SEPTEMBER 2021 FOR INSTITUTIONAL, PROFESSIONAL AND WHOLESALE INVESTORS ONLY

EXECUTIVE SUMMARY • As active investors it is inconceivable

for us to approach investment decisions without considering environmental social and governance (ESG) factors.

• The rationale for conducting ESG analysis in emerging markets is exactly the same as for developed markets.

• We look for businesses that show an awareness of material issues and a commitment to sustainability best practice.

• As stewards of our clients’ capital, we believe engagement and voting are key to ensuring that company management remain aligned with the long-term interests of shareholders.

www.martincurrie.com

THROUGH THE ESG LENS

GLOBAL EMERGINGMARKETS

Emerging markets have made great strides when it comes to ESG over the years and there is now a constellation of companies which can go head to head with their developed market peers.

02

WHY ESG MATTERS There is compelling evidence that ESG factors influence returns over the longer term. As bottom-up investors with a long-term philosophy we include ESG considerations when assessing companies as we believe these factors are critical to a company’s ability to generate sustainable long-term returns. Importantly, this assessment is conducted within our team by portfolio managers rather than managed by a separate ESG research team. In our experience, this ensures that these matters get a proper weighting in the conviction-building process. We work in close collaboration with Martin Currie’s Head of Stewardship & ESG, an experienced investor, who assists with voting policy and promoting best practice.

A FOCUS ON MATERIALITY Our analysis and engagement efforts are guided by the materiality of issues in relation to each company. There is a growing body of research supporting such a focused approach, underlining a strong correlation between material ESG factors and returns. Over the years, we have developed extensive in-house resources, including industry frameworks which ensure that we focus on the most relevant questions. We use a range of proprietary tools to assess and identify material ESG issues, including measuring carbon value-at-risk, assessing modern slavery risks and looking at the portfolio through an SDG framework. We consider a range of ESG factors every time we evaluate an investment and in every instance we assess how the company will be impacted by climate change.

We also recognise that no two companies are identical and as such we consider each company’s individual circumstances when assessing ESG performance.

PROPRIETARY GOVERNANCE AND SUSTAINABILITY ASSESSMENT We have developed proprietary assessment frameworks to support our analysis across the different industries, countries and corporate cultures of emerging markets.

Governance sits at the heart of our analysis, as we believe this is a fundamental determinant of long-term performance and thus the sustainability of a business. Within our governance assessment, we review the sub-categories of ownership structure, board composition, remuneration, capital allocation, information disclosure, business ethics, management accessibility as well as how minority shareholders have been treated historically. We perform this assessment routinely for every company we research and distil our findings into a numerical score to reflect our conclusion on governance strength.

In our experience, good governance goes hand in hand with management of social and environmental risks, making it a good proxy for wider performance. The end goal is to develop insight as to whether a company will be a good long-term steward of our clients’ capital.

We use our sustainability framework to assess awareness, exposure and management of external risk factors. These include supply chain risks, environmental risks, regulatory risks and societal risks. As with governance research, we perform this analysis on every company we research and distil our findings into a numerical score to reflect our conclusion on business sustainability.

We do exclude certain companies in line with broad industry guidelines, specifically those companies significantly involved in the production of tobacco, weapons, coal power generation and mining of thermal coal. We also invest in line with the Ten Principles of the UN Global Compact. Importantly, for all stocks outside of these exclusions we appreciate that companies are on a journey when it comes to ESG performance, so a firm that falls short of our expectations will not automatically be ruled out if we can see potential and a willingness to improve.

1 5 1 5

Governance score Sustainability score

• Board/ownership structure • Management responsibility• Capital allocation and incentives• Information disclosure

• Fundamental characteristics• Environmental • Social • Sustainability importance and credibility

1 5 1 5

Governance score Sustainability score

• Board/ownership structure • Management responsibility• Capital allocation and incentives• Information disclosure

• Fundamental characteristics• Environmental • Social • Sustainability importance and credibility

MARTIN CURRIE GOVERNANCE AND SUSTAINABILITY SCORECARDS

ENGAGEMENT AND VOTING Engagement and voting are two areas where we can make the biggest difference as active investors. Engagement allows us to improve our understanding of the opportunities and challenges companies face as well how management are adapting to these. Ultimately this leads to our investment decisions and voting decisions being better informed.

In our experience, there is a clear appetite for engagement and learning by emerging market companies. We leverage our extensive experience and understanding of ESG matters to help companies deliver improved outcomes from engagement. Our input is increasingly recognised by companies and we are regularly approached to provide support to improvement initiatives. Active ownership, through our engagement and voting, is a key element of how we discharge our stewardship duties on behalf of our clients.

