Emerging Markets Sustainable Blended Debt Strategy

Sustainable portfolio construction aiming for consistently compelling ESG-adjusted returns in EM debt.
Sustainable portfolio construction aiming for consistently compelling ESG-adjusted returns in EM debt.

Strategy overview

The strategy aims to generate improved risk-adjusted returns via a total-return, benchmark-agnostic approach. It places a heavy emphasis on proprietary, forward-looking ESG scores.

Key features
  • Invests across the broad EM opportunity set, including hard currency bonds FX and local rates, and green and sustainable bonds.
  • Places a heavy emphasis on proprietary, forward-looking ESG scores to focus on countries with improving sustainability trends.
  • Regular engagement with bond issuers, with a focus on climate change/nature risks and budget transparency, aims to help them to improve ESG metrics.
We think countries with improving ESG metrics will build more sustainable economies and will unlock higher productivity, leading to outperformance of their assets
Peter Eerdmans

Investment approach

01

  • Builds on Ninety One’s successful Blended debt strategy and process
  • Bottom-up approach selects individual best ideas1 to achieve desired top-down allocation
  • Driven by strong proprietary ESG platform

02

  • ESG has a 50% weight in the bond and FX investment scorecards
  • Maximum 10% in non-sustainable investments in negative-scoring countries.
  • Includes green bonds and sustainable bonds

03

  • Invests in a total return, benchmark-agnostic fashion
  • Targets outperformance versus the benchmark2

1 Best Ideas’ represents our highest conviction ideas following fundamental analysis.
2 Benchmark: 50% GBI EM Global Diversified 50% JP Morgan EMBIG Diversified. Outperform the performance comparison index (net of fees) over a full market cycle.

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General risks
Past performance is not a reliable indicator of future results and performance targets may not be achieved; losses may be made.

Specific risks
Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income.​
Default: There is a risk that the issuers of fixed income investments (e.g. bonds) may not be able to meet interest payments nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and therefore investment loss.​
Derivatives: The use of derivatives may increase overall risk by magnifying the effect of both gains and losses leading to large changes in value and potentially large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss.
​ Interest rate: The value of fixed income investments (e.g. bonds) tends to decrease when interest rates rise.​
Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.