Emerging markets: no (r)ESG, no fun

To be ready for take-off in emerging markets, a typical pension fund’s cruising altitude is up to 20% of assets invested there – provided these are managed in a sustainable manner to mitigate risks while improving returns. Add to that the fun factor of active management.

Our research shows that investing in accordance with ESG principles improves annual returns from emerging markets by 4.1 percentage points in unconstrained portfolios versus an improvement of 2.1 percentage points in global markets. We consider emerging-market equities and hard-currency bonds strategic investments, alongside more traditional benchmark components such as developed-market equities and bonds as well as cash.