In the past, the manager has engaged an Indian manufacturer following the suicide of one of its employees; a Chinese business that cleared what was perceived to be an excessive amount of forest; and resources companies who continued to operate in Burma during and after the 2007 protests led by Buddhist monks. “Just to sell a share and run away isn’t a responsible thing to do,” Gaits said.

In India, sustainability investors should be wary of corruption and violations of social justice sometimes committed by businesses operating in rural lands. Companies operating in these areas have been known to bribe local officials, or pay sums far less than those set by the market, in order to buy land occupied by farmers, Gait said. “The ‘official’ rate goes back for decades and doesn’t reflect the current market.”

But even the more pedestrian route into emerging markets encounters sustainability risks: many of the big names in emerging markets indices are major offenders against sustainability, Gait said. “If you’re constrained by the index it’s hard to integrate sustainable analysis into your decision making process.” Investors should be mindful of the ‘Kodak Count’ – meaning the number of photos of smiling children – in the annual reports of companies.

Anecdotally, according to Gait, the reports showcasing more happy kids in between blocks of text are often published by companies most neglectful of sustainability risks. But the news concerning extra-financial risks in emerging markets is not always so bleak. For example, the Chinese government has reformed its policies guiding the domestic cement industry. Vertical kilns, which were deemed to be energy inefficient and damaging to the environment, are being phased out in preference for dry rotary kilns. Up to 280 million tonnes of old cement works are scheduled to be decommissioned and replaced with the new kilns by 2010. Given the old kilns account for up to 30 per cent of China’s production, 7.4 per cent of the nation’s total energy use, and 15 per cent of its emissions from gas waste while generating just 1.5 per cent of its gross domestic product, Gait supported their demolition.

However the theme dominating the manager’s Asia-Pacific portfolio is an expected demand for natural gas from China and, later, India. “It’s very important for China to move away from coal, and gas is an important next step,” Gaits said. According to First State, in per head of population terms, China and India use hardly any natural gas compared to the United Arab Emirates, Russia, Canada and the US. A move towards gas would help alleviate some of the pollution problems caused by coal as alternative energy sources and clean coal technologies are developed and commoditised, Gait said.

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