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

Financial inclusion: an economic opportunity for all
We explore why financial inclusion is a significant economic opportunity that offers real benefits for society as a whole.
Central bank digital currency: clean atomic monetary energy or financial fallout risk?
Fiorino delves into the emerging field of central bank digital currencies
Credit Pulse: market update – 17 September 2021
In our latest Credit Pulse, we take a deep-dive into credit fundamentals and findings from our credit strategy meetings.
Impact Annual Report, 2020
Covid-19 has resulted in a paradigm shift: it has thrown into sharp focus the need for resilient healthcare systems and supply chains, while also highlighting the climate change crisis and workers’ rights issues.
How to unlock opportunities in the sponsor-less SME loan market
With greater liquidity and mounting interest from institutional investors, can we expect an influx of non-sponsor transactions funded by direct lenders?
Increasing transparency through disclosure
Kate Fowler, senior responsibility analyst, explores the potential impact of the new Sustainable Finance Disclosures Regulation.