“Emerging market debt investors wary of ESG analysis” – Asia Asset Management – April 17, 2018

On April 17, 2018 Asia Asset Management covered a report published by BNY Mellon on April 12, 2018 entitled, “Debunking the ESG Myths in Emerging Market Debt.”

According to the report, “(d)espite the clear benefits of ESG analysis, its adoption by EMD investors has been lacking. Investors mistakenly see ESG and EMD as incompatible.”

The report “highlights two common misconceptions, including the fact that governance standards of companies in emerging markets are perceived to be much lower than in developed markets. Analysing the companies is also seen as ‘prohibitively challenging’ because of poor data quality and difficulty in obtaining data.

But BNY Mellon argues that in some sectors, ESG ratings of similar-sized companies from the same industry in both emerging and developed markets are actually closer than what investors might expect.

‘For the financial; technology, media and telecommunications; and oil and gas sectors, emerging market corporate issuers compare very favourably to US corporates’, it says.

As for the availability of data, the report points out that data providers ‘only cover a limited portion of the universe.’

‘This does not, however, render it impossible to conduct an ESG analysis for emerging market corporates. Investors need to perform their own ESG legwork and should not blindly outsource their ESG analysis.,’ it says.”

You may read the article on the Asia Asset Management internet site.