GLOBAL EMERGING MARKETS THROUGH THE ESG LENS 03

ESG IN EMERGING MARKETS Emerging markets have made great strides when it comes to ESG over the years and there is now a constellation of companies which can go head-to-head with their developed market peers. Indeed, our team’s research has determined that many emerging market companies have caught up with or overtaken developed ones when it comes to environmental and social performance, even if differences remain in terms of governance metrics. Investors should be cognizant of different ownership dynamics – government ownership is more prevalent, and while this may not be a problem, understanding the motivations and stakeholder alignment in such cases is important. Equally, family ownership is more common than in developed markets, but as studies have shown, investing alongside family owners can be a very beneficial long-term strategy.

The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the securities discussed here were or will prove to be profitable.

UltraTech is a cement manufacturer based in India. Cement is important in India, providing low-cost housing and connecting villages with concrete roads so it provides a valuable social function. However, the cement industry is a major contributor to greenhouse gas emissions due to their use of fossil fuels such as Pet Coke in the production process. Consequently, greenhouse gas emissions are the biggest and most material negative externality generated by UltraTech.

After careful analysis of ESG risks which were integrated in our financial models and valuation, we mapped their transition to cleaner fuel and reflected this in higher input costs and additional

capital expenditure. We also identified what we believed to be an industry-appropriate carbon emission target. We had regular engagement with UltraTech and cement associations on the topic of fuel use and emissions. In 2020, reflecting our focus on climate change and our long-term relationship with the company, we joined the Climate Action 100+ investor initiative and proposed to lead this collaborative engagement initiative with the company. In this position we have engaged and advised on reducing CO2 intensity, governance of climate change commitments and strengthening climate-related financial disclosures. UltraTech has been very proactive so far and we expect this to continue with their Chief Financial Officer leading the project.

UltraTech has been very proactive so far and we expect this to continue with their Chief Financial Officer leading the project.

CASE STUDY: ULTRATECH CEMENT

04

LEADING THE WAY We observe a wide range of approaches to ESG both at a company level and between countries, and in a number of areas emerging markets lead by example. For instance, in South Africa the adoption of the 'King Report on Corporate Governance' has led to some of the best integrated reporting anywhere in the world, communicating a clear holistic approach to strategy, planning and how companies’ resources are used to create value. We are seeing growing adoption of integrated reporting in other emerging markets and many companies are reporting how their activities align with the UN’s Sustainable Development Goals (SDGs).

Our work also shows another area where emerging markets differ from US norms is on board structure. Here, emerging market companies generally have better age diversity and shorter-tenured directors. There is also far less controversy around executive compensation, due to the relatively modest pay packages typically offered to emerging market executives. While incentive schemes still require scrutiny, our focus tends to be on ownership structures and board composition.

When it comes to environmental issues, government policy will often play a role. Here it is important to highlight that many emerging market countries have reaffirmed their commitment to the Paris Agreement on climate change, following the US’s decision to leave.1 There is also progress amongst asset owners, as witnessed when four emerging market based sovereign wealth funds joined forces with two developed market funds to create the One Planet Sovereign Wealth Fund Framework in July 2018. This partnership aims to accelerate the integration of climate change issues into the management of these large, long-term asset pools.

The appetite for engagement and learning shown by emerging market companies is often stronger than that exhibited by their developed market counterparts. They are also genuinely willing to listen and respond to investor input, a feature that enhances the influence we can have as stewards of our clients’ assets.

ROOM FOR IMPROVEMENT Whilst most companies in emerging markets recognise the importance of ESG, there is still much that can be done to meet the expectations of asset owners. Rather than poor underlying practice, it is often simply a matter of disclosure, with management lacking an awareness of the importance investors attach to these factors.

We are seeing signs of progress on disclosure with initiatives such as the Task Force on Climate-related Financial Disclosure and SDGs bringing better consistency. We are also pleased to see the development of scenario analysis tools, with the Transition Pathway Initiative and the Paris Agreement Capital Transition Assessment both gaining traction. These and other tools will be instrumental in supporting the Net Zero Asset Managers Initiative (NZAMI), to which Martin Currie has been a signatory since 2021. NZAMI is a group of asset managers with an international span who are committed to supporting the net zero greenhouse gas emissions goal by 2050 or before, investing in alignment with this aim.

The appetite for engagement and learning shown by emerging market companies is often stronger than that exhibited by their developed market counterparts. They are also genuinely willing to listen and respond to investor input, a feature that enhances the influence we can have as stewards of our clients’ assets.

1President Trump announced his intention for the US to leave the Paris Agreement in June 2017, with the withdrawal date of November 2020. Under the Biden presidency the US formally rejoined the agreement in February 2021.

05GLOBAL EMERGING MARKETS THROUGH THE ESG LENS

CASE STUDY: TCS GROUP We added TCS to the GEM portfolio in Q1 2020. The stock was screening well on fundamentals and was building a nimble and sustainable digital only bank in Russia. While acknowledging its impressive prospects, we identified a number of risks including its status as a heavily regulated Russian bank. Furthermore, the founder owned 40% of the company but with dual share classes had 87% of the votes. A key area of engagement for us was around minority protections.

