Franklin Templeton has launched an emerging market equity fund for European investors that will engage with portfolio companies to improve their ESG credentials, in a move reminiscent of alumni Mark Mobius’s strategies.
The Templeton Emerging Markets Sustainability Fund is a sub-fund of the Luxembourg-domiciled Franklin Templeton Investments funds range. It will be managed by Edinburgh-based Andrew Ness (pictured) and Singapore-based Chetan Sehgal.
The fund will invest in a portfolio of 30-50 companies in developing markets whose products and services are aligned to one or more of the six positive outcome areas linked to the UN Sustainable Development Goals. These are: basic needs, wellbeing, decent work, healthy ecosystems, climate stability and resource security.
It will exclude companies involved in weapons, tobacco, coal and unconventional oil and gas extraction, or whose actions violate the United Nations Global Compact.
Each company will be further assessed on three ESG criteria: alignment to positive environmental and/or social areas; intention to improve the ESG footprint of its operating model; and its transition potential through engagement as active owners.
Proactively engaging to improve companies ESG credentials
Ness, who joined Franklin Templeton in July 2018 from Martin Currie, 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.”
But key differences to Mobius fund
Two years ago of former Franklin Templeton manager Mark Mobius launched a Luxembourg Sicav and investment trust which both also invest in emerging markets using a strategy that seeks to engage with and improve portfolio companies’ ESG credentials.
Mobius left Franklin Templeton in January 2018 after 30 years with the firm and shortly after that poached Carlos Hardenberg and Greg Konieczny to launch his eponymous boutique in May 2018.
But while the Franklin and Mobius strategies both actively interact with portfolio companies to introduce ESG improvements, there are differences.
Franklin Templeton believes its three-pillar ESG inclusion framework, its six positive SDG-linked outcome areas and the breadth of its 80-strong global EM equities team sets it apart.
The Franklin Templeton strategy does not include frontier markets whereas the Mobius Emerging Markets fund and Mobius Investment Trust both do.
In addition, the Templeton EM Sustainability fund is not capitalisation constrained whereas Mobius’s strategies focus on mid-sized companies.
See also: Mobius co-founder announces retirement two years after boutique launch
Sehgal took over the Templeton Emerging Markets Investment Trust and Templeton Global Emerging Markets fund from Hardenberg in February 2018. Hardenberg had managed the strategies since October 2015 when Mobius handed them over.
