Emerging Market Investment Opportunities

Everyone thinks EM resilience is a tech story. But that misses the bigger picture There’s been a lot of debate about EM stock index concentration lately #EmergingMarkets have held up remarkably well through the oil shock, outperforming the Q1 2022 episode, and versus typical risk‑off periods. Now the debate has swung to index concentration: if the EM index is dominated by chipmakers, has it lost its diversification appeal for investors? Not quite 1️⃣ Valuations. EM still trades at around 12x forward earnings, a 40% discount to the US. In the 2000s BRICS era, EM traded at a PE premium. Valuation regimes are cyclical, not structural 2️⃣ Positioning. EM is just 13% of global market cap. The US is 61% , far above its 25% share of global GDP. And EM tech is <3% of global indices versus 23% for US tech. Investors are strategically under‑allocated to EM 3️⃣ The dollar. The 2010s were a decade of dollar strength. The 2020s increasingly look like the opposite. A multi-year “dollar down” regime oxygenates EM returns in a way that’s easy to underestimate (see chart) Yes, tech concentration in the index matters. But EM’s story is bigger: valuations, positioning, and a shifting currency regime. That’s where the diversification lives now.

Today in Science Magazine, Jasper Verschuur, Prof Nicola Ranger and I argue that climate adaptation finance is not demonstrably achieving the desired outcome, which is climate risk reduction. https://lnkd.in/dJ4mrxaM We propose five policy reforms that will help shift the focus from inputs to outputs and outcomes: 1. Better local climate risk information, for example for infrastructure, agriculture and people. We need to know the baseline risk if we are to understand whether adaptation finance is shifting the dial. 2. More specific adaptation strategies. Too often there's a gulf between what's in countries' National Adaptation Plans and what ends up happening on the ground. 3. Realistic financing, which takes account of countries' fiscal situation and how it may be impacted by climate shocks; along with a shortened time-frame for international finance mobilization. 4. Much more capable adaptation project delivery, by building local capacity, including in crucial institutions like planning departments and public works. 5. Rigorous monitoring of adaptation delivery and its outcomes in terms of climate risk reduction. Sorting this out won't happen overnight, and we argue that a long-term perspective shouldn't detract from early action to manage climate impacts that are happening now. We're grateful for support from the Climate Compatible Growth #CCG programme.

A new global arms race is underway — and it’s getting costly. The demand for weapons in the Russia-Ukraine war is claiming a lot of the world’s capacity, even as the U.S. pulls back. The commitment by many Western countries, including Canada, to big increases in their defence budgets will only add to that demand. By one estimate, there could soon be another $1.9 trillion budgeted in the coming years for defence spending — and that’s just in the West. Where will all that money come from? And who will produce all the equipment, technology and weapons it will go shopping for? To bridge the gap, a lot of companies and public sector enterprises will need a new generation of capital to scale their innovation labs and production lines, and tackle new markets. It’s about much more than procurement and order books. The new defence and security sector will need new forms of capital, from venture to long-term equity. I’m in London and met today with a group of bankers, defence leaders and government officials to discuss a novel approach called the Defence, Security and Resilience Bank, a British-inspired idea that would pool capital from member countries. Those countries could then each borrow from the bank to finance expanded defence budgets, especially if their own borrowing costs in the open market are going up. Another novelty: This new form of multilateral bank could support guarantees for banks to lend to defence and security companies, making them much less risky. Here’s one of the challenges: The defence sector is made up of large multinational companies, which have a straight line to capital, and a vast array of smaller suppliers that don’t. Those small and medium sized enterprises, including a lot of Canadians, could soon see a massive increase in orders that they may not be ready for. That’s why many will need new equity investors or venture backers, depending on their size, to quickly expand. It’s not just defence firms. Lots of dual use security companies will be in the mix, too. Think of cyber, sonar and space, even health. An added challenge: many financial institutions, including government agencies, have shied away from defence companies, especially if they make lethal weapons. A new playbook may be needed, including definitions for security and defence. Eighty years ago this fall, the United Nations was created to help protect the world against major wars, largely through the rule of law, global standards and investments ion peacekeeping and human development. Now the focus is on deterrence. Starting in the 1940s, the UN approach used multilateral finance — think of the World Bank — to keep the world together. Can a similar approach to defence and security work? If it does, it may need to serve its own “dual purpose” — buzzwords of the season — to both deter conflict through strength while promoting peace through prosperity. RBC Thought Leadership

