Sustainable investing in emerging markets?

July 15, 2010

jumpEmerging markets may not be the obvious destination for your ethical investment. Rapidly expanding economies are consuming a lot of energy, pumping CO2 in return. Many of these markets suffer from legal and political problems that keep investors on their guard.  BRIC legal systems have room for development.  Their financial disclosure is still patchy. 

However, BNP Paribas sees opportunities as it believes fast growth in these markets and increased inflows would create the need for a socially sustainable environment for investment.

“Our analysis has unearthed a number of particularly promising sustainable investment strategies in emerging markets. In each of these cases we see a real economic need linked to maintaining high growth rates, but also evidence that policymakers are recognising this need and are putting in place the necessary policy measures to facilitate this development,” the French bank said in its latest Sustainable and Responsible Investment (SRI) newsletter.

In other words, emerging market expansion creates growing environmental problems and thus a desire from emerging market economies for sustainable investments.

Emerging market countries are also most vulnerable geographically to climate change, said the bank.  It’s targetting its investment in industries including education, water, waste, mobile phone banking, microfinance and clean transport.  Among others, it likes Nine Dragons, a Chinese waste paper company and SABSEP, a Brazilian state owned sewage and water utility.

All of which makes sense.   If there’s any place where people would benefit greatly from SRI, it’s probably emerging markets. SRI, as the name suggests, targets ethical investments, evaluating them through environmental, social and governance criteria (ESG).   With the global downturn, the world has now turned to emerging markets, namely the BRIC economies – Brazil, Russia, India and China – which Goldman Sachs predicts will be the biggest economies alongside the United States in 2050. 

But if emerging economies were to attract more SRI investment, they must do a lot more. Some 70 percent of investors surveyed in 2009 by the Social Investment Forum, a US non-profit association for SRI professionals, saw the lack of corporate ESG disclosure there as their biggest concern. 

(Reporting by Eunice Ng)


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So i shall invest in industries including education, water, waste, mobile phone banking, microfinance and clean transport in China.

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Concerning efforts to confront climate change, microfinance emerges as an important sector with a unique ability to help those who are the most vulnerable. For more information on what microfinance institutions can and are doing to curb global warming and assisting the poor to adapt to a changing environment, I would direct you to the paper Climate Change and Microfinance. Published in November 2009 by Asif Dowla, a professor of economics at St. Mary’s College of Maryland, the paper addresses the dangers presented by climate change to the poor and the tools that microfinance institutions can implement to help their clients. These tools range from disaster plans to weather insurance and are geared towards enabling the poor to continue to move out of poverty in the face of global warming.
With the goal of socially and environmentally sustainable economic development, microfinance institutions, at their base, help the world’s poorest by providing them with the capital they need to create a steady income for themselves. Looking forward to an uncertain future, the services that they offer and the relationships that microfinance institutions have built with their clients have become even more important. Through innovation and the expansion of their services microfinance institutions can remain sustainable while helping their clients move out of poverty.


Remy Olson
Grameen Foundation

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