Creating a 'virtuous circle' in emerging markets

Creating a 'virtuous circle' in emerging markets

As emerging market debt continues to attract institutional investors, there is an opportunity for investors to align an impact investing approach with global poverty alleviation, says Global Evolution.


Danish fund manager Global Evolution is looking to combine the strength of emerging market debt with the current trend towards sustainable investment by superannuation funds.

Global Evolution senior portfolio manager Christian Mejrup said sustainable investing in emerging market debt can have a "very positive impact on poverty alleviation".

"Building human capital and physical infrastructure such as roads, rail, ports, telecoms, water etc. or health and education delivery also has a large impact on productivity; and thus the return potential," Mr Mejrup said.

Global Evolution actively manages a diversified portfolio of emerging and frontier market sovereign debt portfolios, emphasising ESG analysis at the sovereign level.

"We believe there is an ESG dividend to quantitatively integrating ESG dynamics into our valuation model because these indicators improve the forecasting potential of our valuation mode," Mr Mejrup said.

"Our impact investing unfolds through a number of channels: we travel to between 25 - 30 countries per year to analyse the macroeconomic, political and financial situation on the ground.

"While visiting we interact with government officials, incumbent politicians and the opposition with the aim of influencing their prudent and responsible policymaking.

"Countries that promote sustainable development and show progress on such indicators are rewarded by lower risk premia and borrowing costs that can enhance fiscal space and leave room for a virtuous circle in sustainable development."

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Creating a 'virtuous circle' in emerging markets
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