All figures 2023 unless stated

The United Nations (UN) unveiled its Sustainable Development Goals (SDGs) in 2015. These gave voice to a widely shared aspiration: to secure the well-being of people everywhere and to ensure that our planet thrives long into the future.

As we reach the halfway point for the 2030 goals, the progress report is a sobering read. Only 15% of the targets are on track, half are off track and, most worryingly, 37% have seen no progress or have gone backwards. [1]

However, while we recognise the scale of the challenges ahead, we also see opportunities. In particular, the SDGs can be used to identify unmet needs, which represent a source of untapped demand and growth opportunities in emerging markets (EM).

Here, we detail three EM companies we believe are leading the way in Water & Sanitation, Sustainable Real Estate & Infrastructure and Sustainable Energy. Importantly, the companies highlighted here are achieving progress on the SDGs, while also delivering a profit for investors.

Water & Sanitation – safe, clean, accessible

Water supports all life and is a precious and finite resource. Yet, data suggests that progress on establishing universal access to basic sanitation is lagging.

Enter Brazil’s Aegea. It operates water and sewage concessions, covering over 30 million people across the country. Aegea invests heavily in turning around mismanaged facilities and improving water and sewage connectivity. It also has contractual targets to increase water coverage to 99% by 2031 and sewage coverage to 90% by 2033 from the current 83% and 50% respectively.

The company has stayed true to its ambitions and the results speak for themselves. The number of households it supplied with water and/or sewage services increased to 12.1 million, up 50.5% year-on-year. The loss rate on water distribution fell to 44.8% in the same period, down from 46.6% in 2022. Meanwhile, 522,300 families benefited from the company’s social tariff, up from 94,700 in 2020.

Aegea has also impressed from an investment perspective. In the second quarter of 2024, net leverage decreased further to 3.7 times. Meanwhile, spreads on the sustainable Eurobond it issued in October 2023 have tightened by around 100 basis points (bps), outperforming peers. [2]

Sustainable Real Estate & Infrastructure – a common connection

Connectivity is vital for the economic development of businesses and communities across EMs. However, building vast networks to reach rural populations in places like Africa is logistically unfeasible and prohibitively costly.

Mobile phones hold the key. Indeed, as of early January 2024, around 74% of the web traffic in Africa was via such devices – over 14 percentage points higher than the world average. [3]

One leading firm in this space is Axian Telecom. It’s a pan-African company that provides affordable mobile and data services to rural and lower-income communities. This includes in Madagascar, Tanzania, Togo and Uganda, where internet penetration is only 50%. To do so, Axian builds and develops digital infrastructure, such as telecom towers and digital centres. Financial inclusion is also high on the company’s agenda. Its digital money services facilitate financial transactions, making it easier for people to pay bills, send money and more.

To illustrate its success, we need only look at Tanzania. Here, Axian increased its 4G network coverage by building 1,250 new antennae. Measures like these helped subscriber numbers increase by an average of 600,000 per year from 2021 to 2023, with 300,000 net customers added in 2023 alone. Meanwhile, the number of active users on Tanzania’s Mobile Financial Services platform climbed to 7.8 million, up from 6.6 million users year-on-year. [4]

Axian continues to post stable financial results, alongside a conservative net leverage of 2.4 times. Its Eurobond has outperformed the market over the last year, posting a notable total return above 17%. [5]

Sustainable Energy – powering the future

Energy is central to almost every environmental issue the world faces today. While the world has made impressive progress in the electricity sector, renewables only represented around 30% of global energy consumption in 2023. [6]

Improving this figure will require large-scale mobilisation of private capital and deployment of renewables, particularly in some countries and regions.

India is case in point. The country relies heavily on fossil fuels for energy generation, accounting for around three-quarters of primary energy demand [7]. However, the government has embarked on the energy transition path, with the goal of reaching 500 gigawatts (GW) of renewable energy capacity by 2030 (from 176GW in 2023). [8]

Helping them achieve that aim is ReNew. It is India’s largest renewable energy company with 8.3GW of commissioned capacity, split evenly between wind and solar. ReNew produced 18.6 million megawatt-hours of renewable energy, an 11% increase versus the previous year. It also commissioned 940 megawatts of new renewable energy projects. As a result, ReNew’s portfolio now contributes 1.9% of India’s power capacity and avoids 1.1% of India’s power sector emissions. [9]

ReNew's green Eurobonds, which are secured against specific wind and solar projects, have outperformed the market. The spread on its RPVIN July 2028 bond has tightened by more than 100bps over the last year, resulting in a total return of over 14.5%. [10]

Final thoughts…

Progression towards the SDGs has been disappointing. But it’s too early to throw in the towel. Indeed, we see the UN’s progress report as a rallying cry for governments, corporates and investors to refocus on the 2030 targets and make the SDGs an integral part of decision-making. By investing in the bonds from pioneering companies like those above, investors have the opportunity to support progress towards the UN's SDGs' while also making a profit.

You can find out more our Emerging Markets SDG Corporate Bond capabilities on your local fund pages, including our annual report.

Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance. Past performance is not a guide to future results.