A workshop with Scandinavian and international investors confirms the relevance of environmental, social and governance (ESG) issues for emerging markets investments
At the event, hosted by Mistra (the Foundation for Strategic Environmental Research) and moderated by onValues, leading institutional investors, asset managers, investment and academic researchers took an in-depth look at key ESG issues at the company and country level in emerging markets, priority areas for engagement with companies and ways in which academic research can support the work of practitioners. The discussions were based on the findings of the earlier ‹Who Cares Wins› event held on 5 July 2007 and were aimed at exploring the issues in more depth and integrating them in investment decisions. A selection of lessons-learned includes (a detailed workshop report will be made available shortly):
- Corporate governance at the company level was seen as the best starting point for integrating ESG issues in emerging markets investments, because of its usefulness as a proxy for overall management quality – not just in dealing with risks but also with opportunitie
- The importance of visiting companies and being able to contextualise ESG information was stressed. Where the investor (or an agent acting on his behalf) is not able to meet directly with companies, the only ESG research likely to add value was found to be basic corporate governance work and checking for major breaches of international norms
- Other important ESG issues highlighted were rising costs and shortages of energy and water (both a source of risks and opportunities)
- Quality of disclosure on ESG issues (particularly voluntary disclosure that goes beyond legal requirements) was seen as a proxy for the company's willingness to be transparent and treat all investors fairly, and for overall management quality
- In conclusion, workshop participants also stressed investors’ increasing exposure to ESG issues in emerging markets through their investments in multinational companies with growing production and sales volumes in those markets.