"Hey, have you heard? Belarus has used fighter planes to force down a passenger jet so it can arrest a dissident journalist."
"Where are the bonds trading?"
"Haven't budged."
"OK, what else is new?"
The kidnapping of Roman Protasevich (pictured) may not be the worst human rights crime ever — it may not even have been the worst committed in Belarus that day. He’s still alive, unlike Saudi journalist Jamal Khashoggi, who made the mistake of going to his country’s embassy in 2018. But both these events affront the international order in a particularly glaring way.
Should EM bond investors — and investment banks — continue to finance such regimes? It’s an old debate and the usual answers — it’s better to stay involved and encourage change; EM is not Sweden, it goes with the territory; we have to stick to the benchmark; if we don’t do it, someone else will — ring as true or false as ever.
What has changed is the investment industry, with the huge rise in awareness of environmental, social and governance issues.
Many end investors now expect more from asset managers than to turn a blind eye to human rights. Passive funds can do more, by making a fuss at roadshows. Active funds can do more, by using what investment discretion they have.
Above all, there is a big market opportunity for EM funds that explicitly follow ESG principles. They’re going to have to invest in some unsavoury places. But there are enough EMs for them to choose those that are at least improving. If a small but vocal segment of the market started to shun the worst abusers, at least some of them would take notice.