Emerging market stocks combining long-term growth and sustainability

Sustainable investing is a long-term, multi-stakeholder approach to value creation. It has a clear focus on positive, real-world, social and environmental outcomes. These are delivered and quantified in an effective, accurate and repeatable way. Our strategy is one of the few available to give investors pure emerging market equity exposure with a focus on sustainability. 

We invest in a diversified portfolio of companies in developing or emerging nations, focusing on firms with good or improving sustainability criteria as defined by our proprietary environmental and social governance (ESG) rating methodology. 

One of the main investment opportunities we have identified is closing the funding gap. The Organisation for Economic Co-operation and Development (OECD) estimates that the gulf between the annual financing requirement for emerging markets to meet the United Nations’ sustainable-investment goals by 2030, and current investment trends, is $3.9 trillion. 

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Firms we invest in that represent attractive sustainable investment opportunities and contribute to closing the funding gap include the following:

Emerging market stocks to watch 

TSMC (NYSE: TSM) is the world’s largest semiconductor foundry. Through sustainable innovation in product development, the company benefits from higher efficiency and lower water and power consumption, preserving scarce resources. 

The company supplies semiconductor chips for use in smartphones, artificial intelligence (AI) servers and cars. Major customers include Apple, Nvidia and Qualcomm. TSMC has foundries in Taiwan, China and the US, with plans to open additional ones in Europe and the US. Our strategy is to overweight the stock, reflecting our optimism over the long-term growth in global demand for semiconductors used in AI, consumer products and vehicles. 

Hon Hai (NYSE: HNHPF) is the world’s largest contract electronics manufacturing company. Hon Hai aims to reduce the power consumed by its products, reduce emissions and bolster overall efficiency. The company’s business model focuses on original equipment manufacturing for consumer electronics as well as cloud and networking products and components. Customers include Apple, Microsoft and Cisco. Hon Hai has production facilities in China, India and Brazil. 

The group employs more than one million people and plans to establish itself as a contract manufacturer in the electric vehicle industry. Our fund has a significant overweight position in the company, reflecting our view that Hon Hai is well-positioned to benefit from the trend of global supply chain diversification.

How to invest in India

ICICI Bank (NYSE: IBN) is one of the largest private-sector banks in India, with a network of over 6,000 branches. The bank provides individuals with access to capital for fulfilling basic needs, and helps fund small businesses, which drives employment creation in addition to social and economic development. It has a number of subsidiaries, including ICICI Prudential Life insurance, a separately listed company in which it holds a 51% stake. India’s economic growth, which has been the highest among emerging markets, is driving increased demand for financial services. We have a significant overweight position in the stock, reflecting our belief that ICICI will benefit from the increased penetration of financial services, ranging from bank accounts to life insurance.

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