EU arms firms' shares skyrocket, sovereign bonds rise — here's why. My latest for EUobserver European defence companies have significantly outperformed their US counterparts since the start of the war in Ukraine. The most striking cases are Rheinmetall (Germany) and Leonardo (Italy). There is an expectation that increased defence spending in the EU will boost GDP. But we should not celebrate too soon. 1️⃣Beyond financial resources, achieving meaningful improvements in military capabilities will require time and political alignment. Decades of defence underspending in🇪🇺have weakened its military-industrial base. The fragmentation of demand has resulted in a dispersed and a not fully interoperable industrial landscape. 2️⃣Between 2019 and 2023, 🇪🇺sourced more than 50% of its military equipment from🇺🇸. This is due to: 🇺🇸develops some of the most advanced military technology in the world 🇺🇸equipment is often more cost-effective due to economies of scale. Increased military spending will not only benefit the European defence industry but also🇺🇸. 3️⃣Unlike other investments, where most funding will need to come from the private sector, defence investments will be predominantly financed by the public sector. This explains the sharp rise in sovereign bond yields last week. The European Commission has responded by announcing a relaxation of EU fiscal rules and up to €150 billion in loans to support new defence investments. However, such an approach primarily benefits Germany (probably a reason for the sharp increase in the stock price of Rheinmetall), whereas greater spending is also required from other large but highly indebted countries such as France, Italy, and Spain. 4️⃣While the 2% of GDP military spending target is the most well-known, there is another equally important target: at least 20% of total defence expenditure must be allocated to equipment. Some countries, like Greece, report high military spending as a% of GDP, yet historically, a large proportion of these funds has been directed towards wages and pensions. 5️⃣Not all EU Member States perceive the need to increase defence spending with the same urgency and will probably have other spending priorities. But if the EU wants to step up its defence capabilities, what matters is that the largest Member States meet the targets. Thus, EU Member States should adhere to a number of key principles: 1️⃣Demand should be consolidated to strengthen the sector. 2️⃣It must be acknowledged that dependence on the US defence industry will persist for some years in certain categories of equipment. 3️⃣Funding should not be managed at Member State level. It should be done at EU and take the form of transfers rather than loans. 4️⃣Spending should prioritise equipment. 5️⃣Member States geographically distant from the conflict must recognise that Russia’s influence extends far beyond its immediate neighbours. Link:https://lnkd.in/dqpvtGHb

Why is the Stock Market Falling in India? 1. Market Cap to GDP Ratio : The global average market cap to GDP ratio is around 0.9 to 1 (or 90%-100%). India's ratio, however, stands at a much higher ~147%, suggesting overvaluation. India’s higher ratio compared to most emerging markets reflects strong equity growth, but also raises concerns about sustainability, especially as corporate earnings have missed expectations in the recent quarter. 2. GDP Growth and Credit Rating Concerns : India’s GDP growth forecasts for FY2025 have been slightly revised downward by several institutions, citing weaker exports and domestic consumption. Lower GDP growth affects the denominator in the market cap to GDP ratio, exacerbating the perception of overvaluation. This slowdown could impact India’s credit rating outlook, as sustained growth is a key factor in maintaining investment-grade ratings. Any downgrade in credit outlook could lead to: A. Higher borrowing costs for India. B. Reduced confidence among foreign institutional investors (FIIs). Further depreciation of the rupee. 3. Rupee Depreciation The Indian rupee has recently breached the 86.50 mark against the US dollar, hitting record lows. This depreciation is driven by: A. A strong US dollar, supported by robust economic data. B. Outflows of foreign funds, as investors prefer US assets due to higher interest rates maintained by the Federal Reserve. C. Rising import costs, putting pressure on India's trade deficit. A weaker rupee not only impacts inflation but also adds to concerns about India's ability to attract and retain foreign investments. 4. Global and Domestic Headwinds : Trump’s Victory: With Donald Trump back in power, his likely pro-growth, protectionist policies could further strengthen the US dollar and intensify the capital outflows from emerging markets like India. Federal Reserve’s Stance: The Fed’s reluctance to reduce interest rates( Recent strong jobs data) ensures that US treasury yields remain high, making Indian equities less appealing to global investors. 5. Declining Savings and Rising Borrowings India’s household savings rate has been declining over the years, while borrowings—both personal and corporate—are on the rise. This imbalance creates: A. Higher reliance on foreign capital to fund domestic growth. B. Greater vulnerability to external shocks, such as currency depreciation or tightening global liquidity. 6. RBI Leadership Transition and Forex Reserves The new RBI Governor, Sanjay Malhotra, is navigating a challenging environment. While the central bank has been intervening in the forex market to stabilize the rupee, the pace and impact of these interventions have been limited compared to the previous governor’s tenure. Forex reserves are under pressure, impacting India’s ability to weather external shocks effectively. How do you see the Indian market navigating these challenges? Let’s discuss in the comments! #Stockmarket #Nifty #Sensex

