The global financial industry has adopted ESG factors as part of their standard investment decision process. Emerging markets are following this trend at a different pace. However, data disclosure and availability remains a challenge.
- Lack of data and consistency in emerging markets are major barriers to accelerating adoption of sustainable finance. We’ve noticed a significant improvement in data availability, but we still have some work to do.
- Data is the bridge between ESG investing and emerging economies, and a key driver for achieving the Sustainable Development Goals.
- Adopting global standards can be seen as a big step forward, but ESG should be evaluated in a local context. It’s important to consider, “What does a good performance in emerging markets look like?”
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Emerging Market Opportunities
The global financial industry has adopted ESG factors as part of their normal investment decision process. According to the latest version of FTSE Russell Global SurveySustainable investing is now mainstream around the world, with 86% of asset owners implementing sustainability in their portfolios.
In parallel, collaboration among key stakeholders is being strengthened towards achieving a comprehensive global baseline of sustainability disclosure standards. This was evidenced by the establishment of the International Sustainability Standards Board (ISSB) a year ago.
Emerging markets are following this trend at a different pace, but progress is being made in almost all countries.
A recent report published by PRI highlights the drivers of investment in emerging markets. Institutional investors choose to invest in emerging markets for several reasons, including exposure to a growing economy, portfolio diversification, and positive impact on the country’s development.
For many countries, this is a golden opportunity to attract capital, accelerate growth and support the transition to a low-carbon economy.
The benefits of companies implementing sustainable strategies are recognized globally. From identifying new opportunities for revenue generation, to improving reputation, reducing operational and financial risk, and accessing lower cost of capital.
Important factors need to be considered when talking about developing countries. ESG disclosures help dissipate the noise of short-term shocks and better present long-term potential.
Learn more about the benefits of our ESG contribution tool and get started
Data availability challenges
Data is essentially the bridge between ESG investing and emerging economies, driving progress towards achieving the Sustainable Development Goals.
The efforts of regulators and stock exchanges to stabilize the framework and provide guidelines for better corporate disclosures are paying off. We have noticed significant improvements in data availability in many countries such as Malaysia, Thailand, Philippines, South Africa, Morocco, United Arab Emirates, India and China. However, there is still some work to be done.
Lack of data and consistency in emerging markets may be identified as a major barrier to sustainable finance adoption and accelerated capital inflows. Along with a robust and comprehensive database to build on, indexing and analytics are supported to inform investment decisions. How can I accelerate my content creation process?
Collaboration and deeper engagement among participants in the financial community is critical. A good example of this in practice is BIST Sustainability Index, advanced technology and global best practices enable faster and more accurate corporate sustainability assessments. Market information is therefore more relevant.
This index, followed by other indices, aims to encourage investors in Borsa Ístanbul to invest in sustainability. Turkish listed companies are invited to update their sustainability data through the ESG Contribution Tool, a free self-service workflow platform. This allows the company to make his ESG impact known globally.
Additionally, it is a communication channel between the company and Refinitiv’s research team and content experts. This facilitates the reporting task by allowing companies to find guidance on key data points relevant to their investors.
Outlook
Adopting global standards can be seen as a big step forward, but ESG should be evaluated in a local context. The current taxonomy is a benchmark that emerging markets can build.
At the 6th Future Investment Initiative (FII) Conference in Saudi Arabia last October, participants had the opportunity to delve into this idea. The FII Institute is calling on investors to integrate inclusiveness. ESG framework and scoring methodology to their decision-making.
This assessment tool is the result of multiple interviews with leading investors by EY and addresses the question, ‘What does it look like to perform well in emerging markets?’
Having a more holistic approach, taking into account challenges related to social and governance factors, as well as country risks and opportunities, could have a positive impact on the sustainable strategies defined by companies where visions and commitments at the country level are made. It contributes to a virtuous cycle of giving. This will ultimately attract more international and domestic investments as well.
Learn more about the benefits of our ESG contribution tool and get started
DELTA Data Protection & Compliance, Inc. Academy & Consulting – The DELTA NEWS – info@delta-data-compliance.com
