The Evolution of Sustainability Strategies of Companies Operating in Emerging Markets
Introduction
The last five years has seen a rapid evolution in sustainability strategies for infrastructure and energy companies. We recently conducted a study with the International Finance Corporation (IFC) of more than 100 companies that operate in emerging markets to identify trends in sustainability priorities, reporting practices and how strategies are anchored and financed at these companies.
Methodology
The study included 104 companies across six sectors: Energy, Technology, Media, and Telecom (TMT), Transport, Mining, Water & Waste, and 'Cross-Cutting' companies with operations across more than one sector. Data was gathered from publicly available documents, company websites, and databases like S&P Capital IQ and LSEG Data & Analytics. This information was analyzed using a sector performance model developed by KPMG which considered 51 KPIs across Strategy, Governance, KPI & Data Reporting, Environmental, Social, and Community Benefit-Sharing.
Key findings
1. Companies are embracing sustainable finance
51% of the companies studied used sustainable finance. Among the financial instruments most used by the companies, green bonds (53%) lead, followed by sustainability-linked bonds (30%) and loans (25%). Moreover, 25% of the companies have sought support from DFIs and multilateral development banks such as IFC, EBRD and ADB. Among the six major sectors these companies are operating, Water & Waste (75%), and Energy (74%) sector companies are leading in terms of the use of sustainability-linked finance whereas Transport sector companies (16%) trail the companies in other sectors.
2. Increased disclosure on gender equality data
Most companies have disclosed gender-related data, indicating a growing commitment to transparency and accountability. Standout sectors include mining and energy while sectors with opportunities to enhance disclosures include TMT, transport, water, and waste sectors. Despite increased disclosure and reporting, fewer companies publicly disclose targets for gender diversity. Further, there is opportunity to encourage a comprehensive approach to inclusion that goes beyond gender to include other key areas such as disability, underserved groups and communities depending on the operational and geographic contexts these companies are operating in.
3. Decarbonization targets and nature-based solutions
We reviewed company-specific targets across Scopes 1, 2 and 3 as well as whether these were structured as carbon neutral or net-zero targets. The analysis showed that:
Across all sectors, there is limited progress in Scope 3 reduction targets by the companies analyzed. 44% of companies do not disclose Scope 3 emissions.
4. Increasing focus on nature
Companies are increasingly prioritizing biodiversity by integrating it into their operations through conservation, restoration, innovative solutions, and sustainable land management. As part of their resilience strategy, companies are prioritizing nature-based solutions and initiatives that help drive the global energy transition and combat climate change. However, the adoption rate of sustainable disclosure standards on this newer topic remains lower and slower than many others: Only 10 out of 104 companies analyzed are the adopters of Taskforce on Nature-related Financial Disclosures (TNFD).
5. Evolving efforts on community benefit-sharing
Based on the analysis of twenty-five companies in energy and infrastructure sectors on their community-benefit sharing efforts, the majority (84%) have been disclosing education and skill-focused initiatives with measurable impact. Other areas include humanitarian support/environmental protection (48%), health-related projects (44%) community climate resilience initiatives (8%).
Across sectors there is also priority placed on disclosing impacts in Latin America and Africa, with a focus on cultural heritage preservation, access to improved infrastructure and services, community-level education, and healthcare improvement, among others.
The path forward: Overcoming challenges and accelerating impact
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