Combining positive impact and investment in emerging markets
Emerging markets form an important part of investment strategies aimed at generating positive impact, in addition to financial performance.
Companies present in emerging markets have become world leaders, particularly in renewable energies and clean mobility. They have reduced costs, making the options offered in these sectors competitive, even without subsidies.
China’s share of major milestones in solar panel production exceeds 80% today, and for key components, such as polysilicon and wafers, it is expected to reach over 95% in the coming years, on the manufacturing capacity base currently under construction1 .
“Emerging markets present unique and attractive investment opportunities for models that do not exist in developed countries”
Moreover, emerging markets present unique and attractive investment opportunities for models that do not exist in developed countries, such as microfinance. They also contain other affordable alternatives in the pharmaceutical and education sectors. Some of these companies could have a role to play in diversified portfolios for people sensitive to the impact of their investment, beyond performance. Here are some examples.
Gentera
Specializing in “microfinance lending” and based in Mexico, Gentera provides banking and credit services to disadvantaged people in Mexico, Peru and Guatemala. Its model is based on providing loans to microenterprises, particularly in rural areas, for working capital or start-up needs. These are largely low-income women (about 90% of clients) who otherwise would not have access to traditional banking products. Originally founded as a non-profit NGO, Gentera has evolved into a for-profit bank aiming at better financial inclusion.
Pinduo-duo
In China, agriculture is mostly in the hands of micro-farmers, who have traditionally relied on intermediaries and complex logistics to sell their products. Founded in 2015, Pinduoduo allows 850 million consumers to be in direct contact with 16 million farmers. This increases their income, while reducing the cost of fresh produce for the consumer. The aim is also to eliminate the carbon emissions linked to the logistics of the traditional model. In addition, Pinduoduo encourages the development of modern agricultural techniques in its pilot farms, where data collection is carried out with the latest technologies. The company has trained 100,000 farmers in modern farming techniques, helping them take part in the digital economy.
LG Chem
South Korea-based LG Chem is one of the key companies driving the global electric vehicle revolution. Its subsidiary LG Energy Solution (LGES) is the world’s second largest producer of batteries for electric vehicles, and the parent company is a growing supplier of battery manufacturing equipment. LGES supplies most of the original equipment producers including VW, Tesla, Ford, Daimler, GM and Volvo.
The company has ‘core’ battery technology and patents, filed over the past twenty years, based on chemistry, materials and ‘process technology’. This know-how promotes faster adoption of electric vehicles, with costs close to those of internal combustion engines.
1 Source: International Energy Agency (IEA) – July 7
Eli Koen, Portfolio Manager, Emerging Markets Impact Equities, Union Bancaire Privée (UBP).
DR
* Portfolio Manager, Emerging Markets Impact Equities, Union Bancaire Privée (UBP)
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