Innovative Firms Core to ABN AMRO Emerging Markets Strategy
New fund will offer exposure to European investors amid growing interest for opportunities in developing economies.
Companies driving technological innovation in emerging markets (EMs) will play a central role in ABN AMRO Investment Solutions’ (IS) and Boston Common Asset Management’s (AM) new ESG equities fund, aiming to help investors diversify their portfolios.
The ABN AMRO Boston Common Emerging Markets ESG Equities Fund is an EM equities-dedicated UCITS fund. It is the latest joint venture between ABN AMRO Investment Solutions – ABN AMRO’s asset management arm with more than €19.5 billion (US$20.9 billion) in AUM – and Boston Common AM, The two firms first partnered on a sustainable value equity fund in 2020.
The new vehicle will be deployed across a portfolio of 40 to 60 primarily large- and mid-cap companies based in EM countries such as Brazil, China, Indonesia and India, and deemed to have “strong ESG profiles”.
“The next level of EM growth will be driven by industrial automation, visualisation, sustainable consumption and decarbonisation,” Liz Su, Lead Portfolio Manager of Sustainable EM Equities at Boston Common AM, told ESG Investor.
Some of the target companies will operate in the tech space, including AI – which according to Su has seen “strong demand” from investors – as well as across semiconductors, industrial automation and the electric vehicle supply chain.
As the fund’s lead manager, Su will be supported by Boston Common AM’s ESG research and engagement team, which conducts proprietary research and engages portfolio companies to drive long-term thinking and transparency on climate, inequity and human well-being.
She underscored the importance of technology and digitalisation to reduce the carbon footprint of manufacturing, saying that EMs, in particular, presented “great potential” for eco-efficient solutions, electrification and automation.
“Our approach towards ESG really stands out in EMs because very early on, we recognised the immense potential for impact in this arguably opaque, more volatile, and less efficient asset class,” she added. “We’ve been doing the dedicated ESG research and engagement in the EMs for over 20 years, and believe that’s where it can make a big difference.”
Su joined Boston Common AM in 2014 specifically to add to the asset manager’s EM expertise.
Moving with the times
The ABN AMRO Boston Common Emerging Markets ESG Equities Fund has been branded as “fossil fuel-free”, with additional exclusions such as gambling and weapons. It is based on Boston Common’s EM equity strategy, which was launched in 2012 and targets companies addressing global sustainability challenges and opportunities – and is now worth around US$370 million.
In addition for the fund’s focus on tech, its portfolio will incorporate inclusive finance through EM banks providing microfinance to their respective regions. It will aim to enable European investors in markets including Denmark, France, Germany, Luxembourg and Switzerland to invest in companies operating in EMs selected by ABN AMRO IS and Boston Common AM for their “promising” profile.
“Concentration risk is a problem facing portfolios, particularly in US markets,” suggested Bob Hendriks, Chief Commercial Officer at ABN AMRO IS. “Diversification through increased exposure to EMs is positive, as those markets offer a real opportunity to deliver green alpha.”
Hendriks also emphasised the importance of long-term thought leadership, which he said ABN AMRO IS trusted Boston Common AM are delivering. “We want our managers to participate actively in the debate out there, to evolve frameworks, and engage with companies,” he added.
The fund’s focus also responds to growing industry interest in EMs. Last month, European asset manager Candriam released the Candriam Sustainable Equity Emerging Markets ex-China Fund, aiming to offer investors higher allocation to growth themes in developing economies, while reducing volatility and geopolitical tail risks. Meanwhile, Stewart Investors’ Global Emerging Markets Sustainability (GEMS) Strategy also celebrated its 15th anniversary.
At COP28, Brookfield Asset Management launched its Emerging Markets Transition Fund with a US$1 billion in seed investment from ALTÉRRA Transformation – with a focus on energy transition, industrial decarbonisation, sustainable living and climate technologies across South and Southeast Asia, Asia-Pacific, Central Asia, Eastern Europe, Latin America, and the Middle East. The fund is now on the market and targets US$5 billion of investment.
Earlier this year, the International Energy Agency underscored the crucial role that EMs will play in achieving the goal of tripling renewable energy use by 2030. Without further financial support being provided to them by wealthier economies, that target will not be met, the agency warned. In parallel, experts have stressed the importance of EMs in building the voluntary carbon market.
Higher yields in some previously unpopular frontier markets, including Egypt, Kenya, Nigeria and Pakistan, have also been drawing an increasing number of investors as they raise interest rates and liberalise their currencies.
With Boston Common AM being women-led, and majority women- and employee-owned, gender parity has been a strong focus for the firm – providing yet another reason to focus on EMs. In April, data provider Equileap’s inaugural gender equality report showed that companies based in emerging markets outpaced developed markets on gender equality. Only 13% of assessed US companies disclosed gender pay information, compared to 65% or more for companies based in Taiwan, India and South Korea. Additionally, only 69% of US-based and 45% of UK-based firms published anti-sexual harassment policies – while India, Taiwan and South Korea logged publication rates of 100%, 96% and 87% respectively.
The post Innovative Firms Core to ABN AMRO Emerging Markets Strategy appeared first on ESG Investor.