In our standard opening letter to them we wrote: “In recent conversations with you we have discussed the challenges for the Board to maintain and demonstrate independence when there is a dominant shareholder in place as is the case with TCS Group. We have also discussed the strong NPV culture at TCS Group which we think is unique and a real strength worth sharing with investors more fully. Both are topics we would like to continue to pursue with you”. This prompted an immediate response from the company, including from the CEO who agreed with us that the two issues were important and were work in progress.

Among the generally positive structured feedback we provided to the company on their sustainability report in August 2020, we advised that we viewed the issue of minority protection as bigger than the shareholding structure section of the report suggested. We reinforced its importance to us and

encouraged them to provide more detail on their thinking on the topic in future reports. The company thanked us for our input, specifically because we had given them examples of corporates who were doing a good job on the items we reviewed and they valued this context.

In January 2021, the company dissolved their B-share structure, resulting in the company founder owning less than 40% of the company in economic and voting terms. This is not always a step that much larger companies in EM and DM are prepared to take and we believe this reflects their positive attitude toward better governance and disclosure practices. It does not entirely remove the issue of the founder’s influence on company strategy going forward but does represent a very significant step forward for the company on corporate governance.

Since early 2021, the stock has performed strongly on fundamentals and the company has hosted a specific ESG call to showcase their ESG efforts including introducing investors to a radically reshaped Board of Directors. We see this further positive progress. We believe the share price of the stock reflects both their strong fundamentals and the positive market reception of the company’s improving governance profile.

The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the securities discussed here were or will prove to be profitable.

Since early 2021, the stock has performed strongly on fundamentals and the company has hosted a specific ESG call to showcase their ESG efforts including introducing investors to a radically reshaped Board of Directors.

MARTIN CURRIE AND ESG AT A GLANCEThe concept of stewardship is at the heart of our philosophy as active equity specialists, and ESG is a critical component of this, informing our research and engagement efforts. Analysis of these factors has been embedded in our emerging market team’s stock research process since the inception of the strategy. As a firm we routinely engage with businesses to improve awareness of sustainable business practices and to effect change. While most of our engagement takes place in private, we often join up with other investors when we deem this to be more impactful than acting alone. Recent examples of the latter include engagements on water risks in the agricultural supply chain, labour practices in the food retail sector, and cybersecurity.

As signatories to the Principles for Responsible Investment (PRI) we have committed to report on our activities in relation to responsible investing each year. We have consistently been highly rated by the PRI in their annual assessments and in 2020, for the fourth year running, achieved the highest possible rating (A+) in all top-level categories: ‘strategy and governance’, ‘incorporation’ and ‘active ownership’. We have also been listed as a signatory to the new 2020 UK Stewardship Code. Importantly, we believe in holding ourselves to the same standards that we expect of others and live our values through the management of our own business. This includes participating in industry initiatives to raise the profile of ESG issues, as well as sharing ideas about best practice.

The concept of stewardship is at the heart of our philosophy as active equity specialists, and ESG is a critical component of this, informing our research and engagement efforts.

06

IMPORTANT INFORMATION

This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.This document may not be distributed to third parties. It is confidential and intended only for the recipient. The recipient may not photocopy, transmit or otherwise share this document, or any part of it, with any other person without the express written permission of Martin Currie Investment Management Limited.This document is intended only for a wholesale, institutional or otherwise professional audience. Martin Currie Investment Management Limited does not intend for this document to be issued to any other audience and it should not be made available to any person who does not meet this criteria. Martin Currie accepts no responsibility for dissemination of this document to a person who does not fit this criteria.The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.Past performance is not a guide to future returns.The distribution of specific products is restricted in certain jurisdictions, investors should be aware of these restrictions before requesting further specific information.The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.

The information provided should not be considered a recommendation to purchase or sell any particular strategy/fund/security. It should not be assumed that any of the securities discussed here were or will prove to be profitable.

The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategy does not necessarily target particular sustainability outcomes.

For investors in the USA, the information contained within this presentation is for Institutional Investors only who meet the definition of Accredited Investor as defined in Rule 501 of the United States Securities Act of 1933, as amended (‘The 1933 Act’) and the definition of Qualified Purchasers as defined in section 2 (a) (51) (A) of the United States Investment Company Act of 1940, as amended (‘the 1940 Act’). It is not for intended for use by members of the general public.

For investors in Australia, this material is provided on the basis that you are a wholesale client within the definition of ASIC Class Order 03/1099. MCIM is authorised and regulated by the FCA under UK laws, which differ from Australian laws.

Risk warnings – Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.

• Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.

• This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.

• Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.

• Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.

Martin Currie Investment Management Limited, registered in Scotland (no SC066107) Martin Currie Inc, incorporated in New York and having a UK branch registered in Scotland (no SF000300), Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES

Tel: (44) 131 229 5252 Fax: (44) 131 222 2532 www.martincurrie.com

Both companies are authorised and regulated by the Financial Conduct Authority. Martin Currie Inc, 280 Park Avenue New York, NY 10017 is also registered with the Securities Exchange Commission. Please note that calls to the above number and any other communications may be recorded.

© 2021 Martin Currie Investment Management Limited.