Investment Institute

Rising social risks in emerging markets should be a catalyst for action for responsible investors

  • 12 December 2022 (7 min read)

Key points: 

  • Emerging markets are the most at risk from the effects of climate change and the immediate effects of war in Ukraine. This is leading to potentially damaging social impacts, including food insecurity and rising inequality
  • Major gaps remain in the finance available for developing countries. COP27 saw an agreement to create a “loss and damage” fund but details are still lacking, while a now-obsolete annual financing target of $100bn still needs to be updated. Rising interest rates are also making it more difficult to raise funds
  • This is a challenging investment environment but responsible investors can facilitate financing through engagement and advocacy. Blended finance should be an important avenue, while enhancing sovereigns’ capacity to issue green, social and sustainability bonds may be another effective course of action
  • We believe targeted input from investors can help address social factors and help to foster a more sustainable environment, extending to human rights and nature preservation. We think this could bring social benefits and open up investment opportunities
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