Emerging Market Global Challengers Create Higher Value and Ensure Better Resilience in an Increasingly Tough Environment
- Sustainability-Related Risks for the Global Economy Are Rising: Emerging Markets Could Lose up to 15% of Their GDP by 2050 Owing to the Drastic Impact of Climate Change and Challenges Specific to Emerging Markets, According to New Report from BCG
- Effective Sustainability-Related Actions in Emerging Markets Strengthen Global Market Access, Address Consumer and Talent Concerns, and Deliver Higher Business-Value Creation
- Global Challenger Companies in Emerging Markets Secure Access to Lower-Cost Capital and Outperform Peers, Almost Doubling Their Total Shareholder Returns[1]
BOSTON—New research from Boston Consulting Group (BCG) indicates a strong correlation between emerging market companies’ scores in environmental, social, and governance (ESG) indexes and key financial and value creation metrics. It is becoming increasingly clear that the sustainability imperative is transforming the very nature of global competition.
Published today, and titled The Sustainability Imperative in Emerging Markets, BCG’s latest Global Challengers report highlights that the sustainability movement that began sweeping the corporate world in advanced economies decades ago is now hitting emerging market companies and communities with full force.
The report emphasizes that emerging market companies currently underperform compared with developed market peers across each of the ESG pillars, according to widely accepted rankings from various agencies. Emerging markets have an outsize stake, however, in mitigating climate change while supporting global GDP growth: their share of global GDP is expected to rise from 50% today to 62% in 2050. These countries also produce 85% of the global CO2 emissions, even though they emit significantly fewer greenhouse gases per capita than developed markets. If climate change remains on its current trajectory, the impact will grow far more severe for emerging markets, which could lose up to 15% of per capita GDP according to S&P Global Ratings.
“Our research showed that, emerging market companies from Brazil to China and Turkey—and in every industry sector—are responding to intensifying pressure at home and abroad from consumers, employees, trading partners, investors, and regulators to back their green commitments with verifiable actions,” said Burak Tansan, report co-author, Chairman of BCG’s Istanbul office, and Managing Director and Senior Partner at BCG. “Emerging market companies that take the lead are already winning at home, strengthening their access to international markets, lowering their cost of capital, and becoming better able to win and retain top talent while addressing the sustainability concerns of their customers. Those that don’t act risk losing their competitive edge, and we believe that gap will widen rapidly.”
The report identifies 50 companies from emerging markets in various industries, called the “climate pioneers,” that perform strongly on ESG and financial metrics. These pioneers show that companies can be early winners in sustainability without sacrificing growth and profitability. BCG analysis finds that the TSR of global challengers was nearly 35% higher than the S&P 500 Index and 105% higher than the MSCI Emerging Markets Index from 2017 through 2022.
ESG Improvement Can Unlock Growth
The report highlights the link between having a strong ESG record and solid business performance, and shows that emerging market companies that are in the vanguard of sustainability can unlock the doors to new growth opportunities.
“Companies at the forefront of sustainability are strengthening their market access and securing a ‘license to play’ in the long term. A strong, verifiable sustainability record can help companies gain greater access to new and affordable funding, win new customers, and attract the best talent, which is particularly important in markets with significantly younger populations. We see the green transition across industries creating new opportunities for innovators and disruptors to change the dynamics in their industries,” said Tansan.
Download the publication here.
Media Contact:
Brian Bannister
+44 7919 393753
bannister.brian@bcg.com
[1] The cumulative total shareholder return index conceptualizes the growth of each portfolio over the time period with an initial value of 100 multiplied by the cumulative return percentage. All indexes were weighted by the market capitalization of their constituent stocks. The cumulative TSR index is based on data from 50 climate pioneers among global challengers that were publicly listed; total shareholder return is calculated in US dollars. Sources: Refinitiv Eikon; BCG analysis.
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