AI Is Driving ESG Integration In Emerging Markets

AI is enhancing ESG integration in emerging markets by improving data accuracy and efficiency, supporting sustainable investment strategies aligned with global goals.

Developments are providing new opportunities for sustainable investment

Artificial intelligence can help institutional investors and asset managers align their emerging market investment strategies with the United Nations’ sustainable development goals. AI can leapfrog gaps in environmental, social and governance data disclosures and reshape business models to drive economic growth and societal progress.

EMs offer attractive investment opportunities to achieve financial returns and impact. ESG-integrated assets under management are expected to increase from $18.4tn in 2021 to $33.9tn by 2026 in EMs.

Although they still lag developed markets, ESG disclosure requirements have grown exponentially in EMs. For example, of the 62 EMs with sustainable bond issuances in 2023, 51% had ESG and climate disclosure requirements. The International Financial Reporting Standards’ framework on sustainability and climate-related disclosures will help to drive an increase in reporting.

Many EM regulators, like Brazil’s Comissão de Valores Mobiliários, are already signalling their intent to require companies to disclose information according to these requirements. Regulators are also mandating domestic ESG disclosure requirements such as the Securities and Exchange Board of India’s Business Responsibility and Sustainability Reporting framework for the top 1,000 Indian-listed companies to disclose quantitative and standardised ESG information.

Turning to AI

As investment opportunities and disclosures increase, so do the demands of asset managers and industry for solutions that efficiently structure information to measure, track and validate climate and other ESG risks. Unsurprisingly, there is growing interest in the role AI-powered solutions can play to increase the speed and efficiency of the ESG disclosure process, especially in the post-ChatGPT world.

Use cases range from corporate reporting to investor analysis to regulatory oversight. AI-enabled providers span companies that provide ESG data, analytical services and software-as-a-service solutions.[…]