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Sustainability Indices Can Drive Sustainable Investing in Emerging Markets, Finds IFC Study


In Washington, D.C.:
Emmy Markoglou
Phone: (202) 473-9526
E-mail: emarkoglou@ifc.org


Washington, D.C., July 7, 2011—Improving the transparency of the methodology of sustainability indices can drive broader sustainability efforts, according to a study published today by IFC, a member of the World Bank Group.

Assessing and Unlocking the Value of Emerging Markets Sustainability Indices explores the rapid expansion of sustainability indices in emerging markets and makes several recommendations on how to unlock their potential.  It was commissioned by IFC in partnership with the Swedish International Development Cooperation Agency and was conducted by Esty Environmental Partners.
By identifying companies that meet higher sustainability standards, sustainability indices have the potential to elevate the importance of environmental, social, and governance issues and demonstrate the link between better sustainability performance and investment outcomes.  Assessing and Unlocking the Value of Emerging Markets Sustainability Indices” looks at 17 emerging-market sustainability indices, comparing and contrasting business models, sustainability objectives, and construction methodologies and identifying obstacles in establishing a viable business model.

“Sustainability indices can help investors recognize nonfinancial value and enable markets to reward sustainable corporate performance,” said Rachel Kyte, IFC Vice President for Business Advisory Services.  “But these benefits will only accrue if indices have an appropriate business model and structure.  This landmark study provides a concrete set of recommendations to unlock this potential and trigger meaningful dialogue among investors and service providers on sustainable investing.”

In 2009–2010, there was a significant increase in the number of sustainability indices in emerging markets but investor interest appeared to be limited.  With this report, IFC hopes to contribute to setting stronger and more durable business models for emerging-market sustainability indices.

Among the recommendations for a more viable business model, the report is referring to the importance of improving transparency and communications about the intent of the index.  “Index operators have to be clear about how they define sustainability and assess companies’ environmental, social, and governance performance,” said David Lubin, Chairman at Esty Sustainability Network.  “Investors have to be able to understand the sustainability objectives of the indices and then determine if that index matches their sustainability goals.”

The full report, which provides a detailed list of recommendations, is available here.

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. We create opportunity for people to escape poverty and improve their lives. We do so by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. In a time of global economic uncertainty, our new investments climbed to a record $18 billion in fiscal 2010. For more information, visit www.ifc.org.

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