysis to improve corporate engagement, drive sustainable change and, ultimately, to work for better outcomes for investors and the communities in which these companies operate.
Active engagement, alongside a bottom-up, high conviction approach, results in superior outcomes. Juliana Hansveden, Ninety OneMimi Ferrini, co-chief investment officer for Ninety One, commented: “Our emerging markets heritage has taught us the importance of embracing change.
"Ultimately, this has helped shape our view that emerging markets companies benefitting from structural and sustainable growth tailwinds have potential to grow economic profit at above average rates over protracted periods of time.
"It is these quality companies that take all material stakeholders into account that we believe will have a competitive advantage, enabling us to deliver returns to our investors.”
Ferrini's comments came as Ninety One launched its Emerging Markets Sustainable Equity Strategy, which aims to capture the sustainable growth opportunity in emerging markets and helping to promote sustainability initiatives across the globe.
According to Ninety One, the Emerging Markets Sustainable Equity strategy looks to identify companies that capture structural growth opportunities in underserved areas, such as climate change solutions, financial inclusion, and access to digital infrastructure.
The process incorporates a unique way of assessing value creation, unlocking value from sustainability, and engaging with companies to improve sustainability initiatives.
Juliana Hansveden, portfolio manager in the emerging markets sustainable equity division at Ninety One, said implementing such a strategy was essential.
She explained that, given the lower levels of economic development in emerging markets, and with 88 per cent of ESG funds being global or developed market focused, the investment opportunity was substantial but also essential.
Ninety One [has a] drive to put sustainability at the core of our business.Mimi Ferrini, Ninety OneShe pointed to figures that estimated 70 per cent of the Sustainable Development Goals and Paris Agreement capital needs to go to developing countries to achieve net zero.
Hansveden said: “Our strategy has a differentiated lens on long-term potential, which allows time to engage with companies to improve sustainability outcomes.
"We set goals on an individual holding level covering areas such as net zero commitments and seek to drive improvement in the companies’ management of material externalities."
She added: "This active engagement, alongside a bottom-up, high conviction approach, results in superior outcomes.”
Background
Ninety One was established in South Africa in 1991, as Investec Asset Management, and was a small start-up offering domestic investments in an emerging market.
In 2020, as a global business, it demerged to become Ninety One.
The company has stated its commitment to active and sustainable investing across equities, fixed income, multi-asset and alternatives to its clients.
For example, as reported by FTAdviser at the time, September 2021 saw the company team up with Imperial College to produce a series of climate risk programmes for its employees.
The programmes aimed to educate Ninety One’s employees on climate-related risks and opportunities.
In 2021, the company also hired former Aviva manager Stephanie Niven to drive Ninety One's global sustainable equity business.
At the time, Ferrini told FTAdviser: "The broadening of our global sustainable equity offering will be another milestone in Ninety One’s drive to put sustainability at the core of our business.
"Stephanie shares our vision for developing the firm’s sustainable investing capabilities, and her sustainable investing philosophy is absolutely aligned to ours.”
simoney.kyriakou@ft.com
