If ever there was a compelling case for globalisation, then this is it.
A selection of emerging market economies, which have experienced blistering growth rates over recent years, are addressing at least some environmental, social and governance issues in their public disclosures.
Not only is it very encouraging that these sometimes cost-constrained companies are ‘doing’ sustainability (some companies in the oil- and gas-producing and telecom sectors even compare favourably with their counterparts in developed markets), there are also ample opportunities for SRI institutions take this forward.
Currently only 0.1% of worldwide SRI funds are invested in emerging market assets, beyond the $1.1bn invested by the International Finance Corporation. So by directing capital flows to sustainable business practices, investors have a huge role to play.
Usefully, EIRIS comes up with some tips to help them on their way, such as employing external specialists ‘on the ground’ (perhaps surprisingly, no SRI asset owners have their own specialists) and focusing on the more ‘advanced’ emerging countries. The benefits will of course be widely felt, not just in the emerging markets.
SRI makes sense in emerging markets for much the same reasons as in developed markets – responsible companies are usually better managed, have access to new markets, and generally have a more loyal and better-trained workforce. Reasons enough for managers here, who may be struggling with troublesome suppliers located in emerging markets, to follow the (SRI) money.
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Emerging Potential
Ethical Investment Research Services published on September 22 Broadening horizons for responsible investment: an analysis of 50 emerging market companies, revealing significant potential opportunities for socially responsible investment in emerging markets.
South Africa is ahead of other emerging markets in disclosing corporate social responsibility activities, whereas some countries such as China are only beginning to engage with these areas. Some countries show positive signs in reporting in some areas but lag behind in others – Taiwanese companies showed poor governance performance but did display some evidence of addressing environmental issues. Overall, emerging markets reporting on ESG issues is not as advanced as that of their developed market peers, but this mismatch in performance is less apparent in certain sectors. For instance among the oil and gas producers and telecommunications companies, there are some emerging market companies that compare favourably with large developed market companies, EIRIS said.
(The full report can be downloaded from www.eiris.org) Contact Peter Webster, Eiris 020 7840 5700, www.eiris.org
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