Glenn Crane
Global asset manager Dimensional is adding to its popular sustainability suite in Australia and New Zealand with the launch of one of the first funds locally to apply an environmental, social and governance filter to emerging markets.
The clamour by investors in Australia and New Zealand for investment solutions based on environmental, social and governance (ESG) goals so far has mainly focused on the developed markets. But that is now changing with the launch of a new strategy targeting emerging markets.
Dimensional Fund Advisors, a global asset management firm, on Friday launches its Emerging Markets Sustainability Trust, allowing local investors to pursue targeted sustainability goals in emerging markets within a broadly diversified, cost-effective and systematic investment framework.
The strategy is the latest in a series of sustainability themed solutions launched in the Australian and NZ markets by Dimensional, which had the second highest inflows of any manager into ESG strategies in the first quarter of 2021, according to Morningstar’s fund flows report.
Dimensional Australia chairman and CEO Glenn Crane said the addition of emerging markets coverage to the sustainability suite was a logical extension for the firm, which sets the reduction of exposure to greenhouse gas emissions as the primary target for these strategies.
“Many of our clients want transparent, effective investment solutions that focus on climate change in a measurable way,” Crane said. “With many emerging markets having higher emissions than developed markets, this means clients can have a meaningful impact across their total portfolio.”
The new emerging markets fund is expected to invest in more than one thousand individual securities across 24 eligible countries in emerging markets, which account for about 13% of total global market capitalisation and whose economies account for about a third of global GDP.
The strategy is designed to meaningfully reduce exposure to greenhouse gas emissions and potential emissions from fossil fuel reserves, within a robust investment framework that emphasises securities with higher expected returns, maintains broad diversification and keeps costs low.
The fund also systematically evaluates firms on additional environmental criteria such as land use, biodiversity, toxic spills, and palm oil, while filtering for social issues such as child labour, cluster munitions, tobacco and factory farming identified by clients as priorities.
The approach is consistent with the rest of Dimensional’s sustainability suite, which incorporates global developed equity markets, Australian equities and global bonds. The firm also offers a single diversified 70/30 balanced sustainability fund built from the component ESG vehicles.
Dimensional is known as a low-cost, systematic manager that grounds its approach in decades of research and a rigorous approach to data. The new fund will have a management fee of just 60 basis points, making it among the most cost-effective on the Australian market.
“In everything we do, we are guided by financial science and our clients’ changing needs,” Crane said. “This is really just the latest evolution of an approach that goes back decades.”
Founded in the US 1981 and present in Australia since 1994, Dimensional has a long history of applying academic research to practical investing. The company now manages more than $800 billion from 13 offices globally, including about $45 billion for clients in Australia and New Zealand.
