There are thousands of listed companies in the global emerging markets region. Many of these actively incorporate ESG considerations into their operations. However, it is important to recognise the disparity among ESG data providers, leading to different ESG scores for the same company.
In terms of performance, responsible/sustainable strategies with a growth approach have faced challenges in recent times. They have struggled as the companies they are investing in have been part of the cohort of growth stocks that have been de-rated. Simultaneously, these strategies have avoided sectors such as oil due to ethical exclusions. As a result, this has impacted on their performance, as these areas of the market have generally held up well.
In 2022, global emerging markets were very macro driven. Various factors affected investor sentiment, such as geopolitical risks following Russia’s invasion of Ukraine, surging global commodity and energy prices due to fears over energy security, higher interest rates, China’s property market woes and the country’s continued lockdowns – which were abruptly abandoned towards the end of the year
As such, there was a wide dispersion of performance within the region’s markets and sectors during the year. The volatility and drawdowns experienced last year meant that in general the best-performing stocks were very limited, and the returns led by select leaders.
In January 2023, most global emerging markets rebounded, initially due to early optimism of China’s economic reopening and on expectations of a lower growth environment in the west and weaker US dollar. However, as the year progressed, concerns grew over recession risk, especially in developed markets, the state of the banking sector across the globe and ongoing US-China tensions.
Read the full article in ESG Clarity’s November 2023 digital magazine.
