Search this website. You can use fund codes to locate specific funds

Global Emerging Markets: ESG Materiality, Q4 2019

Welcome to the Global Emerging Markets’ ESG Materiality commentary – a quarterly publication that demonstrates our engagement activity with portfolio companies and showcases holdings that are creating positive impact aligned to the Sustainable Development Goals. In addition, we explore an environmental, social and governance (ESG) theme and its implications for the asset class.

China Mengniu: engaging on food safety and climate change

As recognised by the United Nations, the inappropriate use of antibiotics in animals is a leading cause of rising antimicrobial resistance. China leads the way as the largest consumer of veterinary antimicrobials, both in relative and absolute terms.

Recently, we engaged with China Mengniu, a leading Chinese diary company, on the use of antibiotics on milk-producing cows. Encouragingly, the company was responsive. Mengniu published its antibiotics policy in its Sustainability Report, and it started to limit the use of antibiotics for the treatment of verified diseases only.

We have also had a positive and constructive discussion with management on climate change issues, including the adoption of science-based emission reduction targets and water use programmes.

Duratex SA: capturing carbon in Latin American forests

Duratex is the largest producer of industrialised wood panels, sanitaryware, metal taps and shower heads in the southern hemisphere. It is aligned to SDG 8, 12, 13 and 15.

In 1995, Duratex became the first company in South America to receive Forest Stewardship Council (FSC) certification. FSC certified forests are managed in a way that preserves biological diversity and benefits the lives of local people and workers, while ensuring they sustain economic viability. As of 2018, 95% of the company’s forests are FSC certified – and it aims to reach its target of 100% certification by 2025. 

The company’s forests have captured an estimated 4.9m tonnes of carbon in Brazil last year, while in Colombia, it obtained an ICONTEC Forest Compensation Certificate, showing that it captured 956,000 tonnes of carbon from 2010 to 2017. In 2018, Duratex sold its Colombian carbon credits with proceeds of $4m, making it the first large Colombian company to offset emissions and trade carbon credits.

Waves of protests

From Chile to Hong Kong, a number of demonstrations were held in various parts of the world in Q4. Emerging markets tend to lag on social issues, but investors often overlook this. Nevertheless, unrest caused Chile to underperform the MSCI EM index by 21% in Q4. In our view, investors should consider social factors as part of their top-down analysis of emerging markets.

In general, when unrest triggers change, it may slow down market-friendly reforms but speed up populistic ones (such as a higher public spend on welfare). Against this backdrop, investors will have to factor in higher fiscal budgets and inflation as well as a positive outlook for low-income consumers.

To find out more, read our full report here.

Risk profile
  • Nothing in this document constitutes a solicitation or offer to any person to buy or sell any related securities or financial instruments.
  • Past performance is not a reliable indicator of future results and targets are not guaranteed.

More Insights

The Meeting Room Webcast: Global Emerging Markets, October 2020
As we navigate the ever-changing landscape of the coronavirus, the Global Emerging Markets team reflect on recent performance, and discuss the outlook for Global Emerging Markets from both a market and portfolio positioning perspective.
Global Emerging Markets positive impact case study: Advantech
Through its IoT business, Advantech contributes to the attainment of the SDGs
The red and the blue – updates from the US, October 2020
In this webcast, Clive Selman, moderates a discussion with colleagues Phil Orlando and Steve Chiavarone to hear their thoughts on the US elections and the impact on 2020’s final quarter and beyond.
Marking UN Day
To mark UN Day, we are focusing on four sustainability challenges identified by the UN Global Compact.
Credit investors: delivering into the imperatives of Paris
In this video Anna Karim, Investment Director Fixed Income, and Mitch Reznick, Head of Research and Sustainable Fixed Income, discuss how to decarbonise portfolios within fixed income and the imperative of aligning investment strategies with the Paris Agreement.
Credit Pulse: market update – 16 October 2020
In this instalment of Credit Pulse we focus on the high-yield credit environment and how we integrate ESG throughout this asset class. Specifically, we discuss...