Emerging Markets Investments: Local knowledge is key
Andrea van Dijk
|Andrea van Dijk, |
The amount of money being invested in emerging markets has skyrocketed in recent years. Investor surveys point out that investors are optimistic about the financial potential in emerging markets due to the systematically strong growth rates within the region in the last decade, which are forecasted to continue in the upcoming years. In addition, lowering emerging market debt rates, growing consumer empowerment and the recent disappointing performance of developed markets stocks have spurred investor interest in emerging markets. While consideration of environmental, social and governance (ESG) factors is becoming more mainstream among investors and companies in developed markets, it remains relatively uncharted territory for many investors and investable companies in emerging markets. Consequently, some responsible investors are reluctant to put their money into emerging markets for fear of potentially greater exposure to ESG risks.
Sustainalytics' research underscores the concerns held by responsible investors; when compared to developed markets, a greater number of companies in emerging market countries are structurally in breach of international norms, such as human rights conventions and environmental standards. Our research also reveals striking differences in the ESG practices, disclosure and risk exposure between emerging market companies and their developed market counterparts. To truly assess the ESG performance of an emerging market company, investors must be aware of the local reporting standards as well as the specific risks related to the local context in which a company operates.
Lack of ESG disclosure is still a major issue in many emerging market countries and many companies are simply not aware of (foreign) investors' desire for ESG information. For investors who are serious about ESG, engaging companies in a dialogue to explain why these factors and disclosure are relevant and to hear the company's management perspective is often a necessary step.
In March, Sustainalytics will release a report detailing the ESG risks, challenges and solutions for investors interested in emerging markets. The report will include data analysis based on Sustainalytics' ESG scores and ratings, as well as responsible investor case studies illustrating specific ESG strategies for emerging market investments, and the challenges these investors encountered.
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Controversial Weapons Radar research extends to privately held companies
In March 2012, Sustainalytics will offer in-depth research of privately held companies involved in controversial weapons, adding to the already extensive coverage of publicly traded companies. Sustainalytics has more than five years of experience in the field of controversial weapons research, and during this period we have seen a growing need for information and analysis about the involvement for companies that are not publicly traded.
We have identified three main triggers for this growth:
- The adoption of legislation prohibiting investments in cluster munitions by a growing number of countries. Financial institutions are now looking for reliable research to ensure that they do not operate in violation of these national laws. Currently Belgium, Ireland, Italy, Luxembourg and New Zealand have legislation in place banning the financing of cluster munitions and similar legislation is expected in the United Kingdom, Germany, the Netherlands, Switzerland and Norway;
- An increasing number of public companies are moving away from involvement in the most controversial weapons because of international legislation and pressure from civil and financial communities, however private and state-owned companies continue their involvement;
- Financial institutions are moving to ensure consistent application of their responsible investment policies across asset classes. This has led to a growing interest in information and analysis beyond equity investments to cover fixed income, credit lending, etc..
Building on our existing methodology, Sustainalytics will offer full Controversial Weapons Radar profiles on privately held companies involved in the development, production, maintenance or trade of the four controversial weapons covered by international conventions. These weapons include anti-personnel mines, biological and chemical weapons and cluster weapons. Coverage of involvement in depleted uranium, nuclear weapons and white phosphorus will follow throughout 2012.
Follow the link to read more about impending legislation against controversial weapons financing and the potential impact for investors.
For more information about the extended coverage of the Controversial Weapons Radar, please contact your account manager or one of our responsible investment advisers.
More Reports and Webinars
For 2012, Sustainalytics remains committed to offering you timely and informative reports and webinars on the environmental, social and governance issues important to responsible investors. Our first report will focus on the ESG issues related to deepwater and arctic hydrocarbon development. We also plan to re-introduce our popular thought leadership webinar series. Some topics we plan on covering this year include responsible investment in emerging markets, unconventional oil webinar series and latest trends in controversial weapons investments. The first webinar, to be held in late February will focus on free, prior and informed consent. More details to come.
Claudiu Tanasescu, Global Director, ICT
Software development team joins Sustainalytics
Sustainalytics' long-time information communication technology (ICT) partner Share Dimension, has formally joined the company in an expansion of Sustainalytics' in-house ICT team. Share Dimension's seven-person software development team will enhance Sustainalytics' technological capacity and allow for continued improvements to our primary research tool, the Global Platform. Claudiu Tanasescu, former Share Dimension CEO, will become managing director of Sustainalytics' Romanian office and global director of the ICT team. To learn more, please read our press release or visit our Team page at www.sustainalytics.com/team.
Sustainalytics presents to responsible investors in Paris
On January 20, Sustainalytics along with French asset manager Inter Expansion, presented the report Raising the Bar on Human Rights: What the Ruggie Principles Mean for Responsible Investors. Following the presentation, the firms, joined by Amnesty International, engaged in a lively debate on the issue of human rights as a corporate responsibility. The session was well received and Sustainalytics plans to hold similar events throughout the year.
Meet Sustainalytics in your Region
VBDO Seminar: Responsible Investment for Pension Plans
7 February, 2012
Amsterdam, The Netherlands
ODDO/Sustainalytics ESG Lunch on Shale Gas and Offshore drilling
14 February, 2012
Environmental Bonds 2012
15 February, 2012
12-14, March, 2012
GRI-Certified Training Courses
March & April 2012
Toronto & Vancouver, Canada
To view more events, click here
Objection Handling Workshop for Sustainability Professionals
16 February, 2012
To view more events in the Toronto Sustainability Speaker Series, click here
Sustainalytics in the Media
Michael Jantzi interviewed by 3BL Media
Sustainalytics CEO Michael Jantzi was recently interviewed about the firm and the state of responsible investing today. Follow the link to watch the five-part interview.
Korea's Green Rankings
Sustinvest, Sustainalytics' Korean-based research partner, recently released its own Green Rankings; a list of the 100 greenest companies in Korea. This ranking was the first of its kind in Korea. Woogin Coway topped the list followed by Samsung Electronics and Hyundai Construction and Engineering. Korean Prime Minister Kim Hwangshik hailed Green Rankings as a benchmark to help promote green growth in the country.
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Sustainalytics is a global leader in sustainability research and analysis for investors and financial institutions, specialized in analyzing environmental, social and governance (ESG) criteria for companies, institutions and countries. We provide a global perspective, underpinned by nearly 20 years of local experience and expertise in the responsible investment and traditional socially responsible investment markets. Sustainalytics is proud to be voted the 2010 Best ESG Research House of the Year by IPE/TBLI Group. The firm is headquartered in Amsterdam with local offices in Boston, Frankfurt, Madrid, Paris, Timisoara and Toronto; and with representatives in Brussels and Copenhagen.