IFC-Mercer Report Shows Sustainable Investment is Rising in Emerging Markets: Report reveals first ESG rating for fund managers in emerging markets.
In Washington, D.C:
Susan Holleran, IFC
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In New York:
Bruce Lee, Mercer
phone: +1 212 345 0553
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Washington, D.C., March 31, 2009—Fund managers in emerging markets are increasingly considering environmental, social, and corporate governance (ESG) factors in their investment decisions, according to new research conducted by the global consulting firm Mercer and commissioned by IFC, a member of the World Bank Group.
The research suggests that sustainable investment assets under management in emerging markets have grown to over $300 billion—or nearly 10 percent of total investment in emerging markets in 2008.
Slightly more than $50 billion of assets identified represent funds labeled as sustainable investment, with the remainder reflecting mainstream institutional funds committed to integrating ESG within core investment processes.
The IFC-Mercer report also produced the first rating on ESG practices of fund managers in China, India, South Korea, and Brazil, identifying best-practice examples to pre-empt ESG risks and enhance returns.
The project included a survey of 514 equity managers from around the globe, of which 177 managers invest in emerging markets. It also included 40 face-to-face interviews with investment teams in China, India, South Korea, and Brazil, and an additional 10 interviews with managers globally who have sustainable investment strategies in emerging markets. Nearly half (46 percent) of global managers with investments in emerging markets state they are likely to integrate ESG into their investment processes, compared with 34 percent of all managers.
“The research found pockets of innovation, with many local fund managers in emerging markets having deeper knowledge and understanding of social issues than their global counterparts,” said Danyelle Guyatt, Head of Research at Mercer’s Responsible Investment unit. “However, there is also potential for improvement in practices, particularly in the utilization of active ownership tools such as voting and engagement”.
Greg Radford, IFC’s Director of Environment & Social Development, said: “At IFC we believe that mobilizing sustainable capital flows into emerging markets will shore up those economies and ultimately relieve the burden of poverty. That’s why we’ve supported sustainable investment initiatives in the financial industry since 2002. Good progress has been made, but there’s more to be done. During this financial crisis, investors may be tempted to think of environment, social and governance issues as tomorrow’s problem. Failure to act will not only undermine the progress to-date on ESG investment-decision integration, but will profoundly impact financial markets overall.”
The survey was sponsored by IFC, in partnership with the Netherlands, Norway, Luxembourg, Italy and New Zealand.
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For more information, visit www.ifc.org.
Mercer LLC is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement, and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. Mercer’s specialist global Responsible Investment business unit works with investment fiduciaries around the world to implement responsible investment programs, offering a range of services – from policy development to manager selection and monitoring. For more information, visit www.mercer.com/ri.