Towards Sustainable and Responsible Investment in Emerging Markets: A Review and Inventory of the Social Investment Industry's Activities and Potential in Emerging Markets

This paper provides an overview of Socially Responsible Investment (SRI) in emerging markets. The paper analyzes:

• SRI growth and states that:
  • The SRI industry has expanded dramatically in the developed countries over the past three decades;
  • The expansion of SRI in emerging markets could make it a major force influencing how corporations impact sustainable development.
• SRI performance and finds:
  • Consistent competitiveness in its financial performance;
  • Out performance by the majority of SRI funds over their relevant benchmark indices;
  • Decision-making process of SRI including social and environmental externalities.

The paper stresses the demand for SRI in emerging markets and identifies:

• Barriers in this area:
  • Lack of experience among social investors about emerging markets;
  • Concern about the profitability of emerging market investments;
  • Dearth of credible, standardized data on business practices related to social and environmental concerns;
  • Inadequate infrastructure for supporting knowledge development and information networking.
• Opportunities:
  • Growing awareness of international issues making social investors feel it morally imperative to work on a sustainable global economy;
  • The emerging markets witnessing a better environment for SRI;
  • Possibility of multinationals to be engaged in sustainability issues related to emerging markets.

The paper concludes by recommending steps to:

• Encourage a stronger knowledge and networking infrastructure;
• Support the creation of corporate social and environmental data services focused on emerging markets;
• Motivate more institutional and retail SRI.