Emerging markets lag on sustainability – EIRIS

London, 28 September: Companies in emerging markets trail their developed world peers on sustainability, but some do present opportunities for responsible investment, according to a report by Ethical Investment Research Services (EIRIS).

Broadening the horizons for responsible investment surveyed the public disclosures of 50 major emerging market companies, and found that most are making some efforts to address environmental, social and governance issues.

But, while the report finds that possibilities exist for "diversification and risk management for investors as well as wider potential gains for sustainability", it also shows that emerging markets are yet to fully embrace corporate social responsibility (CSR).

Only 15 of the 50 companies included in the report achieved a rating of more than five out of 10 on environmental issues.

And the average score for a chemicals company in emerging markets is 1.6 out of 10, compared with 7.7 in developed markets. But in other sectors the difference is less pronounced. Emerging markets banks scored an average of 5.2, while banks in developed markets scored 6.5.

Some high impact industries, such as metals, oil and gas producers and mining, scored surprisingly well in the study. Companies making serious efforts to address CSR issues include South African chemicals firm Sasol, Korean steel giant POSCO and China Steel. "Others are perhaps either complacent or have not faced sufficient social pressures to address their environmental impacts," the report says.

EIRIS also found wide-ranging differences between countries. "Whilst South Africa appears notably ahead of other emerging markets, some countries have yet to produce evidence of companies embracing CSR and addressing sustainability issues in a substantial way e.g. China, although commentators expect this to change," the report says.

"Other countries may show positive signs in some spheres but lag behind in others. For instance, Taiwanese companies received poor governance scores, yet a number of them showed evidence of 'good' environmental practices."

In addition, EIRIS scored companies on their corporate governance performance, including adherence to core governance principles, the number of women on their boards and the quality of their social, environmental and ethical risk management.