Shining the ESG light on emerging markets

With a focus on corporate governance, can high-quality companies make a difference to returns.

16 Jan 2020

Growing share of world’s population live in emerging countries with a:

  • younger workforce
  • growing middle class
  • consumer base that is getting wealthier

But emerging markets are riskier and can be difficult to navigate with differences in culture, governance standards, lack of disclosure, limited data availability

Big challenges in EM can create big opportunities to add value:

  • Using ESG analysis to differentiate between companies and pick potential winners
  • more variability in ESG disclosure, policy and practise standards 
  • growth potential in domestic consumption if management teams perform well in these areas
  • keep companies accountable

Does ESG integration add value?

Emerging market performance over 5 years shows that the MSCI EM ESG Leaders index outperformed the MSCI Emerging Markets index

By incorporating ESG analysis, emerging market investors are seeing:

  • Rewards for companies seeking to improve ESG performance
  • Governance issues improving