Friday, March 6, 2009

Corporate responsibility gaining ground in developing economies

It’s safe to say environmental, social and governance issues haven’t been viewed as a priority in the developing world. But there are signs of progress, according to a review of ESG practices at 40 major companies in ten emerging markets conducted by the Sustainable Investment Research Analyst Network (SIRAN) in partnership with global sustainable investment specialists EIRIS.

The assessed companies scored much better in environmental areas than in social or governance, with some reaching grades on par with environmental leaders in the developed world, but many fared poorly on human rights.

“Issues such as climate change, water shortages and local pollution are driving the environmental agenda in many emerging markets,” the study found. “However, climate change disclosure remains an area where emerging market companies lag in establishing good reporting practices.”

The report found little emphasis on human rights by the largest emerging markets companies. “Half of the companies which had exposure to human rights issues in countries of concern had established policies on human rights,” the study stated. “A much smaller percentage of companies, however, report on the details of their systems and performance.”

Countries assessed in the study were Brazil, China, India, Indonesia, Israel, South Korea, Malaysia, Mexico, Russia and South Africa. The South African and Brazilian companies in the sample stood out overall as consistently having the highest assessments, possibly because their local stock exchanges have each launched a responsible investment index.

“Increasingly, responsible investors are focusing on emerging markets as they seek to diversify their equity investments,” says Stephanie Maier, head of research at EIRIS. “This research will help investors to identify ESG risks and opportunities which exist beyond developed markets when constructing their responsible investment strategies.”

Please click here to read the complete SIRAN study.

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