Understand emerging markets opportunities and the American Century advantage.
By Patricia Ribeiro
There’s a lot of talk about environmental, social and governance (ESG) investing. However, few managers have focused on emerging markets—and that’s where we see a tremendous amount of potential.
When we engage companies in emerging markets on ESG issues, they’re often surprised. They may already be improving their environmental, social or governance practices, but no manager has ever asked them how their companies address ESG factors. This tells us we’ve found a significant opportunity.
I think we are pioneers in this space. We don’t see a lot of attention from other emerging markets equity managers on ESG or on the United Nations Sustainable Development Goals, which our strategy aligns with.
Watch my video for more on our process and for examples of companies that are doing something good for the world, as well as generate alpha.
The number of opportunities for us in terms of companies that we can identify and align with the United Nations Sustainable Goals is actually pretty large.
Emerging Markets Sustainable Impact—the product that we launched recently—is already showing really good opportunities in terms of names to own. We really identify companies that should be able to give us an opportunity to deliver to clients excess return in terms of generating alpha, as well as aligning with the United Nations Sustainable Development Goals.
15 of the 17 goals that we have defined by the United Nations are investable. What we’re seeing with this product is that there are plenty of opportunities for us to identify companies that we can map to at least one of those goals. In other words, we can generate alpha and at the same time really invest in companies that are actually doing something good for the world, or even the emerging world going forward. So, we are really aligning ourselves on both sides.
I think in the emerging markets world, companies are not really used to it in general. I would say when we approach companies and when we engage with companies to really address ESG topics in ESG shoes, they seem sometimes to be surprised. They have the information; they have the data. But their response is usually that nobody has ever asked them, which is interesting. Which really tells us that there is a significant opportunity here to really help the companies understand that their businesses can actually be seen from the different angle, different lenses as well.
But for us—which is important—is not necessarily that they’re at the same level as the developed market company, but that the trend is positive. That they are actually spending in areas that they need to spend and to actually improve on their E, S or G areas.
Names obviously in general, names that we have in the portfolio, we have exposure to education names in different countries in that portfolio, which is obviously very relevant. We have exposure to companies that are very focused on gender equality—also very important. Climate as well: water. For example, we own a company in Brazil. They do water treatment and sewage treatment as well. Very important in emerging markets. This is something where there is a tremendous amount of opportunity in terms of investments going in those areas.
I do think we are actually pioneers. What we see today is that there’s a lot of talk about ESG. But we have not seen a lot of focus in emerging markets when it comes to ESG, and certainly for the United Nations SDGs—the Sustainable Development Goals. We haven’t seen anything; I have not seen anything in that area yet very focused in emerging markets. I think we are ahead. But that’s the idea also, to really be looking for how can we add value to our clients by really focusing on where it would make sense for us to invest. Where are there opportunities for us to invest in regards to ESG?
Get additional insights in our latest Investment Outlook.
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There’s a lot of talk about ESG investing. However, few managers have focused on emerging markets—and that’s where we see a lot of potential.
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International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.