ESG for EMD: Toward Best Practice

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Our Emerging Markets Debt team has been analyzing ESG indicators for sovereigns for eight years, and started working with Sustainalytics five years ago to build ESG coverage of its corporates universe. During that time, it has continually enhanced its ESG processes, and over recent months the team has drawn some conclusions about best practice in integrating ESG into emerging markets debt, and particularly corporate bond strategies. In this paper, we explain the importance of integrating sovereign governance indicators into corporate-issuer analysis; selecting ESG indicators for financial materiality; gathering proprietary corporate governance data; and engaging with bond issuers that present particularly high ESG risks.