Investors have been told they should stop referring to countries such as China and India as emerging markets because the term is patronising and does not reflect their true economic growth.
Arif Naqvi, founder and group chief executive of private equity specialist The Abraaj Group, told a conference in London it was "patronising" to talk about emerging markets in those terms.
He said: "China is a global powerhouse", whose influence is superceding even that of America, and it was no longer appropriate to badge it as an emerging economy.
"You should call such countries 'global growth', because that is what they are. This is an unalienable fact. It would be presumptive to keep referring to them as emerging markets", he told delegates at the FT's Sustainable Investing in Emerging Markets conference on 17th October.
There is no financial trade-off; there is a financial trade-on, in bringing benefits to bear in society as well as in the financial returns being delivered to investors. Arif NaqviMr Naqvi said while some investors may in the past have been concerned about a lack of transparency in emerging markets, this was fast becoming a thing of the past.
In fact, many have been keen to adopt good corporate governance and operating sustainable business models, which would make them a good long-term investment for investors.
He also said it was an imperative for companies to behave sustainably and to work to improve their environmental, social and governance issues, whether they were so-called emerging market companies or elsewhere.
"This is no longer a niche; it is very much mainstream. Global firms like Unilever and Safaricom in Kenya are increasingly beginning to understand that if you are putting ESG strategies to the fore, you will be very successful in future", Mr Naqvi said.
"There is no financial trade-off; there is a financial trade-on, in bringing benefits to bear in society as well as in the financial returns being delivered to investors."
Mr Navqi's point about the waning influence of the US and the growing influence of China was highlighted by Dr Mathew Burrows, director of Atlanta Council's Strategic Foresight Initiative, who showed that, over the next 12 years, the world in which we live will look vastly different.
While in 1990, the majority of countries were dependent on the US, in 2014, this had already shifted, with most countries dependent on China and fewer on the US.
Therefore, he said the possibility of a Chinese slowdown would have a wide impact across the globe in terms of economics. He highlighted this as one of the risks, as well as the possibility that accelerating climate change would lead to higher numbers of refugees and potentially more global instability.
He pointed out there was just a 10 per cent probability that, by 2035, that there would be global concord; in fact there was a 30 per cent probability of a "bi-polar cold war".
This point was picked up on during the panel debate, where Jane Nelson, senior fellow and director of the Corporate Responsibility Initiative at Harvard Kennedy School, said the fact 190 nations had agreed to the Sustainable Development Goals (SDGs) suggested there was some form of global concord already.
Shami Nissan, head of responsible investment for Actis, agreed the SDGs had been instrumental in driving more investor awareness of the need for investing along ESG lines, as well as encouraging companies in emerging markets to start operating along fairer, cleaner and more transparent lines.
She said: "This isn't some black box methodology", but there was a commercial reality that companies improving their ESG issues were showing strong value creation, which would translate into a higher exit premium for investors.
Fellow panellist John McKinley, director of impact investing at BlackRock, said it was not just private equity that would benefit from a rise in sustainable strategies, but also public equity, as investors increasingly demand impact and sustainable investment options.
He added: "There are a breadth of approaches to sustainable investing and it is important to articulate these different methodologies to investors and when creating portfolios."
Several speaker presentations will be viewable after the event, at www.live.ft.com.
simoney.kyriakou@ft.com
