As environmental, governance and social issues continue to sit high on the agenda, ESG and sustainability-related reforms are becoming increasingly important for countries across emerging markets (EM). Countries that implement these reforms are more likely to have sustainable economic growth, and in our view, these developments are likely to continue to gather momentum.
In our piece below, we highlight three areas where we have recently seen positive developments in relation to ESG reforms:
- India’s net-zero commitment (‘E’): Prime Minister Modi’s commitment at COP26 for India to reach a net-zero carbon emissions target by 2070, as well as a pledge for the country to obtain 50% of its energy from renewable resources by 2030, will likely give it a significant role in the global fight against climate change. A new model of economic development, with low-carbon energy sources at its core, will mean a call for increased climate finance commitments from developed nations.
- Improving gender diversity (‘S’): looking at gender diversity on boards of directors, the representation of women on boards across EM varies greatly but continues to show improvement, and as such, represents a positive trend. South Korea is an example of a country reforming its legislation to improve diversity, and we would expect similar reforms and regulation to be introduced in more EM countries going forward, which should help further improve the participation of women on boards.
- Increasing ESG disclosure by listed Chinese companies (‘G’): the level of ESG disclosure of Chinese A-share listed companies has continued to improve over the last five years. Although there is still significant room for improvement, in June 2022, the first China-focused ESG disclosure standard was introduced. The guidance is comprehensive and covers 118 ESG metrics across topics such as climate change, governance mechanisms and labour rights. We believe it is promising to see China increasingly focus on reforming its ESG disclosure.
By being aware of specific ESG-related risks and opportunities at a country level, we can address these matters with management of companies operating across emerging countries. No matter how well a company is run and how well ESG factors are managed, the operating environment of the country/countries in which a company operates will have an impact on its long-term returns and sustainability.
Which EM country stands out in terms of the number of director seats held by women*? Download our PDF here to find out.