ESG disclosure must improve to support emerging market
investment
22 June 2009
Written by Sophie Baker
A lack of disclosure on environmental, social and corporate
governance (ESG) issues is a key challenge when asset managers an institutional
investors consider investing in emerging markets, says a survey by the
Ethical Investment Research Service (EIRIS) and the International Working
Group of the Social Investment Forum.
The survey, part of the Emerging Markets Disclosure (EMD) project, shows
that 70 per cent of major asset managers and institutional investors cite
this as a key issue, and poor ESG disclosure threatens to undermine investor
confidence in emerging markets.
Brazil and South Africa, however, were commended by respondents to the
survey for making good progress towards greater openness and transparency
when it comes to ESG, with both countries developing a sustainability
index to which their listed companies can aspire through improved disclosure.
After Brazil, China, India, Mexico and South Korea made up the top five
country allocations from investors answering the survey.
Three-quarters of respondents are members of at least one organisation
that is committed to corporate social responsibility or responsible investment
issues, such as the UN Principles for Responsible Investment (UN PRI).
Mike Lombardo, senior sustainability analyst of Calvert Investments, and
the EMD Project’s South Africa country team lead, commented: “While
the results are encouraging, the survey demonstrates the continued need
for greater ESG transparency in emerging markets. Analysts need ESG disclosure
in order to identify the most sustainable companies in which to invest.”
Sonia Wildash, author of the report and senior researcher at EIRIS, added:
“Emerging markets hold significant opportunities for responsible
investors. But if they are to better understand emerging market company
ESG risks and opportunities, then corporate communication to investors
clearly needs to improve. An engagement approach among emerging market
investors should seek to improve the corporate responsibility and disclosure
practices of companies.”
The full report, Emerging Markets Investor Survey Report: An analysis
of responsible investment in Emerging Markets, is available here.
