New York – There is no question that environmental concerns have hit the political radar screen in the US and in Europe. Now there are signs that this interest is reaching the emerging markets as well. In the equity research industry, the application of these concerns has been around for many years. Initially, this type of research was termed SRI or Socially Responsible Investing. Currently, the term has expanded to ESG or Environmental, Social, Governance. By any standard, this is a growth industry. A case in point is a headline from the Korean Press Release Corp (Newswire) which discusses the introduction of ESG research in the emerging markets.
The article states that “For the first time fund managers in emerging markets will be rated based on their capacity to incorporate ESG factors into their investment decisions…” The ratings will be done by The International Finance Company (IFC), a branch of the World Bank. These rating will eventually affect investment manager’s ratings in Brazil, China, India and South Korea.
To establish the benchmarks, Mercer is conducting a survey of managers in the emerging market countries and those that invest in emerging markets, to raise the awareness of sustainable investing in the emerging markets among investors.
One indication of demand for ESG research is a survey conducted previously by The Economist Intelligence Unit and the IFC that indicates that 80% of asset managers that currently do not incorporate ESG factors into their investment decisions, plan to do over the next 3 years. While we would suggest that this is a leading question, the result is never the less remarkable in its implications for ESG research and data over the near term.
Integrity has 25 research firms in its database whose primary research methodology in ESG analysis. We acknowledge that there are many other research firms that use ESG measures in their analysis. Still we would characterize the space as under developed and ripe for rapid expansion as government interest and public awareness appear to be growing exponentially.