On 21 November 2022, Danske Invest Emerging and Frontier Markets fund will change its approach to ESG and become a fund with a sustainable investment objective (a so-called article 9 fund according to the EU Sustainable Finance Disclosure Regulation). At the same time, the fund will change its name to Danske Invest Emerging Markets Sustainable Future. Furthermore, the ongoing costs in the fund will be reduced from 2.30% to 1.92%.
Besides a goal of creating an attractive return, the fund’s sustainable objective will be to contribute positively to the United Nations Sustainable Development Goals (the SDGs) in emerging markets and to support their transition to a more sustainable economy.
“We are excited to add another fund with a sustainable investment objective to our fund offering. At Danske Invest, we have been working with responsible investments for many years and we continue to have a strong focus on developing relevant responsible investment funds to our investors and to help support the transition to a more sustainable society,” says Robert Mikkelstrup, CEO of Danske Invest.
The rebalancing of the fund will start on 21 November 2022 and is estimated to take 2-4 weeks.
The fund will be managed by the Emerging Markets equities team consisting of four chief portfolio managers: Olga Karakozova, Antti Raappana, Ole Gotthardt and Måns Beckeman. All portfolio managers have a long experience in emerging markets with strong stock picking capabilities, evidenced by an excellent performance track record of the funds that they have been managing.
Emerging markets dependent on companies to achieve SDGsThe 17 SDGs have been developed for countries to achieve a better and more sustainable future for all but according to Ole Gotthardt, Chief Portfolio Manager, the level of achievement in emerging markets varies a lot. Most of the countries have set up their own targets of what level they are aiming at. But contrary to what we are used to in the Nordic countries, the governments and the public sector in emerging markets are dependent on private sector companies to achieve the goals.
“Governments in emerging markets need private sector participation in order to move in the right direction in an adequate pace. Their governments and public sectors don’t have the financial capacity to achieve the SDGs. Achievement gaps are wide for both environmental and social SDG’s and local emerging market companies can help countries to narrow those gaps,” says Ole Gotthardt and adds:
“Banking is an example where the penetration level in many emerging market countries is far below the western countries. We take banking services more or less for granted, but many people around the world do not have easy access to such services,” he says.
Emerging markets are also the main suppliers of rare earth elements and metals, such as aluminium, copper, nickel and lithium, which are critical metals for energy transition. Måns Beckeman mentions Brazilian aluminium producer Companhia Brasileira de Alumínio (CBA) as a good example of a company making a material that is crucially needed for the transition.
"We believe that CBA manages to make aluminium in a much more environmentally friendly way than the vast majority of aluminium companies in the world as the electricity used in the production is coming from hydro power,” says Måns Beckeman, Chief Portfolio Manager.
But how does the team select the companies? Besides doing the regular investment analysis of potential companies, they link the products and services to the SDGs.
Finding the right companies
“We look at the revenue streams in specific companies. What are their products and services and are they related to achieving one or more of the SDGs? For instance, telecom is related to SDG 9, Industry, Innovation & infrastructure. That way we link the products and services to the SDGs,” explains Olga Karakozova, head of the emerging markets equities team.
She adds that it is very encouraging to see how many of the companies that are making the SDGs their own goals in their annual reports and how they report their support of the SDGs through their products and services. And she is expecting this trend to continue to grow in emerging markets.
Danske Invest Emerging Markets Sustainable Future
- The fund will consist of 40-60 companies
- At least 80% of the investments in the fund will be defined as sustainable investments
- Strong focus on active ownership
- The fund will not invest in Coal, Tar Sands and Peat, Controversial Weapons, Tobacco, Alcohol, Fossil Fuels, Gambling, Military Equipment and Pornography in accordance with the Danske Invest thresholds.
This publication has been prepared as marketing communication and does not constitute investment advice.
Please note that historical return and forecasts on future developments are not an indication of future return, which can be negative.
Always consult with professional advisors on legal, tax, financial and other matters that may be relevant for assessing the suitability and appropriateness of an investment.
Please refer to the prospectus and the key investor information before making any final investment decision. The prospectus, the key investor information for the fund and information regarding complaints handling (investor rights) can be obtained in English at danskeinvest.lu by clicking on "our funds" -> choose the relevant fund overview -> click on relevant fund -> click on "documents".
Danske Invest Management A/S may decide to terminate the arrangements made for the marketing of its funds.
For more information on the sustainability aspects of the fund, please refer to danskeinvest.lu by clicking on "our funds" -> choose the relevant fund overview -> click on relevant fund -> click on "documents" and click on ”sustainability-related disclosure”.
The decision to invest in the fund should take into account the sustainable investment objectives of the fund as described in the prospectus.