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Templeton Developing Markets R TDMRX Sustainability

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Sustainability Analysis

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Sustainability Summary

Templeton Developing Markets Trust has several promising attributes that may appeal to sustainability-focused investors.

The ESG risk of Templeton Developing Markets Trust's holdings is comparable to its peers in the Global Emerging Markets Equity category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.

One key area of strength for Templeton Developing Markets Trust is its low Morningstar Portfolio Carbon Risk Score of 9.43 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and thermal coal. The fund fulfills this goal by having negligible investment exposure to each of these activities.

The fund aims to avoid or minimize holdings in companies breaching international norms, including the UN Global Compact or the Universal Declaration of Human Rights.

One potential issue for a sustainability-focused investor is that Templeton Developing Markets Trust doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund exhibits relatively high exposure (11.95%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, and environmental incidents that have a negative impact on stakeholders or the environment. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager