Over half of the world’s GDP growth since 2009 has come from emerging markets, with China and India accounting for over 40% of that growth, according to an article from World Economic Forum. This trend is expected to continue, with emerging economies likely growing at 4-5% over the next couple of years, compared to only 1.5-2% for advanced economies.
While advanced economies still account for the majority of global market capitalization, we have seen a shift towards higher market capitalizations in emerging markets. Perhaps one of the most noteworthy examples is the Shenzhen Stock Exchange, which saw more than 170% growth from the end of 2009 to the end of 2018.
This rise of emerging markets is happening alongside other structural changes, namely, changing governance expectations and climate change. Yet these present a difficult challenge: how can institutional investors actively engage portfolio companies in markets where governance norms, legal frameworks, and responses to climate change may vary?
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