Franklin Templeton has announced the launch of the Templeton Emerging Markets Sustainability Fund - a sub-fund of the Luxembourg-domiciled Franklin Templeton Investments Funds (FTIF) range.
The new fund will be co-managed by Edinburgh-based Andrew Ness and Singapore-based Chetan Sehgal, Portfolio Managers at Franklin Templeton Emerging Markets Equity (FTEME) team, who also co-manage the successful Templeton Global Emerging Markets strategy.
The fund's investment objective is to seek capital appreciation by primarily investing in companies that are domiciled, incorporated or listed in developing or emerging markets (EM) globally and demonstrate good or improving sustainability criteria. The fund seeks companies whose products and services are aligned to one or more of the six positive outcome areas linked to the UN Sustainable Development Goals (SDGs). The six positive outcome areas are: Basic Needs, Wellbeing, Decent Work, Healthy Ecosystems, Climate Stability, and Resource Security.
The fund adopts a proprietary framework that reflects key emerging market megatrends such as demographic shifts, urbanisation and technological innovations."
The fund will also apply specific ESG exclusions and will not invest in companies that are involved in weapons, tobacco, coal and unconventional oil and gas extraction, or whose actions have violated the United Nations Global Compact.
The fund will aim to invest in a high conviction portfolio of 30-50 emerging markets stocks with a five-year investment horizon. ESG analysis is a key part of the investment process and each investment will be analysed to meet the criteria of the proprietary bottom-up three-pillar ESG inclusion framework, that measures the:
- Company's alignment to positive environmental and/or social areas,
- Intentionality to maintain or improve the ESG footprint of the company's operating model, and
- Transition potential for improvement through engagement as active owners.
Andrew Ness said: "Our rigorous and holistic three-pillar ESG inclusion framework means that, as well as companies that demonstrate good sustainability criteria, we can invest in companies that may be imperfect and create investor impact by pro-actively engaging with these companies to improve. We believe that our core role as stewards of our clients' capital is to engage in its responsible allocation, management and oversight to create long-term value for our investors."
Julie Moret, global head of ESG, commented: "Our philosophical focus is on positive and improving sustainability inclusion. The fund adopts a proprietary framework that reflects key emerging market megatrends such as demographic shifts, urbanisation and technological innovations, which open up new opportunities from improving awareness of sustainability issues in emerging countries."
Julian Ide, head of EMEA distribution, concluded: "Our commitment and reputation as an emerging markets expert over multiple decades means that we are seen as a long-term investment partner by companies and countries."