Emerging Markets Disclosure Project

The Emerging Markets Disclosure Project (EMDP) is an international initiative to improve corporate environmental, social and governance (ESG or sustainability) reporting in emerging markets. The EMDP is under the leadership of a steering committee comprised of representatives from Boston Common Asset Management, Calvert Investments and the Social Investment Forum (SIF) with technical advisory support from the Principles for Responsible Investment (PRI).

Call For Action

In June 2008, the EMDP’s coordinators called on investors to join them in signing onto the EMDP Investor Statement on Sustainability Reporting in Emerging Markets, and 29 global institutional investors with close to $1 trillion in assets under management heeded that call to encourage companies in emerging markets to provide better ESG information. More than 15 other firms affiliated with the socially responsible investment movement, including investment advisors and research providers, also signed the statement in support of the initiative.

The EMDP Steering Committee is asking signatories to confirm their support of the investor statement. For those of you hearing about the project for the first time or who missed the opportunity to sign on in 2008, the investor statement can be also now signed. Since the original EMDP investor statement in 2008, the number of fund signatories has grown from 29 to 50, and the total assets under management they represent has increased by 10 percent. An additional 21 research, professional and civil society organizations have signed onto the statement in 2010. A copy of the statement as on 31 March 2010 is available here.

This renewed call to action comes as the EMDP enters its third and critical final phase, which is focused on outreach and engagement to promote greater disclosure of sustainability factors by corporations operating in Brazil, China, India, Indonesia, South Africa and South Korea. As part of this effort, country teams comprised of local and international investors will be sending letters to and meeting with selected companies, so it is more important than ever that they can point to your support to help persuade companies to improve their environmental, social and governance (ESG) reporting practices. Please email klang@socialinvest.org and narina.mnatsakanian@unpri.org to support the investor statment and/or been involved in the activities of the local networks.

Emerging markets survey and investor survey report

In March 2009, the EMDP has distributed an emerging markets survey to PRI signatories, SIF members, and other global partners. The objective of the survey was to assess the current level of investment in emerging markets by socially conscious investors and which ESG issues are of interest.

Using this information, EIRIS and the EMDP launched the emerging markets investor survey report 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 US$ 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.

In December 2009, the EMDP, in coordination with UNCTAD, released a baseline study entitled Corporate Sustainability Disclosure in Emerging Markets. For this study, researchers collected data on Brazil, China, India, Indonesia, Israel, Malaysia, Mexico, the Russian Federation, South Africa, South Korea and Taiwan. The report 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. Reporting practices across the countries varied considerably, with companies from Brazil and South Africa exhibiting some of the best sustainability reporting and overall transparency practices and firms in China, India, Indonesia and Mexico lagging. Building on the knowledge gained in this report, the project’s third phase is focused on outreach and engagement to promote greater disclosure of sustainability factors by corporations operating in Brazil, China, India, Indonesia, Russia, South Africa and South Korea.

To date, the EMDP has formed teams in six of the countries, and each country team has submitted work plans to the EMDP, which they will use to assess corporate performance in their respective countries, evaluate companies and measure progress. The results of this engagement process and best practices will be highlighted in a report at the end of 2010.

Project Background

The initiative was presented by Calvert Asset Management Company, Inc. at the PRI in Person event in July 2007 and additional support was gathered through the PRI Clearinghouse.

This group produced a document on the current state of sustainability reporting in several emerging markets including China, India, South Africa, Brazil, South Korea and Russia. This was followed by an investor sign-on statement encouraging emerging market companies to use the Global Reporting Initiative as their framework for reporting. As of May 2008, the sign-on statement has been endorsed by 28 global institutional investor signatories, representing close to US$ 1 trillion in assets under management.

Phase 1 of the project involved a benchmark report on the current state of sustainability reporting in several emerging markets, including China, India, South Africa, Brazil, Korea and Russia. The study, which was conducted by KLD on behalf of SIRAN, assessed 75 companies across three sectors: Energy (Oil and Natural Gas), Material (Metals and Mining), and Telecommunications. Corporate sustainability disclosure was assessed across five areas in September of 2007:

• Public disclosure of sustainability issues
• Dedicated sustainability area within the website or annual report
• Existence of stand-alone sustainability report
• Use of the GRI framework for the sustainability report
• Existence of sustainability goals and benchmarks

The results were announced at the Institutional Investor Events 2nd Annual Forum on Responsible Investing on January 24, 2008. According to the study, nearly 9 out of 10 companies (87 per cent) offer at least some level of sustainability disclosure. South African companies emerged as the overall leaders, while Chinese companies were the laggards on sustainability disclosure. Overall, only 27 per cent of the companies surveyed indicated that they use the GRI reporting framework.

Phase 2 of the project involved a sign-on statement encouraging emerging market companies to use the GRI and to improve sustainability reporting. The sign-on statement calls on companies in emerging markets to improve their transparency of management of ESG issues. Management of ESG issues helps investors determine which companies are best positioned to deliver potentially strong long-term investment performance. The sign-on statement has been endorsed by 28 global institutional investor signatories and 15 affiliated supporters (NGOs and research organisations).

Phase 3 of the EMDP began in May 2008 and ran through December 2009. It focused on outreach to corporations operating in Brazil, India, Korea, Russia, and South Africa to promote greater sustainability disclosure.