Sustainable Development Efforts By Emerging Market Funds

I wrote on Monday about DAI's white paper about vulture funds' interest in and ongoing efforts towards sustainable development in emerging markets. As a follow up to that I'd like to share the following, a recent entry on the website BankInvesmentConsultant.com of a similar sentiment:

Emerging Markets Warming Up to Sustainable Investing
By Money Management Executive
April 2, 2009

Fund managers in emerging markets are increasingly paying attention to environmental, social and corporate governance factors, according to research by Mercer.With $300 billion under management, sustainable investment management assets in emerging markets now represent 10% of all assets managed there. Fifty billion of that is in funds specifically labeled as sustainable investments, and the remaining $250 billion is in funds that practice sustainable investing.While managers in emerging markets often have a deeper understanding of social issues than their counterparts in developed nations, often they don’t know how to use their proxy voting power, noted Danyelle Guyatt, head of research in Mercer’s responsible investment unit.Mercer believes that if socially responsible investing is practiced in emerging markets, it can go a long way toward reducing poverty in those regions.

Worth a Look

In the interest of enriching the conversation about emerging market debt funds, I came across an extremely interesting white paper over the weekend from Debt Advisory International, a DC-based firm with experience and clients in Sub-Saharan Africa, Latin America, Eastern Europe and Asia. The paper, "Prospects For Reduction And Conversion Of U.S. Sovereign Claims On Developing Countries To Support Overseas Sustainable Development Activities," offers thoughtful insight into some of the issues associated with promoting sustainable development in emerging markets. From the Conclusion and Recommendations section:

"Despite these obstacles, potential exists for the use of debt conversion and other innovative financing techniques to support overseas development. While the issues examined in this report are quite complex, they do have an important impact on the budget and foreign policies of the U.S. and should therefore be carefully examined to maximize the benefits to all concerned parties ... In particular, the authors suggest that the following actions be undertaken:

• Thorough study by the U.S. Government of the costs and benefits of a comprehensive program to discount existing Ex-Im Bank and/or USAID claims on developing countries;
• Careful examination by the U.S. Government of the approaches of other creditor governments to converting and reducing their outstanding claims on developing countries;
• Harmonization of the policies of Ex-Im Bank, USAID, Treasury, and other U.S. agencies for valuing outstanding claims on developing countries."

Overall, the paper exemplifies the concerns DAI has about ensuring sustainable development in countries with emerging market funds. Learn more about DAI and read the full paper here.

Some Positive Economic News (for once)

According to a Wall Street Journal article by Kejal Vyas from last week, the times, they are a'changin... and not in a bad way. Vyas writes: "With risk premiums on emerging market assets edging lower and with some investors coming back in the past several weeks, the mood at the Emerging Markets Trade Association's spring forum was mostly upbeat.
Emerging-market asset managers from some large Wall Street firms agreed Thursday that the worst may be behind us."

This is certainly encouraging news for those of us invested in the emerging market fund arena, and it gets even better: "Panelists also said they don't see the U.S. leading out of the global economic decline. They spoke highly of developing markets and their chances of outperforming developed economies namely because of aggressive interest rate cuts by central bankers, which have allowed them to stimulate growth."

For those of you who have been considering or even on the fence about getting involved with an EMF, now might be just the time to dip your toe... Stay tuned--my next few posts will recommend some companies worthy of your consideration as you invest in an EMF.

Come on in, the water's fine.