Totally forgot about this question I had posted to the FT’s Ask the expert column of a few weeks ago answered by Ousmène Mandeng, head of public sector investment advisory at Ashmore Investment Management. He was also a deputy division chief at the International Monetary Fund.
Will lower global growth mean that non-financial, or Environmental, Social and Governance [ESG] performance will become more embedded into emerging markets and will demonstrate regional traits? For example, will companies operating in Brazil need to demonstrate greater attention to ESG housekeeping as well as long term commitments to issues such as Amazon conservation?
Jimmy Greer, London
OM: Emerging markets have an upmost interest in upholding environmental, social and governance criteria.
Peer pressure through regional affiliations could exert regional trends in strict ESG adoption. The risk is as well, though, that ESG will be used in a slower growing international economy as a form of non-tariff protectionism or administrative barrier of entry.
In our view, this must be avoided.
Link to all the questions answered here
The response echoes my biggest concern about raising barrier to entry in regions where diversification of growth requires new participants not a concentration of wealth by established big players.
This was a key finding of my 2008 MSc thesis which explored the impact of SRI on economic development in Brazil. SRI funds I looked at followed the indices and were made up of the biggest companies -who were also the country’s sustainability leaders.
How to avert ESG becoming a non-tariff protectionism or administrative barrier to entry?
Im not too sure but I would say that the key has got to be building up regional institutional capacity to allow countries to set their own frameworks and guidelines.
In many ways this is already happening in Brazil.
The PRI has a regional group there and the WRI is putting together a national GHG index for the country. All good, but are we still just talking about voluntary initiatives (and their limitations)?
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