EM Corporates & ESG: A Surprisingly Strong Opportunity Set

Growing at a cumulative rate of over 300% since 2010, emerging markets (EM) corporates represent a robust and diverse asset class, currently worth more than $2.5 trillion.1 While investors are often drawn to the asset class for a variety of reasons, including the potential for diversification benefits or attractive yields, many perceive the entire EM corporate asset class as being at odds with ESG investing. For example, some may think EM corporates largely lack the ESG market data needed to thoroughly assess the financial materiality of E, S or G factors. Investors who wish to express environmental or other values in their portfolios may believe the practices of EM corporate issuers (or their home countries) are incongruous with that approach. We believe these perceptions reflect an antiquated view of the asset class. Based on our assessment, EM corporates are equipped to help investors meet a range of ESG-related objectives.

Here, we address three major misconceptions around ESG investing in the EM corporate space.

Misconception 1 - The EM Corporate Space Has Limited ESG Market Data Availability

From an investment standpoint, it is essential that reliable, timely ESG data be part of the analytical process. Market data vendors allow investors to analyze standardized data across countries, sectors and companies.