An emerging markets (EM) investment study conducted by Zurich-based asset management firm Vontobel found that virtually all institutional investors in Europe, and the vast majority of investors globally, now take ESG considerations into account in making EM investment decisions. Many report, however, that a lack of quality ESG data makes EM investing challenging.
Vontobel’s surveyed 300 institutional investors and discretionary wealth managers globally in Europe, North America and Asia-Pacific in the second quarter of 2020. The results of the study indicate that ESG has emerged rapidly as a significant investment theme for global investors. In Europe, 99% of respondents reported taking ESG factors into consideration, when making decisions about emerging market asset allocation and stock selection, with 60% stating that it influences the decision to a great extent.. Not far behind, only 5% of North American and 7% of APAC investors stating that ESG considerations play no part in their EM asset allocation.
On the disclosure front, 52% of European investors said that clients, policyholders, scheme members and other stakeholders will increasingly demand they report on ESG issues in relation to their emerging market allocations, yet 58% stated that accessing good quality information on ESG in emerging markets is more difficult than in developed markets.
Sheridan Bowers, Head of UK and Ireland at Vontobel, said:
“ESG is a valuable risk management tool in emerging-market equity investing. Many studies have proven that there is a higher dispersion in ESG performance in EM than in DM companies which lays the foundation for the value-add of ESG analysis by identifying and excluding ESG laggards to the benefit of portfolio performance.”