Swiftly expand and eco-friendly progress through our website

Swiftly expand and eco-friendly progress through our website

In the ever-evolving world of investment, the focus on Environmental, Social, and Governance (ESG) factors is growing, and it's not just limited to the giants of China and India. Emerging markets in Southeast Asia, Latin America, Africa, and Eastern Europe are making a mark, offering added value for those seeking sustainable growth.

The dynamic development of these regions suggests that now is an opportune time to invest with an ESG strategy in these growing economies. The MSCI Emerging Markets Socially Responsible Investing (SRI) Index, for instance, is less susceptible to market fluctuations and provides higher returns than most emerging market indices.

Southeast Asia, with its rapid economic growth and environmental vulnerabilities, is a critical region for climate-transition investments, renewable energy, and sustainable infrastructure financing. Behavioral finance studies highlight investor interest driven by socio-cultural factors unique to this region.

Latin America, rich in natural resources and biodiversity, benefits from increasing biodiversity finance and sustainable bonds issuance. These finance mechanisms help address ecosystem protection, a growing trend in global sustainable investing.

Africa, with increasing regulatory engagement and digital platform adoption, offers opportunities particularly in green energy investments and community development projects aligned with social and governance criteria.

In Eastern Europe, ESG standards are gradually integrating under tightening European regulations, focusing on sustainable corporate governance and environmental policies. This region benefits from Europe’s push against greenwashing and towards net-zero targets.

Sustainable bonds funding projects with strong ESG factors are expected to exceed $1 trillion issuance in 2025 globally, impacting emerging markets covering these regions. The rise of climate-transition investing, targeting companies reducing carbon emissions, is also critical in emerging economies dependent on fossil fuels but seeking cleaner alternatives.

The adoption of Artificial Intelligence (AI) to improve ESG data quality while managing associated ESG risks is on the rise, enhancing investment decision making in these markets.

While China and India dominate emerging market ESG narratives due to their large scale, these other emerging markets stand out for their specific environmental and social challenges, combined with evolving governance standards that create niches for impactful ESG investments. Long-term value comes from addressing local nuances and regulatory progression, which aligns well with global sustainable finance trends.

Collaboration with companies can lead to a double win: ESG enhancement and financial performance improvement. Our asset management team, among the leading in the field of responsible investing, is developing a platform that relies on over 3 billion data points, covering approximately 90 percent of the MSCI Emerging Markets Index. We believe that with a highly skilled team and the right tools, changes can be driven within companies in emerging markets. Our fund management team engages with these companies to support their ESG progress on a case-by-case basis.

In the case of India, the government has set a target to generate over half (57 percent) of its energy from renewable sources such as wind and solar by 2027. Fintech is a particularly promising investment area, with China's Alipay and Tenpay, and Brazil's StoneCo and PagSeguro being notable players.

Considering ESG criteria is increasingly common in emerging markets, making it a significant investment focus. Over time, ESG progress may occur in companies that did not initially meet ESG criteria.

In conclusion, the world of ESG investing is expanding beyond the traditional powerhouses of China and India. The emerging markets of Southeast Asia, Latin America, Africa, and Eastern Europe present a wealth of opportunities for those seeking sustainable, long-term growth. With the right approach and tools, these markets can deliver significant returns while contributing to a more sustainable global economy.

1. The MSCI Emerging Markets Socially Responsible Investing (SRI) Index, which is less susceptible to market fluctuations and provides higher returns than most emerging market indices, is especially relevant for Southeast Asia, a critical region for climate-transition investments, renewable energy, and sustainable infrastructure financing.
2. Africa, with increasing regulatory engagement and digital platform adoption, offers opportunities particularly in green energy investments and community development projects aligned with social and governance criteria, and is expected to experience growth in sustainable bonds issuance.
3. In Eastern Europe, ESG standards are gradually integrating under tightening European regulations, focusing on sustainable corporate governance and environmental policies, creating opportunities for impactful ESG investments that align with global sustainable finance trends.

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