Global investment manager Franklin Templeton announced today that it is launching a new emerging markets-focused sustainability-themed fund for European investors. The new Templeton Emerging Markets Sustainability Fund will invest in companies that are domiciled, incorporated or listed in developing or emerging markets (EM) globally and demonstrate good or improving sustainability criteria.

Julie Moret, Global Head of ESG, Franklin Templeton, said:

“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.”

Franklin Templeton stated that the fund will invest in 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): Basic Needs, Wellbeing, Decent Work, Healthy Ecosystems, Climate Stability, and Resource Security. Additionally, the fund will screen companies for 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.

According to the firm, the new fund will aim to invest in a high conviction portfolio of 30-50 emerging markets stocks with a five-year investment horizon. Each investment will be analysed utilizing a proprietary bottom-up three-pillar ESG inclusion framework, measuring 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.

The 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. 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.”

Julian Ide, Head of EMEA distribution, Franklin Templeton, added:

“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. We are delighted to offer our first dedicated EM-focused sustainability fund to European investors looking to invest for capital appreciation, which offers alignment to positive outcomes and addresses the growing investor demand for these products.”