Royal Bank of Scotland has launched the RBS Emerging Markets Socially Responsible Investment Index, designed to both capture growth in emerging markets and give investors easy access to socially responsible companies.

The index is a rules-based, long-only equity index designed to reflect the performance of 30 emerging markets companies which are deemed to be “best in class” in their commitment to high environmental, social and corporate governance standards. Companies’ ESG performance is determined by RBS’s partner in this venture, RiskMetrics, which will apply a three-tier ESG overlay based on UN Global Compact principles.

According to RBS, emerging markets often lack information transparency, company disclosure and research coverage and ESG screening can be a useful means of assessing companies and finding those which those which may be otherwise undervalued or overlooked.

ESG screening is an increasingly gaining currency as a mainstream investment practice, being seen not just in terms of negative screening but more as a means of identifying companies which represent long-term value. There is increasing recognition that responsible investing need not necessarily have a negative impact on returns. Indeed, according to RBS, simulated back testing of its Emerging Markets Socially Responsible Investment Index has shown that it would have outperformed the MSCI Emerging Market Index on a 1,2,3 and 4-year basis.

“We are delighted to offer this innovative index that enables investors to invest in emerging markets and environmentally and socially responsible companies. This is something that our clients have been asking for, so I am delighted that RBS can now add this to our product range,” said Laurence Black, head of thematic indices at RBS.

RBS Emerging Markets Socially Responsible Investment Index provides daily liquidity and is offered through Delta 1 certificates or a variety of structured products.