Record EM Sustainable Finance Strategy Marks Fourth Anniversary with Strong Performance#

Key Achievements#

• Financial Performance: Since inception, EMSF has delivered +18.7% returns, significantly outperforming USD and local currency Emerging Market (EM) Debt benchmarks with approximately 30% lower volatility, demonstrating that impact investing can yield competitive returns without compromising risk-adjusted performance.
• Asset Growth: The strategy has grown to over 1 billion in assets under management (AUM), reflecting strong investor confidence in its innovative approach.
• Investment Approach: EMSF takes currency risk across a diverse universe of emerging and frontier market currencies, enabling multilateral development banks (MDBs) and development finance institutions (DFIs) to raise local currency funding. This eliminates foreign exchange (FX) risk for borrowers, enhancing financial stability in emerging markets.
• Impact Focus: By investing in bond instruments issued by MDBs and DFIs, EMSF directly supports development projects aligned with the UN Sustainable Development Goals (SDGs), addressing critical needs in emerging and developing economies.

Strategic Importance#

• Addressing the SDG Funding Gap: The UN estimates a 5–7 trillion annual private sector funding gap to meet the SDGs by 2030. EMSF’s model mobilizes private capital to bridge this gap, supporting projects in sustainable infrastructure, financial inclusion, and climate resilience.
• Currency Risk Management: By facilitating local currency funding, EMSF reduces the currency volatility barrier that often hinders economic development in emerging markets, where loans are typically denominated in foreign currencies like USD or EUR. Link
• ESG Integration: The strategy aligns with Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR), promoting social and environmental characteristics. It employs a proprietary impact assessment tool, updated monthly by Lemma FX, to evaluate investment holdings and ensure positive outcomes for the poorest communities. Link

Leadership Perspective#

• Andreas Koester, Head of EM and Frontier Investments: “Innovative sustainable finance solutions, such as EMSF, have a vital role to play in bringing private investors into the development finance marketplace. We are proud to have delivered tangible impact and strong outperformance relative to Emerging Market Debt benchmarks, demonstrating that you don’t need to sacrifice returns to do good.”

About Record Currency Management#

Founded in 1983, Record is a specialist currency and asset manager managing over 100 billion in AUM for 140 institutional clients worldwide across FX Risk Management, Absolute Return, and Private Markets. Its partnership with UBS Wealth Management has been instrumental in scaling EMSF’s impact and reach. Link

Market Context#

• Sustainable Finance Growth: Emerging markets saw 190 billion in ESG-linked debt issuance in 2021, with sustainable finance accounting for 18% of foreign financing (excluding China), highlighting growing investor appetite. Link
• Challenges: Emerging markets face barriers like limited local investor bases, higher risk premiums, and poor ESG data disclosure, which EMSF mitigates through its partnership-driven model and focus on MDB/DFI-backed investments. Link

Conclusion#

The EMSF Strategy’s fourth anniversary underscores its success in delivering strong financial returns (+18.7%) and measurable impact in emerging markets, with over 1 billion in AUM. By addressing currency risk and supporting SDG-aligned projects, EMSF sets a benchmark for sustainable finance. Investors seeking impact-driven opportunities should explore Record’s offerings, while monitoring global ESG trends and regulatory developments.