Moving beyond short-term noise

Investing in emerging markets is more subtle and nuanced than just investing in companies that benefit from certain growth prospects. For one, emerging equity markets are less homogeneous than developed ones, and tend to be at different stages of growth. They also typically feature a wide variety in their demographic composition, approaches to policy implementation and fiscal management, as well as their level of integration with the global financial system.

Understanding the socio-economic and political differences between the different countries in which companies operate is an important input for successful stock selection.

Investors looking for exposure to emerging markets equities must therefore keep in mind that country analysis is critical to the investment process. The key is to determine the investment themes that are expected to drive stock performance and to identify those companies that are best positioned to benefit from these themes.

This is where Robeco’s time-tested approach can make a difference. A proprietary five-factor country analysis framework is applied to analyze a country’s attractiveness, capture changes in a country’s outlook, and exploit differences in the socio-economic and political variables among countries.

The landscape for sustainability is changing rapidly. Long overlooked in emerging markets, sustainability awareness has been spreading across emerging countries and companies.

Governments in emerging markets have started to adopt sustainability objectives such as the net zero emissions target. A growing number of emerging markets companies now clearly state their sustainability objectives in their annual report, and increasingly publish their financial accounts in English on their corporate website. ESG coverage of emerging markets companies by third-party providers has also expanded significantly. Meanwhile, individual emerging markets investors’ attitudes towards sustainability have also shifted radically over the past few years. As a result, reporting standards of emerging markets are converging rapidly with those of the developed markets.

Robeco has long been an advocate of sustainable investing in general, and in emerging markets in particular. We started to explicitly integrate ESG criteria into our investment processes for emerging markets equities more than ten years ago. Prior to that, we had already been including certain governance aspects in our processes since 2001 by sending a corporate governance-related questionnaire to listed companies.

Today, depending on their sustainability requirements and objectives, we offer investors three main types of sustainable investing solutions: Inside, Focused and Impact. Although these offer different levels of sustainability integration, they do all share the same ESG integration process, as well as our active ownership offering, which includes voting and engagement.