As one of the fastest-growing bond sectors, emerging-market (EM) corporate debt has become too big to ignore. With US$2.7 trillion outstanding across more than 600 companies, it's now larger than the entire EM sovereign sector and is equal to the US-dollar and euro high-yield markets combined. For bond investors who've had a tough time finding opportunities for attractive yield and potential return, that's good news.
Unfortunately, many investors hesitate to buy EM corporates because they're holding onto outdated notions about these issuers-especially when it comes to environmental, social and governance (ESG) risks. In our view, investors need to cut through the confusion around ESG in EM
to access a rising sector with a compelling risk/reward profile.
Below, we debunk the four most common ESG misconceptions about EM corporates-from wanton pollution to hopeless complexity.