Fund managers in emerging markets will be rated based on their capacity to incorporate environmental, social and governance factors into their investment decisions as part of a new research initiative commissioned by the International Finance Corporation (IFC), the private sector branch of the World Bank Group.

To determine the ratings, Mercer, which has been appointed by the IFC to conduct the study, is approaching 50 managers based in the emerging markets of China, India, South Korea and Brazil. The research will also include a survey of over 200 managers globally who invest in emerging markets.

Tim Gardener, global business leader of Mercer's investment consulting business, says the survey is expected to shed light on the sustainability of growth in these four countries.

"As demand for investment in emerging markets has grown, so too has the need for a better understanding of the environmental, social and governance forces at play in these markets and their impact performance," he says.

The results of the interviews with managers on the ground in China, India, South Korea and Brazil is expected to provide investors with an insight into how emerging markets are operating and the initiatives they demonstrate in environmental, social and governance factors.

Helga Birgden, Mercer's responsible investment leader for Asia-Pacific, says there are likely many managers and companies already engaging in sustainable practices, but not promoting themselves as such. ôA key aim of the study is to ensure these practices and managers are duly recognised," she says.

A joint IFC and the Economist Intelligence Unit survey shows that about 80% of asset owners who currently do not integrate environmental, social and governance policies in their emerging market investments expect to do so over the next three years. That shows the difficulty in finding fund managers with the required capacity.

The sustainable investing programme of IFC has been working, for the past four years, on increasing the sustainability of investments in emerging markets. Through the programme, IFC delivers technical and financial support to projects that help investors capture the potential for superior long-term returns in emerging markets using a sustainability approach.

Mercer has assembled a team of over 20 investment consultants and researchers, and will make use of its Global Investment Manager Database in each of the emerging markets to conduct the research. The findings will be made publicly available late this year.