Research shows value of ESG in emerging markets

New research has found that emerging market stocks with strong environmental, social and governance (ESG) have produced annual returns of 9.4% a year, compared to 5.4% for the benchmark.

The research was carried out by fund manager Alquity and Cass Business School and is based on 4,400 listed stocks from 2011 to 2015. The study also found that ESG disclosure has risen among emerging market companies looking to attract foreign investment. The research concluded that ESG analysis helps identify successful investments, with companies with high and improving ESG disclosure giving better risk-adjusted returns. Paul Robinson, founder & CEO, Alquity, commented: “The findings of this study clearly show that companies in emerging markets with strong and improving ESG disclosure perform better and display lower volatility than companies without.”

Alquity is a fund manager in emerging and frontier markets which aims to donate up to 25% of its fee revenue into enterprise schemes in local communities in emerging markets. To date it has donated £249,000 in Asia and Latin America.