“Solid Emerging-Markets Funds With High Sustainability Ratings” – Morningstar – July 21, 2016

On July 21, 2016 Jon Hale, Ph.D., CFA, head of sustainability research for Morningstar, published an analysis of emerging markets funds with a high Morningstar sustainability rating.  The article includes a list of 24 emerging market funds that carry a Morningstar sustainability rating of high.  A chart lists these 24 fund and notes teach fund’s Morningstar rating, Morningstar analyst rating, and those funds with a high or above average governance score.

Until very recently, conventional wisdom held that socially responsible investment (SRI) was challenging, if not impossible, in emerging markets due emerging markets companies’ poor environmental, social and governance performance.  Indeed, the first comment posted to the article states exactly this position.

The article demonstrates that in current imperfect market conditions, it impossible to apply ESG metrics to select emerging market companies and funds that perform well on financial as well as these extra-financial parameters.  A lack of ESG data about many emerging market companies remains a challenge.  Investor pressure for better disclosure and better performance will help – on a company level and broadly.  Furthermore, the dimension of the Volkswagen scandal should caution against generalizing about the rarified nature of ESG disclosures in developed markets.

You may read the article on the Morningstar internet site.