Emerging market investments finding success through Environmental, Social, and Governance (ESG) considerations.
In the dynamic world of investment, Nordea Asset Management is making a significant impact in the emerging markets. With a strong commitment to responsible investing, the functional name of the asset management business operated by Nordea Investment Funds S.A. and Nordea Investment Management AB, is leading the charge in creating a more sustainable future.
The 18-member Responsible Investment Team collaborates closely with portfolio managers to create a comprehensive Environmental, Social, and Governance (ESG) scoring for each investment candidate. Only companies passing the ESG screening are considered for investment, reflecting Nordea's conviction that companies acting responsibly towards employees, suppliers, customers, environment, and society will be more successful in the long run.
The Emerging Stars Equity Strategy of Nordea Asset Management focuses on companies that seek long-term success and utilise structural growth opportunities. This strategy is particularly relevant in the emerging markets, which are developing into an economic powerhouse. The ESG screening process allows the investment team to identify long-term winners among emerging market companies.
The importance of ESG considerations in linking these companies' financial performance and their appeal to investors is increasingly recognised. Numerous studies show that the consideration of ESG criteria has a significantly higher positive impact on the financial performance of emerging market companies compared to industrialised countries.
Emerging markets are experiencing explosive growth rates that outpace mature markets. Companies in these markets are becoming more adaptable and agile, recalibrating strategies from market entry to competitive intelligence to align with ongoing economic development and evolving global competition. Investment funds and government programs in emerging economies, such as China’s industrial ambitions supported by multi-trillion US dollar funds, prioritise high-tech and high-value-added sectors, boosting the global competitiveness of emerging companies.
Multinational corporations (MNCs) often enter emerging markets for growth opportunities, but also face criticism for insufficient technology transfer and limited development of local talent. Local firms that cultivate their own innovation capabilities tend to become global leaders. Integrating ESG factors is increasingly important in emerging markets’ firms to attract global investors, as ESG compliance reduces operational, regulatory, and reputational risks.
Firms with strong ESG performance tend to show improved financial results and enhanced access to capital, reflecting investor preferences for sustainable and responsible corporate behavior. In the context of emerging markets where environmental and social challenges can be pronounced, adherence to ESG principles demonstrates management quality and risk mitigation capacity, boosting investor confidence.
By engaging with investment candidates to improve working conditions and reduce CO2 footprint, Nordea Asset Management is not only contributing to positively and sustainably changing the world in the emerging markets but also enhancing the financial performance of its investments. The integration of ESG analysis into the investment process of ESG Stars products for years is a testament to Nordea's long-standing commitment to responsible investing.
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- Nordea Asset Management's Economic and Social policy, with a focus on ESG considerations, plays a crucial role in their Emerging Stars Equity Strategy, allowing them to identify long-term winners among emerging market companies that prioritize sustainability and responsible business practices, thereby enhancing the financial performance of their investments.
- The integration of finance and investing, guided by ESG principles, is increasingly significant in emerging markets. Companies demonstrating strong ESG performance not only contribute positively to the environment and society but also attract global investors due to reduced operational, regulatory, and reputational risks, leading to improved financial results and enhanced access to capital.
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