Legal & General Future World ESG Emerging Markets Index added to Wealth Shortlist

The Legal & General Future World ESG Emerging Markets Index was added to the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential on 27 April 2023.

The Legal & General Future World ESG Emerging Markets Index provides broad exposure to emerging markets, while being mindful of environmental, social and governance (ESG) issues. Its benchmark, the Solactive L&G Enhanced ESG Emerging Markets Index, is made up of around 1,500 companies spread across a range of countries including Taiwan, India and China. These markets are higher risk as they're at an earlier stage of development, so this fund should only be considered for a portfolio with a longer investment outlook that can accept periods of high volatility.

The index increases investments in companies that score well on a variety of ESG criteria – from the level of carbon emissions generated, to the number of women on the board and the quality of disclosure on executive pay. It also reduces exposure to companies that score poorly on these measures.

The fund won't invest in persistent violators of the UN Global Compact Principles or companies involved in tobacco and controversial weapons. On top of these exclusions the fund adopts a decarbonisation pathway. This means it aims to reduce emissions by 50% relative to the unadjusted benchmark as of 2021 and thereafter achieve at least a 7% reduction in carbon emissions per year until 2050.

The fund aims to track its benchmark by investing in most of the underlying shares in a process known as partial replication which helps the fund closely match the index. The fund also invests a small amount in smaller companies in line with the benchmark, which are usually subject to more extreme price movements, and this can increase risk.

Legal & General has been running index tracker funds longer than most. It’s also one of the largest providers of tracker funds and has the biggest index team in the UK. That means it’s got the resources and expertise to track indices as closely as possible, and the scale to keep charges to a minimum. Legal & General has continued to develop their passive fund range over the last 30 years. It has just over £470bn invested in this part of the business, allowing it to offer a wide range of index-tracking options.

Shane Padden is the primary manager responsible for this fund. Padden is responsible for a range of LGIM’s Equity Index portfolios and joined LGIM in 2022 from Mercer where he spent 3 years as an Investment Consultant. The secondary manager is Konstantins Golovnovs who is responsible for managing a range funds with both UK and global equity mandates. The team running this fund works closely with various risk departments across the business. We believe this provides support and adds challenge where appropriate.

We’ve monitored the Legal & General index team for several years and it’s currently one of the best for integrating ESG solutions into tracker funds. We hold the team in high regard and following a recent detailed review of the emerging markets ESG passive sector and several meetings with the team, our conviction has grown stronger.

To find out more about the investment process and performance, please read our latest full fund update.

Past performance is not a guide to the future. Source: *Lipper IM to 24/04/2023.

**N/A = performance data for this period is not available due to when the fund or index was launched.

Find out more about L&G Future World ESG Emerging Markets Index including charges

L&G Future World ESG Emerging Markets Index Key Investor Information