Uncovering climate-related investment opportunities in emerging markets.

Emerging markets may contain climate-related investment opportunities for investors seeking to invest in companies pursuing reduced emissions in the real economy, provided they have a helpful framework to find the hidden opportunities, according to new research from Morningstar Sustainalytics.

The index has returned 4.8% in 2025 (as of April 29) and 11.9% for 1 year as compared to a 2.9% and 7% rise in 2025 and for 1 year, respectively, for its parent index the Morningstar Emerging Markets Target Market Exposure Index^TM. More importantly, the EM LCTL Index provides roughly 13% more exposure to strong performers in terms of low carbon transition readiness compared to its parent index – a material difference.

Two of the “emerging market climate leaders” listed in the index are featured in the report: electric utility Enel Chile SA (ENIC) and construction material company TCC Group Holdings Co., Ltd. (1101.TW).

Azadeh Sabour, Director of Climate Thought Leadership, Morningstar Sustainalytics

“Investors focused on mitigating long-term systemic climate risks while pursuing related investment opportunities are increasingly adopting low-carbon transition strategies to finance decarbonization in the real economy, reflecting a shift away from simply decarbonizing portfolios.  Financing decarbonization efforts in emerging markets is a meaningful way to achieve real economic impact. Companies operating in emerging markets are in many instances much earlier on their low carbon transition journey than their developed market counterparts. Yet, on closer inspection, curious investors can find strong investment potential in companies that are outpacing their peers in the development, implementation and ongoing management of decarbonization-related strategies. Uncovering these hidden gems can benefit the portfolio strategies of institutional investors.”