Emerging Markets Disclosure Project

The Emerging Market Disclosure Project (EMDP), an international initiative led by representatives from Boston Common Asset Management, Calvert Investments, US SIF and US SIF's International Working Group (IWG), has been working since 2008 to assess and improve corporate environmental, social and governance (ESG or sustainability) reporting in emerging markets.  The group, which has benefited from technical advisory support from the United Nations Principles for Responsible Investment (UNPRI), has conducted several baseline studies, engaged companies and won important victories on ESG reporting along the way.

Global providers of ESG data largely do not offer information about companies listed in emerging markets, and local research organizations generally do not have the capacity to offer these types of products to investors, at least not on a global scale that offers comparability between markets.  Yet, investors are beginning to offer socially responsible investment (SRI) funds with emerging markets equities, and many more are exploring the possibilities for creating SRI products in this area.  The prospect for SRI emerging markets funds to grow holds great promise to improve corporate transparency and ESG performance in these economies.  However, without the right research and tools, these developments are less likely.

The EMDP and its partners set out to tackle this problem in three work streams.  The first focuses on assessing ESG disclosure trends, and the second seeks to demonstrate investor support for greater ESG disclosure among emerging market companies.  The third encompasses the project partners' efforts to execute outreach and engagement strategies with corporations and local stakeholders operating in Brazil, India, Indonesia, South Africa and South Korea to promote greater disclosure of sustainability factors.

As part of the first work stream, EMDP participants collected benchmark data on sustainability reporting in the emerging markets where the project would be active.  The EMDP in collaboration with US SIF member KLD (now a part of MSCI) published the first study, Sustainability Reporting in Emerging Markets: An analysis of the sustainability reporting in selected sectors of seven emerging market countries, in January 2008.  It was followed by a second report, A Review of ESG Practices in Large Emerging Market Companies,coauthored by EIRIS and US SIF in March 2009.  Both reports found that, while a significant number of emerging market companies have begun to report on ESG issues, the practice is not yet widespread, and most reports do not conform to a global standard, such as the GRI reporting guidelines.  (Click here for a full list of EMDP reports.) 

As part of the second work stream, participants created a sign-on statement for investors to declare their support for emerging market companies issuing sustainability reports using the Global Reporting Initiative's reporting guidelines.  (For more information on GRI, see www.globalreporting.org.) The EMDP investment statement affirms that corporate disclosure of ESG performance helps investors mitigate portfolio risk and determine which companies are best positioned to deliver potentially strong long-term investment performance. The EMDP launched the sign-on statement in June 2008 and renewed its call in March 2010, and to date investors with more than $1 trillion in assets under management, including a growing number in emerging markets, have signed onto the statement. The world's largest ESG research providers, as well as a long list of trade associations and civil society organizations also have endorsed the statement.(Click here to view the letter and list of signatories.)

In March 2009, the EMDP distributed an emerging markets survey to UN PRI and US SIF members, as well as other global partners. The survey assessed the level of investment in emerging markets by socially responsible investors and the ESG issues that interested these sustainable investors most. Lead author EIRIS and other EMDP partners debuted the resulting report, Emerging Markets Investor Survey Report: An analysis of responsible investment in Emerging Markets at the Responsible Investor conference in June 2009. One key finding of the survey was that seven out of ten major asset managers and institutional investors collectively representing $130 billion of emerging market investments cited lack of ESG disclosure as the key challenge to investing in emerging markets.  Survey respondents also commended two emerging market countries—Brazil and South Africa—for having made the most progress towards greater ESG disclosure.

Leading up to the beginning of the third work stream, the EMDP formed teams in Brazil, India, Indonesia, South Africa and South Korea, and each country team has submitted work plans to the EMDP with an emphasis of working with local partners in those markets. The EMDP also has created a scorecard to assess corporate performance that each country team will use to evaluate companies and measure progress. (Click here to read more about the country teams) 

If you're interested in getting involved in the EMDP, please contact US SIF Assistant Director Sylvia Panek - spanek(at)ussif.org, EMDP Co-chair Lauren Compere, of Boston Common Asset Management, at lcompere(at)bostoncommonasset.com or EMDP Co-chair Mike Lombardo, of Calvert Investments, at mike.lombardo(at)calvert.com.