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Global Emerging Markets: ESG Materiality, Q2 2020

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.

Engaging an electronics company on governance

In 2016, we initiated our position in a South Korean electronics company and, in doing so, we made a commitment to actively engage in constructive dialogue with it on material ESG issues. In Q1 2020, we engaged the company predominantly on governance matters.

In February 2020, the company appointed a former finance and labour minister as its board chairman. In 2019 we expressed concerns over his potential conflict of interest because he was also a professor and dean of the Graduate School of Governance at the University of Sungkyunkwan, which has received significant funding from the electronics company. During our last engagement call, management reassured us that the board chairman terminated his relationship with Sungkyunkwan University in the first quarter of 2020 so as to resolve the potential conflict that we had raised.

Positive impact case study: enabling the roll out of sustainable and resilient infrastructure

In China, 500,000 5G base stations are expected to be in place by the end of 20201. This build-up of 5G infrastructure is the main growth driver for one of our current holdings, a Chinese telecommunications infrastructure service provider.

In March, as part of the country’s stimulus plan to offset the economic impact of the coronavirus, China’s government ordered the acceleration of new infrastructure construction, including 5G networks and data centres2. For example, in just three days, our holding managed to complete the 4G and 5G wireless network planning and construction for two hospitals in Wuhan3.

How will the coronavirus impact workers in emerging markets?

In response to the coronavirus pandemic, governments have conjured up fiscal packages to support their economies, while central banks have pulled on their monetary levers to reassure financial markets. But despite these efforts, we expect the pandemic will have lasting effects on many workers in emerging markets.

In our quarterly report, we assess the government support measures provided to employers during the pandemic and the impact the structural trend in favour of automation will have on jobs in the medium to long-term. We also examine how the coronavirus impacted the asset class and our holdings in the first three months of 2020.

To find out more, read the 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.
  1. 1“China expects 5G to reach all prefecture-level cities by the end of 2020,” published by RCRWireless in December 2019.
  2. 2“China Mobile picks Huawei and ZTE to build its 5G network,” published by the Financial Times in April 2020.
  3. 3“Annual Report,” published by the Chinese telecommunications service company.

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