What types of companies are helping address the SDGs?
Agreed in 2015, the United Nation’s 17 Sustainable Development Goals (SDGs) are a set of global priorities to deliver sustainable economic, social and environmental development. They focus on a wide range of issues, including poverty, inequality, climate change, environmental degradation and social injustice.In our view, the SDGs are particularly important for emerging markets (EM). Many countries have fast-growing economies but still face the ongoing impacts of underinvestment in major areas of need. Crucially, however, these regions boast some of the most innovative companies that can help solve a variety of problems. These opportunities span multiple countries and sectors. So, how does this look in practice?
SDG 15 – Sustainable Real Estate & Infrastructure
First, we turn to India and Ascendas India Trust (AIT). It acquires, owns and develops land for business use. Among its portfolio are seven IT parks and one logistics park. In 2020, the company reported that 77% of its buildings across the portfolio were certified with either an Indian Green Building Council or US Green Council LEED green rating. AIT also confirmed that around 78% of revenues came from green buildings. Furthermore, management stated that solar accounted for 49% of total landlord energy consumption. It also achieved a 53% reduction in water use.We recently met AIT to discuss a range of sustainability topics. These included the expansion of the company’s commitment to green buildings, as well as the benefits these buildings might bring. We also talked about its plans to obtain green certifications for its warehouses. We were encouraged by the meeting.
To us, the company is a leader in sustainable buildings in India, a market where the quality of infrastructure requires upgrading and demand for high-quality assets remains robust. However, we feel the wider market has yet to realise AIT’s qualities. We believe the situation has the potential to change as the company continues to improve its sustainability disclosures.
SDG 12 – Circular Economy
Turning to a similar real estate theme in China, there is Glodon. It provides software products and services covering the entire life cycle of a building. The company’s Building Information Modelling software allows companies to manage complex construction projects and improve project accuracy. This helps developers reduce inefficiencies and waste, as well as limiting the overall environmental footprint. Glodon’s systems also help to optimise the management of buildings once they are in operation, further improving efficiencies and cutting waste.Glodon’s expertise and technology appear to be in high demand. Most notably in its native China, where construction inadequacies and high energy costs can blight many areas of the real estate sector. Glodon and companies like it should prove invaluable in addressing such issues. They also have the potential to be in the vanguard as property developers across EMs create the green and sustainable cities of tomorrow.
SDG 3 – Good Health and Wellbeing
Good health and wellbeing remain major challenges in many EMs, with issues around access and cost. This is where companies like China’s Shenzhen Mindray Biomedical Electronics can play an important role. It produces essential medical devices that support the provision of vital healthcare services. In particular, in areas like life-support, in-vitro diagnosis and medical imaging. According to our analysis, its products are more cost effective than global peers, while they compare favourably in terms of quality.Mindray continues to make inroads in rural China. Here, existing healthcare facilities often struggle to offer advanced services compared to secondary/tertiary hospitals in larger conurbations. As such, by improving medical facilities in rural areas companies like Mindray can help facilitate access to better medical care. In turn, this supports the improvement in medical outcomes and overall general health. We believe the lower cost of domestic equipment versus imports is a crucial driver for expansion.
There are areas Mindray can improve, notably around carbon emissions, disclosures and board independence. Nonetheless, we think it and others are at the forefront of improving healthcare outcomes where they’re needed most.
SDG 7 – Sustainable Energy
In Taiwan, there is Chroma Ate. The company is one of the biggest electric vehicle (EV) testing providers globally. This core activity is considered less glamorous than other parts of the EV value chain and is therefore often overlooked. Nonetheless, we believe it will prove to be increasingly important as the nature of testing changes. Chroma is also focused on growing its clean technology exposure through LEDs, solar cells, and batteries. Areas like 3D testing and semiconductors are also structurally exciting. In our view, these segments will continue to expand as the transport industry plays its part on the global journey to net-zero emissions.These are just a selection of the innovative names operating across EMs. Other companies to highlight include Segezha, which plays a vital role in driving best practice in the development of sustainable forestry in Russia. Or Mexico’s Gentera, which helps facilitate financial inclusion. The list goes on.
Final thoughts…
We believe that investing in alignment with UN SDGs creates tangible opportunities for companies to make a positive contribution to society and the wider world, while enhancing the long-term financial value of their businesses. As asset managers, we to can play our part by effectively channeling capital to these innovative companies – while seeking to help our clients achieve their own financial goals.Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.