It turns out that the key is to pick companies that are ‘good’ – which rather goes against the traditional, hard-nosed investor mind-set. However, if you look at what has happened to Volkswagen recently, or BP in 2010, investors need to have more than just a moral reason to hope their companies are behaving responsibly. Ethical, green, responsible all have different connotations to each individual investor.

New research, which Alquity has published with Cass Business School, has shown this to be truer in emerging markets than anywhere else. In fact those companies which voluntarily disclose information on their Environmental, Social and Governance (ESG) criteria delivered almost double returns; between June 2010 and June 2015 the ESG portfolio realized 56.9% compared to 30% realised by the benchmark.

Part of the key to these stocks’ performance is that they were five times less likely to experience extreme volatility – making them much safer for investors. Generally emerging markets are a much less regulated environment and thus a greater potential for companies to behave badly – and for that bad behaviour to blow up in their face. At Alquity we are calling on investors to choose companies that cut down on emissions and waste, treat their employees well and demonstrate both transparency and good practice across the board.

The other exciting trend shown by our research was that companies in emerging markets have made great progress in the last five years with disclosing information to investors on their practices. Of course this trend varies from sector to sector but interestingly the most marked change has been in the energy sector which has have increased disclosure on ESG by 25% in the last five year.

Why the dramatic shift in this sector? 2010 was the year of the BP oil spill in the Gulf of Mexico – an event which was foreshadowed by BP’s troubling scores on ESG indicators. With each disaster investors and companies alike wake up the safety that ESG informed investing can provide; it will be interesting to see what happens to the automotive industry in the wake of VW’s scandal.

This trend towards greater ESG disclosure also brings investors great opportunities to tap into the potential that emerging markets still hold and to do so in a way which seriously mitigates the risks inherent in the sector. In emerging markets, perhaps more than elsewhere – the smart money is on the ‘good money’.

Paul Robinson is founder and CEO of Alquity Investment Management

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