Enhanced ESG Emerging Markets Debt

Building on the ESG analysis that is part of all of our strategies, our Enhanced ESG strategies are designed to offer further reduction in ESG risks.

Stone Harbor’s traditional EMD strategies integrate analysis of ESG factors and engagement with issuers into our fundamental investment process. The Enhanced ESG strategy takes this further through negative screening of countries and corporates, being benchmarked versus dedicated ESG indices, and typically maintaining a larger weight to Green Bonds, for example. Our Enhanced ESG strategy is available for both emerging markets sovereign and corporate investments.


Objectives How we aim to achieve them
Strong investment returns Apply our disciplined investment process based on rigorous fundamental credit analysis
Limit exposure to ESG risks Highlight specific ESG factors in fundamental credit analysis with a focus on anticipating future changes

Reduce exposures to countries and companies with weaker ESG scores

Avoid exposure to countries and companies with the weakest ESG scores

Maintain average portfolio ESG scores that generally exceeds the respective traditional benchmark’s ESG score
Incentives for issuers to improve ESG performance From an issuer perspective, the link between ESG scores and index weight may promote a growing investor base as ESG scores improve
Foster engagement with issuers on ESG issues Incentivize issuers for progress on ESG performance which we believe tends to result in lower financing costs

Encourage issuance of Green Bonds where applicable



How we measure ESG risk

  • We have constructed a proprietary model combining a large set of environment, social and governance indicators.
  • We use quantitative data from independent institutions supplemented by commercial data sources, including ESG scores compiled by J. P. Morgan based on data from Sustainalytics and RepRisk
  • We use qualitative inputs based on country visits and our discussions with policy makers, companies, politicians, political consultants, international organizations, NGOs, journalists, think tanks, and academics
  • For emerging markets corporate debt, we specifically focus on whether we believe potential portfolio names adhere to best environmental practices; to appropriate social/sustainability standards, and optimally to “first world” governance standards