The 3 Most Important Characteristics For Emerging Market Companies With Strong Corporate Governance 1

Sustainable investing

Sustainable investing seeks returns from investing in companies that are environmentally and socially responsible, and have good corporate governance. Now, with a good part of the world (ACWI) (VTI) now beset with either social or political upheaval, fund managers are increasingly flocking towards stocks that score well on their ESG (environmental, social, and governance) metrics.

Franklin Templeton’s Hardenberg on corporate governance 

The Global Sustainable Investment Review 2016 report indicated that global sustainable investments have been growing at a 12% compounded annual growth rate. For Carlos Hardenberg, director of frontier markets at Franklin Templeton Emerging Markets Group, companies with good corporate governance are the “better ones.”

3 characteristics

At an interview with Citywire Selector, Hardenberg identifies three characteristics that qualify companies on this metric. According to him, these are:

  1. Companies which are truly privately run
  2. Companies which have the ability to attract staff from abroad, which have international training
  3. Companies where you can generate the feeling in the feedback by managers that they are proud and happy to work there
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While Hardenberg did not list any names of companies that are the “better ones,” Frontera recently projected the economies that score the highest and the lowest on ESG assessment. Our series, ESG Analysis: The Best & Worst Emerging Markets, recognizes the Czech Republic, Taiwan (EWT) (FTW) (QTWN) & Poland (EPOL) (PLND) as the top three emerging markets, while Nigeria as the last in ESG assessment.

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