Uncut gems: The evolution of ESG in EM sovereign debt

Sustainability. We mean it.

Insight

16 May 2023 |

Active ESG

There are few asset classes upon which ESG factors have a more visible and profound impact on financial outcomes than in emerging market sovereign debt. However, effective ESG integration in the space remains inconsistent.

EMD Q2 report 2023

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The lack of a systematic means of integrating ESG factors into the processes that underpin EM sovereign debt investment has led to a widespread overdependence on exclusions and quantitative data – which is often backwards looking – and typically fails to reflect the realities on the ground.
In this paper, we look at challenges EM sovereign debt investors face and outline our progress in integrating ESG factors into our portfolios. Our process, as we explain, seeks to move beyond the industry’s overdependence on quantitative data and exclusions, employing a forward-looking approach that targets mispriced risks and improving fundamentals.

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