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First State launches Global Emerging Markets Sustainability Fund

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First State Investments has launched a Global Emerging Markets Sustainability Fund to UK and European retail and institutional investors which complements its existing Asia Pacific and

First State Investments has launched a Global Emerging Markets Sustainability Fund to UK and European retail and institutional investors which complements its existing Asia Pacific and Emerging Markets product range.

The fund aims to capitalise on the growth in sustainable business practices in emerging market nations and is measured against the MSCI Emerging Markets Free Index.

The fund is managed by David Gait, in conjunction with First State’s Asia Pacific and emerging markets equities team.

It offers a disciplined approach to sustainable investing in emerging markets by targeting companies which are ‘sustainability leaders’ and whose business models are positioned to benefit from new opportunities in six areas: renewable and cleaner energy; energy efficiency; waste and pollution management; water management; environmentally aware consumer products and services; and broad sustainable development.

The fund will also have a strong focus on positive engagement.

Gait is also the lead portfolio manager on the team’s First State Asia Pacific Sustainability Fund which was launched at the end of 2005.

Gait says: "It is becoming increasingly clear that many low-income countries will be unable to follow the resource-intensive, carbon-intensive, environmentally destructive development path pursued by most industrialised countries in the past. A scarcity of key natural resources such as arable land and fresh water, the unpredictable, serious consequences of a changing climate and unprecedented population levels have all combined to block the traditional development route. Instead emerging economies are being increasingly forced to follow a different, more sustainable development path. This is creating new opportunities for well managed companies positioning themselves as sustainability leaders, while posing serious risks to poorly managed sustainability laggards.

"The aim of the fund is not to invest in every emerging markets solar energy company which is created. Instead, the fund has a much wider remit, focusing on broad-based sustainable development in emerging markets. As with all our Asia Pacific and emerging markets products, the team will follow a disciplined, consistent investment process, investing only in those companies with quality management teams, strong business franchises and healthy financials.

"The fund will not employ formal negative screening. However, we do not anticipate investing in companies operating in high-risk sectors, such as armaments or tobacco. This is because we believe the environmental, social and governance risks facing such companies are particularly high and difficult to quantify. At the heart of our sustainability approach is a focus on identifying companies which are well positioned to seize new sustainability opportunities. In our view companies operating in high-risk sectors do not fit naturally into such a strategy."

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