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In the ever-evolving landscape of global finance, a new wave of promising investment opportunities is emerging beyond the traditional powerhouses of China and India. Latin American countries such as Chile and Brazil, Southeast Asian nations like the Philippines and Indonesia, and African markets including Zambia, along with select Eastern European countries, are capturing the attention of investors seeking added value through Environmental, Social, and Governance (ESG) investments.
These markets are driving ESG-linked infrastructure investments, with an acceleration in green bonds and sustainability-linked debt instruments, notably in Chile and Zambia. The commitment to sustainable infrastructure is further bolstered by supportive regulatory and policy frameworks, often influenced by the G-20’s focus on integrating ESG criteria into debt restructuring and climate finance. This trend is particularly evident in the Philippines and Indonesia.
Moreover, these markets are undergoing green agenda advancements. For instance, Brazil's regional ESG financing is being propelled by government initiatives. Despite challenges such as reactive investor behavior and limited data transparency, ongoing improvements and tailored strategies continue to enhance ESG investment value.
The appeal of these emerging markets lies in their commitment to sustainable infrastructure, regulatory momentum around ESG standards, innovative financing mechanisms like green bonds, and opportunities linked to climate adaptation solutions projected to expand significantly by 2050 across both established and emerging technologies.
The MSCI Emerging Markets Index covers approximately 90 percent of these markets, and many family-owned companies in these regions tend to outperform the overall market. The MSCI Emerging Markets Socially Responsible Investing (SRI) Index offers higher returns and is less susceptible to market fluctuations compared to most emerging market indices.
As ESG criteria increasingly become a consideration for emerging markets, fund management teams engage with these companies on a case-by-case basis to support their ESG progress. Direct interaction with companies is crucial to obtain essential data from them and support them in improving their ESG practices.
Our in-house model for responsible investing draws on over 3 billion data points, an increase from 250 million, to ensure comprehensive analysis. Data availability in emerging markets is still lower than in established markets, but corporate disclosure is increasing rapidly due to pressure from governments and institutional investors like sovereign wealth funds.
Opportunities abound in renewable energy, particularly in countries like China and India, which are making progress in this sector. Fintech is a particularly promising investment area, with Chinese payment services Alipay and Tenpay, as well as StoneCo and PagSeguro in Brazil, being notable players.
With a highly skilled team and the right tools, we believe that we can create the conditions to drive change within companies. While family-owned companies may not always exhibit strong corporate governance, the interests of owners often align with those of investors, supporting sustainable, continuous growth and reducing risks.
In conclusion, the future of ESG investments seems bright in these emerging markets. With their commitment to sustainable infrastructure, supportive regulatory frameworks, and innovative financing mechanisms, these markets offer a unique blend of potential and resilience. As these markets continue to evolve, now is the time to invest in an ESG strategy in these growing economies.
- Other promising investment opportunities beyond the traditional powerhouses of China and India are emerging in the fields of environmental science, technology, and lifestyle, as countries like Chile and Zambia are driving ESG-linked infrastructure investments with an emphasis on green bonds and sustainability-linked debt instruments.
- As the MSCI Emerging Markets Index covers approximately 90 percent of these markets, investors seeking ESG investments can find higher returns and less market volatility by focusing on the MSCI Emerging Markets Socially Responsible Investing (SRI) Index, which favors family-owned companies in emerging markets that often outperform the overall market.
- Fintech is a particularly attractive investment area in emerging markets, with Chinese payment services Alipay and Tenpay, as well as StoneCo and PagSeguro in Brazil, serving as notable players in this sector. Furthermore, opportunities linked to climate adaptation solutions are projected to expand significantly by 2050 across both established and emerging technologies, offering additional investment potential in these growing economies.
