Opportunities and risks in Emerging Markets

“Emerging Markets” refers to countries that are typically undergoing a transformation from a developing to developed or advanced economy. This convergence and modernisation process opens up great market potential, and Emerging Markets exhibit high growth dynamics. We at Raiffeisen Capital Management believe that a broadly diversified fund portfolio should also include a share of Emerging Market equities over the medium to long term – if the investor is willing to bear the associated risk. Low debt, moderate monetary policy and, as previously mentioned, the potential for strong growth are the positive factors.

The other side of the coin is that the economic structures and political systems in these countries are often still in flux, and the danger of crises and instability is comparatively high. Emerging Market funds generally exhibit elevated volatility. Unit prices can move significantly higher or lower, and loss of capital cannot be ruled out. You can obtain extensive information about the characteristics of Emerging Markets from your Raiffeisen bank advisor.

Sustainability in Emerging Markets

An investment in Emerging Markets thus offers a number of opportunities, even with the particular risks that must be taken into account. But many investors do not associate the topic of sustainability with the Emerging Markets. In fact, the trend is very encouraging – with the number of companies in the Emerging Markets that are following sustainable practices rising from year to year. The fund Raiffeisen-Nachhaltigkeit-EmergingMarkets-Aktien offers an opportunity to invest in these companies. It combines the themes of “sustainability” and “Emerging Markets”.

More than just environmental protection

Here, the term “sustainability” is used in a broader sense. Environmental protection is just one aspect. An investment does not qualify as sustainable until it meets criteria from all three ESG fields. The acronym ESG stands for:

• Environmental (the environment itself, resources and waste, carbon footprint, etc.)

• Social (treatment of people, equality, education, etc.)

• Governance (corporate governance, compliance, supervisory structures, etc.)

How are the sustainability criteria assessed?

A sustainability analysis is like another lens that provides insights into a company. Integrating sustainable criteria allows certain risks to be evaluated better. One example is assessing corporate governance criteria, which include corruption risk. The most important analysis factor for us in terms of sustainability is the Raiffeisen ESG Indicator . It is calculated in part using external data and sustainability analyses sourced from reputable rating agencies. At the same time, we also make use of the expertise of the local Raiffeisen network to make our own final sustainability assessment. Jürgen Maier and Leopold Quell, Emerging Markets experts at Raiffeisen Capital Management, explain the sustainability analyses in more detail in a recent interview. At the end of this work-intensive screening process, 70 to 90 shares are selected for Raiffeisen-Nachhaltigkeit-EmergingMarkets-Aktien. A look at the regional structure of the fund shows that countries in Asia, especially China and Taiwan, have the highest scores. The countries on this continent assign greater importance to sustainability than Latin America or Russia. They are pioneers within the Emerging Markets and have a higher weighting in the fund.

Two examples of sustainable companies

A major Taiwanese microchip manufacturer places a key focus on recycling and water treatment, for example. Many western companies could learn a thing or two from its sustainability standards. And India’s largest IT and outsourcing company is highly committed to improving the qualifications of its employees, and offers women part-time work after they return from maternity leave. Which is not at all typical in this country.

Would you like to learn more about Raiffeisen-Nachhaltigkeit-EmergingMarkets-Aktien? Your Raiffeisen bank advisor will be pleased to speak with you.

The Raiffeisen-Nachhaltigkeit-EmergingMarkets-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.