Templeton Emerging Markets Sustainability Fund

The environmental and social characteristics of the product include the binding considerations such as: resource efficiency, carbon emissions management, waste prevention and recycling, pollution prevention and control, labor standards, fair wages, diversity and gender balance, health & safety practices, and product safety.

The product is also bound to consider governance characteristics such as: appropriate accounting practices, alignment of interests, board effectiveness, capital allocation, shareholder rights, and quality of disclosures.

The Fund seeks to achieve its objective through a policy of investing primarily in a diversified portfolio of equity securities of companies located or having their principal business activities in developing or emerging nations and which demonstrate good or improving sustainability criteria as defined by the Investment Managers’ binding ESG rating methodology. When selecting investment for the strategy the investment manager seeks to identify companies with sustainable earnings power at a discount to intrinsic worth and whose products and services align to positive social and environmental areas linked to the UN SDGs.

In order to meet the environmental and social characteristics described above, the investment manager combines the results of its ESG assessment to produce a company specific ESG score for each of the Fund’s companies prior to investment. This assessment includes the application of a rigorous and holistic 3 pillar environmental, social and governance (ESG) analysis on each company which measures a company’s alignment to positive environmental and/or social outcome areas, intentionality to maintaining or improving the ESG footprint of its operating model, and transition potential through our engagement as active owners. The Fund will only invest in companies that score a minimum of A as per this internal ESG assessment and exclude companies scoring BBB or below. Given the bottom-up and high conviction approach undertaken, the Fund will typically have a higher weighting to companies scoring AA or AAA based on this assessment.

The Fund also applies specific ESG exclusions and will not invest in companies which according to the investment manager’s analysis:

• Repeatedly and/or seriously violate the United Nations Global Compact Principles
• Manufacture nuclear weapons or controversial weapons defined as anti-personnel mines, biological & chemical weaponry, depleted uranium and cluster munitions or those that manufacture components intended for use in such weapons. Companies that derive more than 5% revenue from any other weapons will also be excluded.
• Manufacture tobacco or tobacco products, or those that derive revenue from such products that exceeds 5%
• Derives more than 5% of their revenue from thermal coal extraction or unconventional oil & gas extraction
• Derives more than 5% of their revenue from gambling or adult entertainment
• Any company which appears as excluded on the Norges Bank Investment Management (NBIM) exclusion list

On an ongoing basis the investment manager measures exposure of the portfolio to companies contributing to positive social and/or environmental outcome areas across Basic Needs, Wellbeing, Decent Work, Healthy Ecosystems, Climate Stability, and Resource Security, and the underlying exposure to UN SDGs. The investment manager may also measure against these outcomes through appropriate metrics where available such as number of people or percentage of population benefiting from necessities, key development, living standards, and job creation, as well as quantity or metric of energy conservation, carbon reduction and natural resource quality and conservation.

The investment manager uses an established proprietary research and engagement process which includes:

• Internal Scoring – 3-Pillar ESG assessment
• Engagement activity and tracking – Targeted engagements with specific goals and objectives based on scope for improvement

No index has been designated as a reference benchmark for sustainability.