By L. Bryan Carter, Head of Emerging Market Fixed Income and Helena Vines-Fiestas, Head of Sustainability Research & Policy, BNP Paribas Asset Management
In short, there are two ways to generate alpha: either overweighting the champions or underweighting the pitfalls. EM investing is not just about finding the best markets; it is also about avoiding the worst ones. Long-term sustainability, in our belief, is synonymous with minimizing crisis or 'blow up' — which are, arguably, harder to predict. Further, we cannot rely on past cycles and back-testing, instead we need a view on what will matter going forward. At the same time, investors increasingly expect asset managers to have ESG lenses. Asset holders' ethos and views are increasingly shaping the industry. The desire for ESG-tailored investing is driving a more innovative and nuanced implementation of ESG research.
This article is second in a series on Sustainable Investing by BNP Paribas Asset Management. The next instalment will continue to explore how to integrate an ESG framework into emerging market debt investing.
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