MSCI | ESG investing in emerging markets
- Recent studies by MSCI ESG Research LLC have shown historical positive links between ESG considerations and corporate financial performance.
- Because investors might still question whether ESG historically added value in emerging markets, where companies’ consideration of ESG risks is a more recent phenomenon we compared the performance of four ESG indexes to their MSCI emerging-market parent.
- We found historical outperformance for the four broad-based integration ESG indexes and that a significant component of this outperformance can be explained by the index being overweight or underweight certain stocks based on ESG criteria.
- We also found that higher-rated emerging-market companies had higher profitability, lower idiosyncratic risk and a premium on their valuation over the study period of June 2013 until July 2019.
- Overall, we found that despite emerging-market companies tending to have lower MSCI ESG Ratings than global peers on average, ESG characteristics measured by MSCI ESG Ratings had contributed to performance overall.
Associated Marketing Collateral: MSCI Emerging Markets ESG Leaders Index