The need to rapidly increase investment in adaptation is clear, but how can this be achieved? A key part of the answer is to strengthen domestic policy frameworks to enable increased investment to flow. Today, we released the Climate Adaptation Investment Framework to support governments to put in place clear, credible and consistent policy frameworks to spur public and private investment. The Framework covers six key policy areas: strategic planning, regulatory alignment, insurance and risk transfer, public finance and investment, sustainable finance, and support for private investment. It is non-prescriptive and flexible, respecting countries' differing adaptation needs, priorities and capabilities. Over the coming years, we plan to work with countries and partners to apply this Framework. We hope that this will provide an important contribution to the broader collective efforts needed to unlock investment at scale. If you'd like to discuss further, please do get in touch. The full framework is available here: https://lnkd.in/dMVwyJn7 Links to the Policy Highlights, a 3-minute video summary and recording of the launch event can be found here: https://lnkd.in/dqDthfkJ It was a pleasure working on this report with Iris Mantovani and Konstantin Blondeau-Mikhaïlov. It's been a collaborative effort, and we are grateful to all of the experts who have contributed their insights and guidance to help shape this work. Arghya Sinha Roy, Vladimir Stenek, Dr Nicola Ranger Jia Li Chloe Desjonqueres, Paul Smith Gary Power Craig Davies Kit England Raffaele Della Croce Jennifer Doherty-Bigara Kevin Adams Martin Wermelinger Ana Novik Mathilde Mesnard Robert Youngman Yuval Laster Mikaela RAMBALI Simon TOUBOUL Sophie Lavaud Géraldine Ang Valentina Bellesi Leigh Wolfrom Mamiko Yokoi-Arai Sophia Gnych Wiebke Emilia Stazi Kerstin Schopohl Ada Ignaciuk Emma Raiteri #cop29 #adaptationfinance #resilience #oecdatcop29

Less than 1% insurance penetration across most of Africa. That number hasn't moved meaningfully in years. And the industry's response has largely been: "We need better marketing." I respectfully disagree. The product needs reinvention. Not louder promotion. The issue isn't awareness. People understand risk. They deal with it every day. The issue is product design. Most insurance products sold in Africa were architected for markets with very different economic structures. Monthly premiums, agent-driven distribution, lengthy claims processes, none of this maps to how the majority of Africans live and work. Here's what a reimagined insurance industry looks like: • Micro-insurance with flexible premiums. Daily or weekly contributions that match actual income cycles. A farmer who earns at harvest shouldn't be forced into a monthly payment schedule. • Parametric models that pay automatically. Rainfall below a certain threshold? Payout triggers instantly. No forms. No waiting. No trust deficit. • Mobile-first distribution. Products that travel through the platforms people already use, embedded in the transactions they already make. • Community-based design. Insurance has always been about pooling risk. In Africa, communities already do this naturally. The smartest products will build on existing social structures, not replace them. The opportunity is extraordinary. Over a billion people who need financial protection and will adopt it when it's designed for their reality. What's the most interesting insurance innovation you've seen recently? #Insurance #FinTech #Africa #Innovation #ProductDesign

