Emerging Market Disclosure Project (EMDP), is an international initiative led by representatives from Boston Common Asset Management, Calvert Investments, Social Investment Forum (SIF) and SIF's International Working Group (IWG). The project started in 2008 with a goal to assess and improve corporate environmental, social and corporate governance (ESG) reporting in emerging markets. The group, which has benefited from technical advisory support from Principles for Responsible Investment (PRI), has conducted several baseline studies, engaged companies and won important victories on ESG reporting along the way.
Global providers of ESG data largely do not offer information about companies listed in emerging markets, and local research organizations generally do not have the capacity to offer these types of products to investors, at least not on a global scale that offers comparability between markets. Yet, investors are offering more and more responsible investment products related to emerging markets equities. The prospect for these products to grow holds great promise to improve corporate transparency and ESG performance in these economies. However, without the right research and tools, these developments are less likely.
The EMDP and its partners set out to tackle this problem in three work streams. The first focuses on assessing ESG disclosure trends, and the second seeks to demonstrate investor support for greater ESG disclosure among emerging market companies. The third encompasses the project partners' efforts to execute outreach and engagement strategies with corporations and local stakeholders operating in Brazil, India, Indonesia, South Africa and South Korea to promote greater disclosure of sustainability factors.
As part of the first work stream, EMDP participants collected benchmark data on sustainability reporting in the emerging markets where the project would be active. The EMDP in collaboration with SIF member KLD (now a part of MSCI) published the first study, Sustainability Reporting in Emerging Markets: An analysis of the sustainability reporting in selected sectors of seven emerging market countries, in January 2008. It was followed by a second report, A Review of ESG Practices in Large Emerging Market Companies, co-authored by EIRIS and SIF in March 2009. In December 2009, a new report authored by the Emerging Markets Disclosure Project analysed data from the United Nations Conference on Trade and Development (UNCTAD) on the top 10 companies by market capitalization in 10 of the world’s largest emerging markets—Brazil, China, India, Indonesia, Israel, Malaysia, Mexico, the Russian Federation, South Africa and South Korea—for a total universe of 100 companies. It analysed the companies’ reporting practices on five environmental, five social and 10 corporate governance indicators for 20 in all. These reports found that, while a significant number of emerging market companies have begun to report on ESG issues, the practice is not yet widespread, and most reports do not conform to a global standard, such as the GRI reporting guidelines.
As part of the second work stream, participants created a sign-on statement for investors to declare their support for emerging market companies issuing sustainability reports using Global Reporting Initiative's reporting guidelines. (For more information on GRI, see www.globalreporting.org.) The EMDP investment statement affirms that corporate disclosure of ESG performance helps investors mitigate portfolio risk and determine which companies are best positioned to deliver potentially strong long-term investment performance. The EMDP launched the sign-on statement in June 2008 and renewed its call in March 2010, and to date investors with more than $1 trillion in assets under management, including a growing number in emerging markets, have signed onto the statement. The world's largest ESG research providers, as well as a long list of trade associations and civil society organisations also have endorsed the statement. (Click here to view the letter and to learn about how to become a signatory.)
In March 2009, the EMDP distributed an emerging markets survey to PRI and SIF members, as well as other global partners. The survey assessed the level of investment in emerging markets by socially responsible investors and the ESG issues that interested these sustainable investors most. Lead author EIRIS and other EMDP partners debuted the resulting report, Emerging Markets Investor Survey Report: An analysis of responsible investment in Emerging Markets at the Responsible Investor conference in June 2009. One key finding of the survey was that seven out of ten major asset managers and institutional investors collectively representing $130 billion of emerging market investments cited lack of ESG disclosure as the key challenge to investing in emerging markets. Survey respondents also commended two emerging market countries—Brazil and South Africa—for having made the most progress towards greater ESG disclosure.
Leading up to the beginning of the third work stream, the EMDP formed teams in Brazil, India, Indonesia, South Africa and South Korea, and each country team has submitted work plans to the EMDP with an emphasis of working with local partners in those markets. The EMDP also has created a scorecard to assess corporate performance that each country team will use to evaluate companies and measure progress.
Update from the country teams
Brazil: The Brazil team is led by Caixa de Previdência dos Funcionários do Banco do Brasil and consists of members of the PRI’s local network in Brazil. The EMDP Brazil team realized the fruits of a yearlong effort in July 2010, when it hosted an event on the merits of issuing sustainability reports in compliance with GRI’s guidelines. The event attracted 56 participants from 38 companies and included testimonials from GRI reporters.
Indonesia: The EMDP Indonesia project for 2011 is led by IndonesiaWISE, a sustainability-focused management consulting firm. Team members include prominent local and foreign institutions such as Jamsostek (social security provider), Bank Negara Indonesia (state-owned bank) and BNP Paribas Investment Partners (asset manager). Additionally in 2011 a special outreach has been made to PRI Investors who have an interest in emerging markets and Indonesia such as Threadneedle, Nordea Asset Management, VIP and Comgest that are also supporting the project. The team hopes to build on the success achieved in 2010 with Phase 1 and continue to research ESG practices of listed companies on the IDX as well as understand the perspective of stakeholders such as financial institutions, regulators and NGOs regarding extent and quality of disclosure. Research has commenced and it is being conducted in parallel in Jakarta and London.
South Africa: The South Africa team is comprised of Calvert Investments, Element Investment Managers (formerly Frater Asset Management), Mn Services, Robeco, the Government Employees Pension Fund of South Africa and PRI. Given that sustainability reporting is fairly widespread and well developed in South Africa, the team there has set a higher bar for company engagement and has chosen to reach out to companies that were not included in Johannesburg Stock Exchange’s SRI index, that are not addressing significant sustainability controversies or did not respond to the Carbon Disclosure Project’s latest survey.
South Korea:Boston Common Asset Management and Korea CSR Research Service (KOCSR) co-lead the South Korean team. The other members are ESG research providers EIRIS (United Kingdom) and Responsible Research (Singapore), and Korean supporting partners Eco-Frontier, KoSIF (Korea Sustainability Investing Forum), NH-CA Asset Management, Solability and Sustinvest. The team took the lead in developing the scorecard that all of the country teams use in evaluating companies and completed its first benchmark report in 2010. In May, it engaged 10 companies in discussions surrounding the report’s findings and co-hosted an event with the Korean PRI network to raise awareness of the project with local stakeholders.
If you're interested in getting involved in the EMDP, please contact Valeria Piani, Head of Clearinghouse at valeria.piani@unpri.org, EMDP Co-chair Lauren Compere, of Boston Common Asset Management, at lcompere@bostoncommonasset.com or EMDP Co-chair Mike Lombardo, of Calvert Investments, at Mike.Lombardo@Calvert.com.
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