Friday, 17 September 2021 Reading time : 3 minutes

Emerging Markets: Tomorrow’s Growth Engine
Emerging Markets have become increasingly important in terms of their contribution to global GDP as well as their market capita-lization. Longterm forecasts predict that by 2050, the combined GDP of the seven largest Emerging Markets (E7) will be twice as high as that of the G7 industrialized countries. The financial crisis has boosted this transformation process even further. The balance will probably continue to shift in favor of the Emerging Markets in view of the unsolved debt crisis in the eurozone and the highly unstable financial situation in the U.S.

Growing Environmental and Social Risks
Unfortunately, the high growth expectations are coupled with in-creasing environmental and social risks. The fastpaced growth in Emerging Markets is closing the gap between rich and poor countries, thus raising prosperity globally. Yet, at the same time the negative aspects of this development are becoming increa-singly obvious as the surge in consumption of resources accelerates and the output of greenhouse gases rises, further accele-rating the climate change. Moreover, population growth in Emer-ging Markets is likely to remain high, partly due to lack of adequate social welfare systems (world population is expected to reach 9 billion by the year 2050).

Creating Added Value Through Sustainable Companies
In order to mitigate the problematic effects described above, it is vital that especially companies in Emerging Markets actively strive to uncouple their resource consumption from their econo-mic growth, for instance through more efficient and sustainable production processes. This will gain them an additional competi-tive edge. In a first step, the ZKB Sustainability Research Team examines the sustainability of all companies qualifying for ZKB MeinIndex Sustainability Emerging Markets. The Team applies a multi-level monitoring procedure encompassing comprehensive and rigorous exclusion criteria as well as quantitative and quali-tative environmental, social, and governance criteria. In addition, the respective companies must fulfill one of the following three criteria: inclusion in the MSCI EMMA (ex energy, ex mining), Emerging Markets companies not included in the MSCI EMMA, or companies with a predominant share of sales in Emerging Markets. 

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