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In the dynamic world of investing, stewardship has emerged as a key principle in sustainable investing, particularly in emerging markets. Fund managers view stewardship as the responsibility to preserve and grow clients' wealth, while ensuring sustainable growth of the portfolio without negatively impacting other stakeholders.
Stewardship encourages companies to invest in sustainable development and adapt to climate and technological disruptions, which is essential for their future relevance and competitiveness. Through constructive engagement, investors influence companies to improve their Environmental, Social, and Governance (ESG) performance and align with sustainable development goals.
This collaborative approach extends to emerging market debt, where stewardship promotes sustainable practices that improve borrowers' long-term creditworthiness and reduce risks.
Stewardship also helps overcome challenges unique to emerging markets, such as less mature regulatory environments or limited ESG disclosure, by providing active oversight and tailored engagement. This often involves the use of proprietary ESG data to better assess risks.
The corporate world, including sectors like video games, social media, and renewable energy, presents complex issues and potential benefits. Each sector, in its own way, is influenced by stewardship, fostering long-term value creation, supporting innovation and growth, and ultimately contributing to both social and financial outcomes.
However, it's important to note that investors in emerging markets often have to make compromises. Exclusion criteria and precise control or redirection of investment capital are used to get closer to desired social and ecological goals.
The market is demanding more disclosures from companies, with many initially voluntary but likely to become mandatory over time. Bridging the funding gap for the United Nations' Sustainable Development Goals (SDGs) in emerging markets requires the active involvement of private capital.
Political decision-makers are advocating for governance and stewardship, influenced by various stakeholder groups and both domestic and international investors. It's crucial to remember that the document is intended for general information purposes only and should not be construed as personal investment advice, a recommendation, or solicitation for the purchase or sale of any security or to adopt any investment strategy.
In conclusion, stewardship in sustainable investing in emerging markets shifts from a passive or purely regulatory role towards becoming a collaborative partnership that empowers companies to invest sustainably, supports innovation and growth, and ultimately contributes to both social and financial outcomes. This approach contrasts with rigid regulatory frameworks that may inadvertently stifle investment in sustainable opportunities by forcing tick-box compliance rather than fostering meaningful engagement and accountability.
- Economic and social policy should include a focus on the promotion of stewardship in sustainable investing, particularly in emerging markets, to encourage companies to invest in environmental-science, technology, and sustainable development.
- Fund managers can use their stewardship roles to influence companies to improve their Environmental, Social, and Governance (ESG) performance, aligning with sustainable development goals and advancing in science and technology.
- Investors adopting stewardship principles in emerging markets may need to make compromises by using exclusion criteria and precise control or redirection of investment capital to achieve desired social and ecological goals.
- The increasing demand for ESG disclosures, driven by both private capital and political decision-makers, is helping to bridge the funding gap for United Nations' Sustainable Development Goals (SDGs) in emerging markets, promoting business growth and financial outcomes while addressing environmental and social issues.
