ESG disclosure holding back 70% of responsible investors from upping emerging markets assets

Institutional investors that support sustainability in their investment approaches say a lack of environmental, social and corporate governance (ESG) disclosure in emerging markets is still a key issue preventing them from increasing the amount of money they invest there. Approximately 70% of a sample of 67 major asset managers and institutional investors collectively representing $130bn of emerging market investment, told the Emerging Markets Disclosure (EMD) Project, that they wished to see the development of national sustainability indices, ESG listing requirements and greater incorporation by emerging markets companies of global ethical standards and norms before they could commit more money. The EMD Project is co-ordinated by the International Finance Corporation (IFC), part of the World Bank Group, the International Working Group (IWG) of the US Social Investment Forum (SIF) and Calvert Investments, US fund manager. The full survey findings will be released on June 25th in New York City at the ‘Integrating ESG into Portfolios’ conference put together by Responsible Investor and the SIF. The EMD survey was sent to institutional investor signatories of the United Nations Principles for Responsible Investment (UNPRI) and the EMD Project, as well as members of the global social investment forums. Nearly two thirds of the responding investors had at least six years of experience in investing in emerging markets. The survey analysis, carried out by EIRIS and the IWG, found, that investors prioritised emerging markets such as Brazil and South Africa where sustainable investmentinfrastructure is being developed: both have seen the launch of sustainability indices aimed at prompting listed companies to improve ESG disclosure. Brazil was deemed the best emerging market for ESG disclosure, followed by China, India, Mexico and South Korea. Petrobras, the Brazilian oil company was the top emerging market holding for responding investors, followed by Samsung Electronics (South Korea), China Mobile (China), Taiwan Semiconductor (Taiwan), Teva (Israel), Vale Do Rio Doce (Brazil), America Movil (Mexico), Gazprom (Russia), Posco (Korea), and Ambev (Brazil). Interestingly, the survey revealed that among its respondents European investor exposure to emerging markets was nearly double that of North Americans. European investors were also much more likely to use corporate governance criteria for deciding on how to invest in emerging markets while North Americans favour negative screening of companies on issues such as tobacco or involvement in countries like Sudan. Lauren Compere, senior vice president of Boston Common Asset Management and the EMD Project’s Korean country team lead, said, “As a global responsible investor, Boston Common would like to increase our investment opportunities in emerging markets. We are encouraged by the initiative taken by some of our emerging market holdings, including Samsung Electronics and Posco, to increase their level of ESG reporting. We hope that the survey findings will help articulate the need for better ESG disclosure by a broader set of emerging market companies.”
Link to RI’s Integrating ESG into Portfolios conference, June 25th, New York