“Ethical investors tightening screws on emerging-market debt issuers” – Reuters – December 18, 2017

On December 18, 2017 Reuters reported that environmental disasters (like the 2015 accident at Vale’s Samarco mine in Brazil) “are increasingly spurring fund managers to look closer at environmental, social and governance (ESG) risks before investing in emerging markets, where polluting industries and accounting issues have often gone unpunished.”

The article quotes Karine Jesiolowski, senior investment specialist for EM debt at Swiss asset manager UBP as follows: “As investors become increasingly ESG-minded, a company that isn’t making any efforts in terms of ESG will have fewer investors willing to lend them money, so longer term, their cost of funding will increase.”

Balancing the equation, the article notes that “not everyone is convinced that using ESG criteria can help generate excess returns for debt investors.”

However, another fund manager, Roy Scheepe, senior client portfolio manager at NN Investment Partners, explains that there is a clear direction towards incorporation of ESG analysis into the investment process.  “There is always a group with very high standards, and that has helped raise the minimum level for all,” he said. “The bar is higher than it was five to 10 years ago, and I expect that to continue.”

You may read the article on the Reuters internet site.