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Do emerging markets & ESG mix?

Anthony Kettle tackles the common misconception that emerging markets – which make up 25% of the global bond universe – are behind the curve on this industry megatrend.

While ESG is quickly becoming a big part of most asset managers’ day jobs, for those specialising in emerging markets (EM), many ESG considerations are already considered standard practice.

EM issuers typically undergo more investor scrutiny than their developed-market peers, as a consequence of their operating environment.

Certain ESG factors, such as governance (G) and political backdrops (S), have always played a critical role in the fundamental and risk analysis of EM credits – both sovereign and corporate. Extending traditional EM analysis to cover a more explicit ESG framework has therefore been a natural and relatively seamless progression.

The focus on environmental factors is the newest element of the equation. Here, EM investors who have well-established dialogues with issuers have been successfully extending their engagement efforts to include environmental topics.

Over the last few years, we have seen the level of commitment to ESG development strengthen meaningfully across issuers and investors within EM. While there is still work to do, we believe that EM will play a key role in the evolution of the global ESG investment landscape. This should create a multitude of opportunities to build momentum behind this trend and invest in the resulting positive stories.

To read more, download the PDF.

For more ESG insights, visit our Responsible Investing content hub.