Are emerging markets a hot spot for sustainable investing?

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The most basic measure of ESG performance, the MSCI ESG EM Leader Index, has demonstrated that companies with top ESG scores significantly out-performed over the past decade, generating 3.09% of annualized out-performance against MSCI EM index since 2010. The MSCI ESG EM Leader Index selects companies with the top 50% of ESG scores within each sector of the MSCI EM Index.

A study by MSCI “How Markets Price ESG: Have Changes in ESG Scores Affected Stock Prices?” demonstrated that from 2013-2017, companies with improving ratings have outperformed the benchmark globally by 0.97% returns annually, this outperformance in EM was higher, at 2.88% annually.

This is also borne out by our experience wherein good quality companies – ESG being one component of quality – tend to outperform poor quality ones over the medium to long term.