Emerging Markets and the Opportunity for ESG

Zola Mirenge

Consultant II

Table of contents

• Access to Finance Incentives
• Unmet Demand
• Regulatory Harmonisation
• How Anthesis Can Help
• Contact Us

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Emerging markets – nations that are progressing through rapid growth and industrialisation – represent increasingly attractive opportunities for corporate global expansion. At the same time, governments, financial institutions, and consumers across such markets in Latin America, Africa, and Asia are driving a shift toward more sustainable economic models to accelerate growth, respond to growing investor interest, and align with global regulatory developments. Credible environmental, social, and governance (ESG) strategies can therefore be powerful enablers for companies looking to enter these new markets and to grow their business.

This article will explore three ESG-related opportunities in emerging markets:

1. Access to ESG-linked financial instruments
2. Unmet demand for sustainable products and services
3. Regulatory harmonisation

We’ll also examine how companies with robust ESG strategies may be better positioned to successfully enter these markets.

Greater access to sustainable finance incentives

Governments and financial institutions in emerging markets have recently introduced a range of sustainability-linked financial instruments to attract investment and incentivise companies to pursue ambitious sustainability objectives. Among these is the fast-growing sector of sustainability-linked loans (SLLs), offering preferential terms such as potential interest rate reductions or increases, depending on the borrowers’ performance against predefined ESG performance targets (e.g., emissions reduction or gender equity).

The market for SLLs in emerging markets has expanded significantly, growing by nearly 60% between 2017 and 2021, and the adoption of SLLs is expected to continue accelerating, with the Asia-Pacific market leading at a projected compound annual growth rate (CAGR) of 27.8% through 2033. This growth is fueled by heightened awareness of climate risks, expanding public regulations on sustainable finance, and increasing technical assistance and investment from Development Finance Institutions (DFIs).

Notable SLL examples include the International Finance Corporation (IFC)’s $85 million loan to Precious Shipping Limited (PSL) in Thailand, tied to freshwater-use reduction targets for its vessels, and a $30 million loan to the Izmir Water and Sewerage Administration (IZSU) in Turkey, linked to a gender equity target of hiring at least 300 women in industries in which they are underrepresented. Similar financing arrangements have also been rolled out by multi-lateral development banks such as the African Development Bank and the Asian Development Bank.

Companies with robust ESG strategies supported by clear KPIs and measurable sustainability performance targets are best positioned to secure SLLs, as they effectively fulfill the eligibility requirements set by issuers. These strategies not only demonstrate alignment between business and sustainability objectives but also reflect strong internal performance management and mature performance relative to peers. This strategic positioning also supports market entry in regions where sustainable development is a national priority.

Unmet demand for sustainable products

Consumer preferences have long played a pivotal role in emphasising the business value of ESG, particularly in regions like the EU and North America. Recent research indicates that the demand for sustainable products is similarly rising in other parts of the world, especially in emerging markets across Asia, Latin America, and Africa. Consumer segments such as “zero-wasters” are now actively seeking sustainable product alternatives in these regions, signaling a shift toward more conscious consumption.

Additionally, another report found that over 80% of survey respondents in emerging markets indicated they care about the sustainability of products such as leisure travel, laptop computers, and apparel. Companies such as Kärcher are recognising this trend and strategically aligning their business expansion to respond, investing in the growth of sustainable and efficient cleaning technologies and addressing the growing demand for “green cleaning” in countries such as India.

Presently, this growing consumer demand in emerging markets remains unmet, as barriers such as unclear sustainability labelling still deter purchasing behavior. Companies that can identify and address these challenges are well-positioned for growth. For companies who do not yet have clearly articulated products or services related to sustainability, the development of an ESG strategy can help focus effort and investment into product innovation related to ESG that aligns with a company’s values, core competencies, and responds to evolving consumer expectations.

Regulatory harmonisation

Driven by rising investor and trading partner expectations for transparency, country-level ESG regulations in emerging markets have expanded and aligned with leading global frameworks and standards. For example, Brazil’s adoption of the ISSB standards integrates key elements from both the TCFD and SASB, signaling a shift toward internationally harmonised reporting. Similarly, Rwanda’s green taxonomy is deliberately structured to align with the TCFD and GRI frameworks, ensuring consistency in climate-related and broader sustainability disclosures. Aligning with global ESG frameworks is also expected to accelerate in emerging markets as global investors and companies continue to advocate for streamlined standards to reduce reporting and compliance complexity.

Companies with robust ESG strategies are well-positioned to recognise and respond to these shifts. By proactively aligning with foundational frameworks such as ISSB, TCFD, SASB, and GRI, they can embed regulatory readiness into their operations, reducing the cost of compliance that is often tied with expanding into new markets. This forward-thinking approach not only facilitates smoother market entry but also enables companies to meet growing expectations for transparency and performance measurement from regulators, investors, and other key stakeholders. Ultimately, a strong ESG strategy equips businesses to navigate multiple stakeholder demands simultaneously, enhancing trust, reducing regulatory risk, and creating competitive advantage in both domestic and international markets.

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While increasing political and economic shocks have caused markets in North America and Europe to retreat and slow down on their sustainability agendas, some other regions such as Asia and Latin America are viewing these shocks as opportunities to accelerate their sustainability efforts. A recent survey revealed regional differences in attitudes toward sustainability, as 91% and 71% of respondents in North America and Europe, respectively, reported backlash against the sustainability agenda in their countries, while only 38% in Asia reported similar sentiments. Coupled with the continued development of mature financing instruments, unmet consumer demand, and increasing regulatory harmonisation, ESG has evolved beyond a resilience strategy and into an opportunity for business growth and value.

How Anthesis can help

At Anthesis, we specialise in guiding organisations to develop and implement robust ESG strategies or refresh existing strategies to keep pace with change. Our team of global experts can support your company to develop ESG programs and strategies that support entry into emerging markets through regulatory horizon scans, mandatory reporting readiness, materiality assessments, and stakeholder engagement. We are experts at identifying and mitigating ESG-related risks, uncovering opportunities for innovation through ESG, and making the business case for sustainability.

For more information about how our ESG advisory services can support expansion into emerging markets, please get in touch using the form below.