By Gordon Platt
The biggest challenge of investing in emerging markets is a lack of disclosure on environmental, social and corporate governance (ESG) issues, according to a global survey of 67 major investors that support sustainability in their investment approaches.
Improved corporate disclosure on these issues could persuade more-responsible investors to increase their allocation to emerging markets, according to the survey by the Emerging Markets Disclosure Project, which is coordinated by the IFC, the US Social Investment Forum and Calvert Investments, a US-based fund manager.
Approximately 70% of the asset managers surveyed said they would like to see the development of national sustainability indexes and ESG listing requirements and better ethical standards and norms for companies before they could commit more money to emerging markets.
According to the survey, Brazil was deemed the best emerging market for such disclosure, followed by China, India, Mexico and South Korea. The asset managers surveyed collectively represent $130 billion of emerging market investments.
European investors were found to be much more likely than North Americans to use corporate-governance criteria for deciding on how to invest in emerging markets. North Americans favored negative screening of companies based on specific issues, such as tobacco production or involvement in countries such as Sudan.