Matthews Asia ESG Fund Looks Beyond ESG Integration
Matthews Asia seeks to uncover investment opportunities with a focus on environmental, social and governance (ESG) factors across the world’s fastest-growing region.
In Asia, ESG investing encompasses large, transformational changes. It focuses on companies that can potentially deliver profits and growth from improving the quality of life across the region. Within this context, Matthews Asia launched the Matthews Asia ESG Fund (Investor Class: MASGX; Institutional Class: MISFX) more than four years ago. Managed by Vivek Tanneeru, the Fund seeks to capitalize on the growth of the region by investing with an ESG lens.
“For ESG investors, a regionally diversified approach can help capture global growth,” said Vivek. “We believe Asia offers a prime opportunity to invest in highly innovative and profitable companies addressing critical ESG challenges through robust and sustainable business models,” he noted.
Integrating ESG into Investment Decisions
The Matthews Asia ESG Fund seeks to invest in cash-flow generative businesses that are improving quality of life and promoting positive environmental, social and economic outcomes.
We define ESG integration as taking an “investment first” approach to building an ESG portfolio. This means we pay equal attention to a company’s ESG record and its long-term return potential. We focus on identifying attractive long-term investment opportunities through bottom-up, on-the-ground fundamental research. We also maintain a sharp focus on corporate governance, which has been a hallmark of our investment process for 27 years.
Representing a universe of more than 10,000 publicly traded companies, Asian equities tend to receive less coverage by global research firms, investment banks and third-party ESG ratings providers.
Our active due diligence process differentiates us from some other managers who may rely solely on third-party ESG ratings for security selection. Through extensive research and our ESG factor analysis framework, we aim to improve the quality of the ESG inputs we use and broaden the opportunity set by including companies that may not be rated by third-party providers.
Once we have evaluated a company’s business and are satisfied with its financial fitness, we then assess its additional merits through an ESG lens, and examine potential ESG impacts. This strategy seeks to go beyond ESG integration with an emphasis on positive outcomes. ESG factors tend to have many subjective characteristics, can be difficult to analyze, and frequently involve a balancing of a company’s business plans, objectives and actual conduct, among other issues. ESG factors can vary over different periods and can evolve over time, and they may also be difficult to apply consistently across regions, countries, industries or sectors. For these reasons, ESG standards are adapted to each region or country and applied flexibly.
For additional information on the Fund including Holdings and Country Allocation, visit Matthews Asia ESG Resource Center.
Article by Vivek Tanneeru, lead Portfolio Manager of the Asia ESG Fund at Matthews Asia. Prior to joining Matthews Asia in 2011, Vivek was an Investment Manager on the Global Emerging Markets team of Pictet Asset Management in London. Before earning his M.B.A. from the London Business School in 2006, Vivek was a Business Systems Officer at The World Bank and served as a Consultant at Arthur Andersen Business Consulting and Citicorp Infotech Industries. He interned at Generation Investment Management while studying for his M.B.A. Vivek received his Master’s in Finance from the Birla Institute of Technology & Science in India. He is fluent in Hindi and Telugu.
Risks to Consider: Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively. Additionally, although an investment by the Fund in a company may satisfy ESG standards in the view of the portfolio managers, there is no guarantee that such company actually promotes positive environmental, social or economic developments. Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more-developed markets.
About Matthews Asia
As an independent, privately owned firm, Matthews Asia is the largest dedicated Asia-only investment specialist in the United States. With US$29.9 billion in assets under management as of June 30, 2019, Matthews Asia employs a bottom-up, fundamental investment philosophy, with a focus on long-term investment performance.
A strong commitment to improved ESG outcomes helps Matthews Asia foster the growth and development of the communities where we invest, while also aiming to generate long-term alpha for our clients. As a UNPRI signatory, the firm maintains a responsible investing policy, with a mission of fostering sustainable growth in Asia. For more information.
Disclosure and Notes
You should consider the investment objectives, risks, charges and expenses of the Matthews Asia Funds carefully before making an investment decision. This and other information about the Funds is contained in the prospectus or summary prospectus, which may also be obtained by calling 800.789.ASIA (2742). Please read the prospectus carefully.
The views and information discussed herein are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles.
Matthews Asia Funds are distributed in the United States by Foreside Funds Distributors LLC, Berwyn, PA