Investors call for improved ESG disclosure by companies in emerging markets

Environmental, social, and governance (ESG) disclosure by companies in emerging markets is becoming an increasingly important issue of concern to sustainability investors in the developed world. The Emerging Market Disclosure Project (EMD Project) is an initiative whose aim is to improve sustainability disclosure in emerging markets. Its organizing partners include Boston Common Asset Management, Calvert Investments, the International Finance Corporation (IFC), and the Social investment Forum (SIF). As part of the EMD Project, which focuses on promoting improved ESG disclosure by corporations operating in Brazil, India, South Korea, Russia, and South Africa, the project partners asked EIRIS, a research organization, to analyze the results of an investor survey to gain a better understanding of investment activities in emerging markets. The report analyzed the responses of 67 sustainability investors, mostly from North America and Europe, who manage over $130 billion of emerging market assets. Among the key findings of the report is that responsible investors, especially those located in Europe, already have extensive experience in investing in emerging markets, some for longer than six years. An impressive 70% of respondents reported that lack of good ESG disclosure hampered their efforts to increase their investments in emerging markets. According to the report, Brazil is making the most progress toward ESG disclosure. Investors cite two important developments in Brazil that allow the government there to pressure companies to improve transparency. First, the Bovespa Sustainability Index integrates sustainability into lending and investment in emerging markets. And second, the presence of local ESG investment research activity in Brazil provides vital information to potential investors from the developed world. Investors reported that South Africa, China, South Korea, and India were also making progress toward improved ESG disclosure. Among the companies cited by respondents as being their top holdings were Petrobras of Brazil, Samsung Electronics of South Korea, and China Mobile. The report concludes, "There is obviously a record of strong interest in emerging markets among responsible investors. But there is significant scope for improvements by companies in both the levels of disclosure and the quality and consistency of information provided."