Talking Point  

Emerging markets’ ESG scores do not 'reflect reality'

Da Costa-Bulthuis also cites the Sustainable Development Goals as another investment opportunity in emerging markets. “We believe that investing in sectors that provide basic needs and reduce the inequalities in emerging markets is a good way to impact and promote the achievement of the SDGs.

“Good examples would be investing in infrastructure, sanitation services and hygiene products, banking focused on low income and SME financing, education and healthcare providers.”

James Johnstone, co-head of the emerging and frontier markets team at Redwheel, likewise says that several of its investment themes align with the SDGs.

“One of the team’s core themes, financial inclusion, focuses on promoting access to financial services to millions of unbanked, low income and otherwise disadvantaged parts of the population in emerging and frontier markets.

“The team invests in banks that work with governments to promote affordable housing, fund women in business and support SMEs run by ethnic minorities in rural areas. This is where the team sees tremendous opportunity from both investment and equality, diversity and inclusion perspectives.”

Cook at Axa Investment Managers also sees opportunities in green bond issuance from a number of emerging market countries.

“The rise of sustainability in emerging markets is clearly reflected in the growth in the sustainable bond market. In 2020 there was $40bn of green bond issuance in emerging markets, with a further $260bn expected by the end of next year.

“As the green bond market continues to grow, there will be significant opportunities for investors to finance the transition to a greener and more sustainable approach in emerging market countries.”

Chloe Cheung is a senior features writer at FTAdviser