ESG in emerging markets
Emerging market companies can profit from man- aging ESG issues well, especially where governance is concerned.
Marta Jankovic, BlackRock
“Some voices in the market would question the impact index fund managers can have, given that they cannot sell their holdings. However, it is also because we cannot sell that we are so committed to stewardship activities.” Engagement is not the only part of this. “Voting is part and parcel of stewardship and is a form of engagement mecha- nism for providing feedback to companies on investors’ per- ceptions of company performance,” Jankovic says. BlackRock could vote against management teams that are not making progress on issues such as managing climate risk or adopting high standards of transparency, for example.
Changing times Awareness of ESG appears to be moving in the right direc- tion. For Langridge, the trend is clear. “Over the past 20 years, there have been material improvements in corporate govern- ance, transparency, engagement, openness and in under- standing environmental and social risks. “Companies are realising that they will attract a higher valua- tion and have better access to capital as a result,” she adds. So the message is getting through to emerging market corpo- rates and governments about the need to manage sustainabil- ity risks thanks largely to pressure from international inves- tors and, in places, the changing attitudes of its citizens and customers. Burger summarises the main point that I have discovered in researching this article that when it comes to managing envi- ronmental, social and governance risk in the developing world: “Emerging-market companies are not all perfect, but neither are all developed-market companies.”
BlackRock has an active stewardship approach that seeks to drive long-term change within companies because the firm takes a patient capital perspective on the companies in its funds. “Our commitment can go beyond the tenure of the current board or management of a company and so we work to encourage practices that enhance sustainability and ulti- mately investment performance. ³
1) Projected growth. BlackRock projection, April 2020, based on Morningstar data, as of March 2020. Subject to change. The figures are for illustrative purposes only and there is no guarantee the projections will come to pass. 2) Source: BlackRock as of July 17, 2020. 3)Source: BlackRock Investment Stewardship as of July 24, 2020.
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Issue 95 | August 2020 | portfolio institutional | 35
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