The biggest mistake investors make? Treating Africa like a country instead of 54 distinct markets. Afridigest’s latest map shows a clear divide: countries with massive Economic Potential (bottom-right) vs. those with actual Investment Attractiveness (top-right). But the UK-India-Africa Investment Corridor is currently building the bridge to close that gap. Here’s how the landscape is shifting in 2026:  ➡️ Nigeria’s Efficiency Play 🇳🇬: The massive £746M UKEF-backed port deal isn't just about ships; it’s about moving Nigeria up the Y-axis by slashing the logistics tax that kills PE exits. ➡️ Uganda’s Value Jump 🇺🇬: Already high on Investment Attractiveness, Uganda is the "darling" of the new UK-India trilateral. With UK FDI stock in-country jumping nearly 90%, we’re seeing a shift from raw exports to high-value pharma and agro-processing. ➡️ The Ghana/West Africa Halo 🇬🇭: Total trade with Ghana has hit £1.5B, but the real story is the UK–West Africa Digital Corridor. It’s tackling the $7B trade finance gap, making the "Emerging 9" much safer for institutional capital. The "Sleeping Giants" like Ethiopia and Tanzania (bottom-right) are the real targets for 2027. As the UK ramps up regional export finance capacity to £3B+, we’re moving away from speculative growth toward operational efficiency. Which of the Emerging 9 do you think breaks into the Top Tier 6 first? 

Adaptation finance is core of climate investing, and it has become a genuine commercial opportunity. Glasgow Financial Alliance for Net Zero (GFANZ) has just published "Investing in Resilience," a report built on 22 in-depth case studies from banks, insurers, asset managers and blended finance vehicles around the world. A few things stood out to me: 🔹 Nearly half of the case studies involved purely private capital, with no public subsidy required. Adaptation finance is increasingly viable through conventional loans, bonds, equity and insurance, not just concessional funding. 🔹 About a quarter used labelled instruments like green or blue bonds, showing both conventional and labelled finance can scale resilience investment. 🔹 The strongest business cases come from "stacking" value: avoided losses, lower insurance premiums and new revenue streams combined, rather than relying on a single cash flow to justify the investment. 🔹 Where private returns alone don't clear the bar (often in emerging markets), blended finance and catalytic capital from MDBs and DFIs are what get resilience projects to bankability. 🔹 The projects span the full range of physical risk: catastrophe bonds for sovereign disaster response, water infrastructure, climate-resilient housing, aquaculture supply chains, agricultural resilience in Sub-Saharan Africa, and grid hardening against extreme weather, across both advanced and emerging economies. The throughline: financial institutions aren't waiting for perfect data to act. They're combining hazard data, geospatial analytics and direct client engagement to turn physical risk into numbers that credit and underwriting teams can actually use. Worth a read for anyone working at the intersection of climate risk and capital allocation. #climatefinance #adaptation #resilience #sustainability #gfanz #investing

Global impact investing assets now exceed $1.5 trillion. Philanthropy, DFIs, and private investors continue to deploy record levels of capital across emerging markets. Yet Sub-Saharan Africa still faces an estimated $331 billion financing gap for micro, small, and medium enterprises. At least 44 million formal MSMEs operate across the region. Roughly half remain credit constrained. These businesses generate most employment and a major share of GDP. They carry the productive base of African economies. If capital were flowing according to real economic need, this gap would be shrinking. It is not. Over the past decade, blended finance for African SMEs has totaled roughly $11 billion across 145 transactions, representing only 14 percent of Sub-Saharan Africa’s total blended finance volume. Most capital continues to concentrate in large infrastructure, sovereign-backed projects, and late-stage transactions where risk is already well defined. This tells us something important. The constraint is not a lack of money. The constraint is how money is structured, priced, staged, and governed. African SMEs are not failing because they lack demand, talent, or relevance. They are failing because most capital stacks were not designed for: - Early execution risk - Small ticket sizes - Long maturation cycles - Local currency revenues - Thin balance sheets - High transaction costs per dollar deployed More capital poured into the same misaligned structures will not solve this. Over the coming weeks, I will share how philanthropic capital, when structured with discipline, can correct specific failures inside this system. Not by replacing banks or institutional investors. By absorbing the risks they cannot yet price and financing the transitions they cannot yet fund. The goal is not more activity. The goal is functioning capital pathways for African enterprises.