Skip to main content
utility-drawer__close
0
Add funds
Fund 1
Fund 2
Fund 3
Fund 4
Confirm your location and role
location select
language select
Responsible Investing

ESG investing in EM debt: enhancing sustainable development outcomes

solar panels

Inherent challenges in EM ESG analysis

Today’s financial markets are at an extraordinary juncture, grappling with persistently high inflation, war in Eastern Europe, global climate change and the ongoing and severe effects of the COVID-19 pandemic. Against this backdrop, fixed income investors are increasingly seeking to generate financial returns while building portfolios that support positive outcomes through environmental, social, and governance (ESG) investing.

In an emerging markets (EM) sovereign debt context, Nuveen’s focus is on enhancing sustainable economic, environmental, and human development outcomes, which we believe are highly correlated with material ESG factors. But executing on an EM ESG strategy is no easy feat. Research shows that existing third-party ESG frameworks generally fall short when it comes to accounting for countries’ differing starting points on the journey of economic development, leading to inherent income biases.1 The significant diversity within EM requires a highly refined approach to assess the ESG performance — and potential — of each country.

Drawing on Nuveen’s decades of experience investing in EM debt and longstanding leadership in fixed income responsible investing, we developed a proprietary EM ESG scoring framework that addresses the shortcomings of third-party approaches. Our framework adjusts for each country’s specific level of economic development, while ensuring that governance remains the cornerstone of every assessment. Furthermore, we address both environmental risks and related social consequences, recognizing the conflicts that can arise between the two when moving rapidly on climate change.

Most third-party ESG frameworks were created primarily for public equities in developed markets, making them ill-equipped to address the elements that make emerging economies unique. The complexity of sovereign issuers only adds to the challenge of ESG assessment.

Because of their biases toward wealthier countries, relying on existing external ESG frameworks results in skewing capital toward countries with less need for it. Nuveen seeks to correct this inequity.

Download the full PDF

Related articles
Responsible Investing 2024 Proxy Season Preview
The momentum and support for environmental, social and governance (ESG) integration into the investment process has reached critical mass.
Responsible Investing Responsible investing 2.0: Focus on generating sustainable returns
When seeking to invest in ways that advance sustainability goals and deliver attractive risk-adjusted returns, it is important to focus on specific investment themes and monitor how those themes impact performance.
Responsible Investing 2022 – 2023 Annual Stewardship Report: Aligning advocacy with actions
Despite 2023 being an unprecedented year of challenges, we remain focused on advancing responsible investing practices, with preserving and enhancing long-term shareholder value at the center of our approach.
Aerial view of the ocean shore

You are on the site for: Financial Professionals and Individual Investors. You can switch to the site for: Institutional Investors or Global Investors

You are about to access our website for visitors outside of the United States.

You are about to access our website for Nuveen Global Cities REIT

You are leaving the Nuveen website.

You are leaving the Nuveen website and going to the website of the MI 529 Advisor Plan, distributed by Nuveen Securities, LLC.

The Nuveen website for institutional investors is available for you.

You are about to access our website for visitors outside of the United States.

You are about to access our website for Nuveen Churchill Private Capital Income Fund (“NC - PCAP”)

Contact us
Contact us
Back to Top