An increasing number of money managers in green finance are looking into international markets to unearth hidden areas in sustainable investing.
Fund managers in Europe’s Northern regions have expanded beyond their borders to find cheap assets they say will eventually meet their environmental, social, and governance goals, Bloomberg reports.
For instance, Nordea Bank Abp’s $450 billion asset management unit launched a fund targeting ESG assets in emerging markets.
“We felt it was a compelling idea,” Thede Ruest, head of emerging debt markets at Nordea’s investment management unit, told Bloomberg.
The strategy to is expected to deliver “slightly better yield without too much risk-taking,” Ruest said, adding that he also hopes it will “make a difference where it arguably will matter more.”
Money managers looking for sustainable investment opportunities abroad argue that ESG is gaining momentum after a rocky start.
“In the past, a great deal of companies didn’t even know what the acronym ESG stood for,” Burton Flynn and Ivan Nechunaev, fund managers at Terra Nova Capital, told Bloomberg. “When we would explain, many would push back saying that it’s all nonsense and some would outright laugh at us.”
However, the market environment has already changed a fair bit, and it’s now “quite rare” to come across companies that are unaware of the demands from ESG investors, Flynn and Nechunaev added.
There are still challenges with dealing with the emerging markets. Ruest is worried that some firms aren’t as clean as they claim.
“It’s a nightmare of mine that we should expose ourselves to greenwashing,” Ruest said. “That is one of the biggest fears I have.”
“What we always look for is to have credibility in the issuer, we want to see credible plans in the whole transition of the issuer,” he said.
Money managers, though, still believe that frontier markets could provide amazing opportunities for ESG investors, according to Karine Hirn, founding partner and chief sustainability officer at East Capital.
Instead of just focusing on established names, Hirn argued that “you want to invest in companies that are improving in terms of ESG.”
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