'Misconceptions' holding back 'true impact' EM sustainable bonds

High-quality impact investment opportunities are being missed, Edmond de Rothschild's Lisa Turk tells Ahren Lester

Emerging market (EM) sustainable bond issuance hit a record in 2025, with $214 billion raised from almost 850 different issuers, according to Environmental Finance Data. This was a 36% increase on 2024 volumes, and represented more than a fifth of total global sustainable bond issuance.

Despite this, Edmond de Rothschild EM credit and climate bonds fund manager Lisa Turk tells Environmental Finance many investors are still missing out on the opportunities these issues provide for impactful, targeted investment.

Turk manages the sustainable bond focused Edmond de Rothschild EM Climate Bonds which was launched in 2023. The fund is 97% invested in labelled sustainable bonds – with 85% allocated to green bonds, 10% to sustainability bonds, and 2.1% to sustainability-linked bonds (see Table) – and around 40% is allocated to issuers from the United Arab Emirates (UAE), South Korea, and Chile.

The fund has seen robust growth in assets under management (AUM) since it was launched. Currently, the fund has around $78 million in AUM – up from $60 million at the end of 2025, and $48 million the year prior.

Turk tells Environmental Finance there is an expectation the fund will reach $100 million soon amid institutional investor interest. Nonetheless, she says the €107 billion ($125 billion) Swiss asset manager had anticipated the AUM growth to have been a little quicker to date.

Misconception headwind

Turk says the "biggest challenge" for the fund has been tackling the numerous "misconceptions" around EM sustainable bonds related to the quality and ambition of the 'green' investments and credit quality.

"There is still this misconception in investors' minds about EMs that they are not able to be green while they are in a developing state," she says. "But that is not true. Many countries are actually using sustainability to develop their countries. And they are leapfrogging old school, fossil fuel-related technologies and going directly towards cleaner ones. So, I think we tend to underestimate them a little bit."

Indeed, she says many EM countries are ahead of developed markets (DMs) in key sustainable finance areas – especially with regards to transition finance.

"For example, China is ahead in terms of solar panel technology and South Korea has very advanced financial [sector] sustainability criteria," she says. "In South Korea, when you look at their reports they are so detailed and so much more transparent than what we do here in Europe."

This also specifically impacts perceptions about green bond frameworks being developed by EM issuers, in particular an assumption that they "will not be as 'green' or fit into sustainability markets as well as developed markets".

Edmond de Rothschild EM Climate Bonds: Top 10 holdings (as of 31 March)

"Actually, a lot of sustainable finance frameworks in EMs are much stricter than in DMs," she says.

And this extends to post-issuance reporting as well: "Most of the time it is good quality [post-issuance] reporting," she says. "It is much better than one would think, and I think it is comparable to DM."

"Some companies are being very transparent," she adds. "They always give specific examples of the projects they are financing, not only giving the category. Sometimes they go really beyond what is only needed."

For example, she highlighted Brazilian paper and packaging firm Klabin, which provides highly detailed impact reports for its green bond issuance.

"And, if we do not have good information, we do engage a lot with the companies. And that is probably one strong point of emerging market companies – we are actually in direct contact with the management teams of these companies. And I am talking about big 'blue chip' companies here, not just small companies."

'True impact'

It is around this area that Turk argues EM sustainable bond investment really delivers impact for clients.

"The investor exchange is much more important for EM companies, which is also why we feel like we have a true impact when we talk with them," she says.

"They are still learning and they are much more in need of capital than in DMs, so they want to listen to what investors tell them."

As a result, she says that the entire EM investment story is "one of the best ways to have impact". In addition, EM investment is also a great way to "directly address" the global climate financing gap with "labelled bonds representing the perfect opportunity to bridge this gap".

Nor does investing in EM green bonds necessarily mean that you have to compromise on the sustainable technology opportunity deployed.

"To me, investing in green bonds means investing in next gen energy, next gen transport, and next gen industrial technologies," Turk says.

"And, here, China is very much advanced in anything that is renewables related. India has huge ambitions on the renewables front and supports companies a lot in the transition.

"There are also great examples of emerging countries, like Chile, that have done a 180-degree turn, going from coal-intensive economies to an economy where half of the country's electricity is now generated from renewable sources. And these huge sovereign shifts need private sector support. So, all these companies will be issuing on the green bond markets." 

Diverse, stable market

Turk adds that there is an additional misconception that EM sustainable bond investing means accepting higher credit risk.

"Actually, on the credit front there are also very stable markets – especially the investment grade (IG) part of the market," she says. "And this is not widely known."

What is more, the opportunity set for EM sustainable bond investment is expanding rapidly – providing a wide variety of diversification opportunities across issuers, countries and regions.

"We are above $1 trillion markets for EM sustainable bonds now," she says. "So, you can truly build a nice portfolio with nice diversification."

According to Environmental Finance Data, cumulative EM sustainable bond issuance is around $1.15 trillion. More than 70% of this is through green bonds, with a further 16% from sustainability bonds. Social and sustainability-linked bonds (SLBs) contribute an additional 12% of these volumes, split broadly equally between the labels.

Nonetheless, there are still opportunities for further diversification in the future – in particular, beyond the higher credit quality IG issuers.

"The labelled bond market [in EMs] is mainly investment grade, so it is higher quality companies that are issuing currently," she says. "We would love to see a little bit less developed issues come sometimes to the sustainability market as well."

'Huge possibility'

There are "improvements" being seen in this growing market, however – in particular, with some high-yield issuers coming to the market.

Turk hopes that this greater depth of EM sustainable bond issuers will also be followed by greater breadth of issuers by region, however. For example, she says it would be "nice" to see more issuance from Latin America and, in particular, sub-Saharan Africa.

"[African] banks have a huge possibility to do sustainability bonds," she says.

"Also, on the social side, the West African Development Bank – BOAD – has issued. And there are more agencies like that which could issue."

She also expects there to be opportunities for more technology, media, and telecommunications companies in the region to come to the market.

[Corrected return and benchmark in key facts table]

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