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Basak Yeltekin

Papers White Paper

TT Sustainable Emerging Markets: where sustainability and returns align

White Paper
18 September 2026

By

Head of Sustainability & Stewardship

TT’s Sustainable Emerging Markets strategy has demonstrated that sustainable investing and strong returns can go hand-in-hand. By applying our tried-and-tested EM investment process alongside a proprietary UN Sustainable Development Goal framework, the strategy has outperformed the MSCI EM Index by 36.8% gross since inception on 1 October 2022 to 31 August 2026. We believe this validates our central thesis: companies that invest in their people, reduce their environmental impact and support economic development are often structural winners that represent compelling long-term investments. This paper highlights three high-conviction holdings that we believe can help drive the strategy’s next phase of outperformance.

In October 2022, we launched the sustainable version of our long-standing Global EM strategy, which celebrated its 15-year anniversary earlier this year and has delivered top-decile performance versus peers since inception.

TT’s Sustainable EM strategy follows an identical process with the same investment team, but additionally we:

  • actively target UN Sustainable Development Goals (SDGs) using a proprietary scoring framework, investing at least 80% of the fund’s capital in companies that promote the SDGs through their operations, products or services;
  • exclude companies that derive more than 10% of their revenues from fossil fuels and related industries, tobacco, cannabis, alcohol, gambling or adult entertainment; and
  • screen every investee company for violations of the UN Global Compact.

Our core belief remains that the SDGs are universally relevant, but particularly important in emerging markets. We believe the long-term structural winners will be the companies that invest in their people, minimise their environmental impact, and contribute to economic development.

Almost four years of running the Sustainable EM strategy alongside our flagship EM strategy have reinforced our belief that sustainability need not sacrifice performance and can, in fact, enhance risk-adjusted returns. Indeed, the strategy outperformed its ex-fossil fuel benchmark by 34.9% and the broader MSCI EM index by 36.8% since inception to 31 August 2026, equivalent to annualised outperformance of 8.0% and 8.3%, respectively.

The Sustainable EM strategy has also generated returns comparable with those of our standard EM strategies, providing further evidence that its exclusions have not impeded performance. As per Morningstar, the strategy is in the top 1 percentile of actively managed EM strategies over one, two and three years, and the top 2 percentile since inception to 31 August 2026.

These results support our original thesis: that a disciplined investment framework can deliver long-term capital growth, while alignment with the SDGs offers a durable growth runway for our investee companies.  

Active engagement is another cornerstone of the strategy, helping us to harness the alpha opportunity created by improvements in corporate governance, disclosure and sustainability practices. 

Three high-conviction, high-impact ideas

We remain confident that the alpha generated since inception is repeatable through continued execution of our disciplined investment process. To illustrate the point, we will now discuss three high-conviction, high-impact current investments that also demonstrate strong alignment with the UN SDGs. It is our firm belief that investments such as these will drive the next leg of outperformance for the strategy. 

Axia Energia

Axia Energia, formerly Eletrobras, is Brazil's largest power utility by installed capacity. Its substantial uncontracted generation capacity, equivalent to 34% of the total in 2027, provides unique earnings leverage to what we believe will be a structural uptrend in Brazilian power prices.

Axia’s sustainability credentials are underpinned by a 100% renewable, predominantly hydro-based generation mix and an ambitious commitment to reach net zero by 2030. The company has also recently strengthened its governance and capital allocation strategy through a series of large accretive preferred share redemptions. These transactions are part of a broader transition towards a single-class common share structure following Axia’s migration to the Novo Mercado, which management expects to improve liquidity and further strengthen governance.

The shares trade at a discount to global peers and offer an implied real equity IRR of 14% (Morgan Stanley, August 2026). We therefore believe the current valuation offers meaningful re-rating potential as the market increasingly recognises the benefits of post-privatisation governance and efficiency improvements as well as higher power prices.

Delta Electronics

Delta Electronics is a Taiwan-headquartered global provider of integrated high-density power and cooling solutions, representing a high-conviction play on the structural growth in AI data centre infrastructure. Delta’s technology provides solutions to the considerable energy and water requirements of modern data centres. Delta’s leadership in high-voltage direct current solutions is significantly increasing its content per rack, potentially doubling the power content compared to previous generation architectures. Growth is further supported by a robust thermal management portfolio, with liquid-to-air cooling products making a growing contribution to revenue as demand increases for solutions capable of supporting the higher thermal design power requirements of advanced chips such as NVIDIA's Rubin series.

Beyond data centres, Delta is a major enabler of the energy transition, providing high-efficiency power electronics that support smart manufacturing, EV charging infrastructure, and hydrogen fuel cell development. Since 2021, the company has implemented a sophisticated internal carbon fee mechanism of US$300 per metric tonne of CO2e, with the proceeds directly reinvested into low-carbon innovation and renewable energy technologies. Delta is committed to reaching net zero by 2050 and has already achieved 100% renewable electricity across its Americas operations, five years ahead of its global target.

Credicorp

Credicorp is Peru’s leading financial franchise, with a market share of more than 35%. We believe it is well positioned to benefit from the powerful combination of a macroeconomic inflection and accelerating digital transformation. An improving political backdrop should support faster economic growth, lower inflation, and a multi-year expansion of credit. The opportunity is particularly attractive given Peru’s low level of financial penetration, with a loan-to-GDP ratio of only 30%, and the concentrated structure of its banking system, in which the four largest banks account for more than 80% of loans and deposits.

Credicorp’s SME lending business, which directly supports the UN SDGs, is a cornerstone of its growth strategy. The company is well placed to capture this opportunity, given its dominant market position with a 35% share of the SME business lending market. Its digital initiative, Yape, was launched over a decade ago and now has approximately 17 million active users, equivalent to more than 80% of Peru’s adult population. Yape has become a key engine of financial inclusion and digital scale across Credicrop’s ecosystem, bringing approximately 6.6 million people into the formal financial system since 2020. We view Credicorp’s expansion into the SME and unbanked segments as a key source of potential upside, particularly if the bank can maintain solid asset quality as credit growth accelerates.

Important information: This information is issued by TT International Asset Management Ltd (“TT”), authorised and regulated in the United Kingdom by the Financial Conduct Authority. This information is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. The circulation of this information is restricted to professional investors as defined in the legislation of the jurisdiction where this information is received.  No representation is made as to the accuracy or completeness of any information contained herein, and the recipient accepts all risk in relying on this information for any purpose whatsoever. Without prejudice to the foregoing, any views expressed herein are the opinions of TT as of the date on which this information has been prepared and are subject to change at any time without notice. TT does not undertake to update this information. Any forward-looking statements herein are inherently subject to material business, economic and competitive risks and uncertainties, many of which are beyond TT’s control and are subject to change. The information herein does not constitute an offer of shares or units in any fund, and it is not an offer to, or solicitation of, any potential clients or investors for the provision by TT of investment management, advisory or any other comparable or related services. No statement in this information is or should be construed as investment, legal, or tax advice, nor is any statement an offer to sell, or a solicitation of an offer to buy, any security or other instrument, or an offer to arrange any transaction, or to enter into legal relations. This information expresses no views as to the suitability of the investments described herein to the individual circumstances of any recipient. Any person considering any investment should consult the offering documentation if and when is made available. Investments carries with it a high degree of risk. Past performance is not necessarily indicative of future results and investors may not retrieve their original investment. 

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