2021 ESG Annual Report


Sustainable Emerging Market Debt – Hard Currency Strategy

Promoting sustainability in the emerging world While Environmental, Social and Governance (ESG) issues are now a leading topic of conversation in emerging markets, we think the more active, engaged and forward- looking perspective of genuinely sustainable investing is critical to meet the particular needs in these regions. One reason is that sovereign ESG scores systematically favor richer countries. Another is that certain UN Sustainable Development Goals (SDGs) have more impact than others in economically developing countries, and demand more focus. We believe an effective approach to emerging sovereign sustainability needs to counter the challenges of data limitations, take a holistic view of the concept of sovereign sustainability, and bring it somewhat in line with the better-established concept of corporate sustainability. Strategy Overview • Aims to outperform the JPMorgan JESG EMBI Index by investing primarily in hard currency emerging markets debt issued by countries that comply with the strategy’s sustainable investment criteria. • Focused on three key sustainability objectives: 1. Climate-change preparedness: portfolio tilts based on the income-adjusted Notre Dame Global Adaptation Initiative Country Index (ND-GAIN) 2. Progress on the UN SDGs: portfolio tilts based on the Sustainable Development Report and UNDP Human Development Index 3. “Do No Harm” and Minimum Thresholds: portfolio guidelines, including exclusions to reduce ESG tail risks



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