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.
«Emerging markets investments: do environmental, social and governance issues matter?»
The Swiss market for ESG-inclusive investments continues to show strong growth, according to a biannual market survey produced by onValues. Swiss assets (including funds, mandates and structured products) that are managed with the explicit inclusion of environmental, social and governance issues totalled approximately CHF 25 billion at the end of the first half of 2007. This represents an increase of 39% relative to the volume per end of 2006, and a doubling of ESG-inclusive assets in the past 12 months. Interesting trends observed are the increasing share of private client investments and the strong growth of new products with a focus in sustainable themes such as climate change, water and alternative energy.
Press release (in German)
This was the topic of the fourth annual Who Cares Wins event which brought together more than 80 investment professionals from leading asset owners, asset managers, investment research and consulting institutions. It took place on 5 July 2007 in Geneva and was facilitated by onValues on behalf of the Federal Department of Foreign Affairs, the International Finance Corporation and the UN Global Compact. The goals of the event were to 1) assess the importance of environmental, social and governance (ESG) issues in emerging markets investments; 2) showcase and reinforce best-practice in the consideration of ESG issues in asset management and investment research; 3) identify opportunities for future developments and collaboration in this area.
New Frontiers in Emerging Markets Investment
The Enhanced Analytics Initiative (EAI), an alliance of asset owners and managers who collectively represent more than 1.9 trillion (US$ 2.6 trillion) in assets, commissioned onValues to produce a case study of the quality of investment research on mergers and acquisitions (M&A). The study investigated whether research providers covering M&A transactions are addressing the full range of issues that may be material to long-term investors. Depending on the type of M&A activity, these issues might include the impact of combining different corporate governance regimes and corporate cultures, the role of management, potential impacts on intangible assets, and environmental liabilities acquired in a transaction. The study's main conclusions are presented in the public summary report below
Summary report on EAI case study