Why Emerging Markets Face High Stakes Test in Responsible Development

In several emerging economies, gleaming business districts rising beside flood-prone neighbourhoods, net zero office towers operating within water-stressed cities and billion-dollar infrastructure projects built on land where community negotiations remain unresolved years later. This contradiction increasingly defines modern development across the Global South: growth is accelerating, but the systems governing that growth are struggling to keep pace.

That matters because the next decade will lock in the economic and environmental future of emerging markets for generations. According to the United Nations Environment Programme, buildings and construction already account for nearly 37% of global energy-related carbon emissions. This means the infrastructure decisions emerging economies make over the next decade will disproportionately shape whether global climate goals remain financially and operationally achievable. At the same time, the World Bank estimates that India alone will require more than $2.4trn in investment by 2050 to build resilient urban infrastructure. Much of the urban landscape that countries like India, Indonesia, Vietnam and parts of Africa will depend on in 2050 has not yet been built. India alone is expected to build nearly 70% of its future building stock in the coming decades.

What gets built now, and how, will be extraordinarily difficult to reverse later.

Capital is the Real Regulator

Responsible development is often framed as an ESG issue. It is increasingly a capital allocation issue. The standards developers follow are largely determined by the expectations of the institutions financing them. A significant shift is now underway in global capital flows. Sovereign and long-duration institutional investors are no longer evaluating emerging-market projects only through the lens of returns and growth potential. Increasingly, they are scrutinising resilience, governance quality, operational transparency, labour practices and social stability.

Climate exposure, worker conditions and land-related disputes are no longer peripheral ethical concerns. They are investment risks. In many emerging markets, developers continue to operate with dual standards – rigorous disclosure and governance for internationally financed assets, and materially weaker oversight for projects funded domestically. That divergence remains insufficiently priced into the market.

The geopolitical dimension is equally important. Climate finance is no longer only about sustainability targets; it is also about strategic influence. Infrastructure corridors, renewable energy systems, logistics networks, ports and urban development are increasingly tied to broader contests around supply chains, economic alignment and regional influence. In that environment, governance credibility itself becomes a strategic asset.

The Certification Illusion

The expansion of ESG frameworks and green certifications has created visibility, but not always accountability. Too many developers continue to treat sustainability certifications as transactional exercises designed to satisfy investor checklists, or marketing requirements. The sector has become crowded with overlapping frameworks, ratings and disclosure systems that often measure intent more effectively than outcomes.

The more difficult question – how the building actually performs three or five years after certification – is rarely asked. In many emerging markets, post-occupancy operational data remains fragmented or unavailable. According to the International Energy Agency, operational inefficiencies in buildings continue to undermine global decarbonisation efforts despite rising green certification volumes. Without longitudinal measurement of energy use, water efficiency, maintenance performance and climate resilience, sustainability claims remain difficult to validate. The market is slowly beginning to distinguish between assets that are genuinely operationally resilient and those that are merely well-documented.

Managing Risks

The greatest risks in emerging-market development are often the least visible in annual reports. Land acquisition remains one of the sector’s most sensitive fault lines. How land is assembled, how communities are consulted and how rehabilitation is managed increasingly forms part of institutional due diligence. Investors are recognising that unresolved social friction can impair long-term asset performance as materially as financial mismanagement.

The same applies to supply chains. The construction sector still tends to treat embodied carbon and labour conditions as separate conversations, even though both sit inside the same procurement ecosystem. According to the International Labour Organization, construction accounts for nearly one in five workplace fatalities globally – a reminder that supply-chain opacity is not only an ethical concern but an operational and reputational risk. Meanwhile, the World Green Building Council estimates that embodied carbon from materials can account for up to 50% of a building’s total carbon footprint before operations even begin.

Yet reporting often stops at the primary contractor level, even though the most serious labour, sourcing and environmental risks typically exist several layers deeper.

Going Beyond Balance-sheet 

For years, the global sustainability conversation focused primarily on reducing emissions. The more immediate challenge is adapting assets to the climate conditions already unfolding. Extreme heat, water scarcity, flooding, and energy instability are beginning to reshape the economics of urban development faster than many underwriting models acknowledge. The Swiss Re Institute estimates that climate change could reduce global GDP by up to 18% by 2050 under severe warming scenarios. Insurance markets are already responding. In several regions globally, climate vulnerability is beginning to affect insurability, financing conditions and long-term asset pricing. For emerging economies, adaptation is no longer an environmental conversation alone. It is rapidly becoming a balance-sheet issue.

Beneath every sustainability promise sits governance. Strong certifications and diversity commitments do not compensate for weak procurement systems, opaque disclosures or unclear decision-making authority. Governance ultimately determines whether sustainability survives commercial press.

Representation Vs Authority

The governance question reframes a debate that has too often been treated as a separate diversity discussion. Across emerging market real estate and infrastructure, women remain materially underrepresented in the functions where capital is actually deployed – investment committees, development boards, joint-venture structuring and in P&L roles. Representation in advisory, sustainability and compliance roles has improved over the past decade, but these are largely consultative functions.

The more consequential measure is participation in decisions that determine which projects get built, on what terms and against which standards. Until that shifts ESG and diversity commitments will continue to sit alongside the business, rather than inside it – visible in reporting, absent from underwriting.

Ultimately, markets are beginning to separate operators capable of demonstrating measurable operational change from those relying primarily on documentation. That valuation gap is widening. What emerging markets build over the next decade will matter enormously. But how they build may matter even more.

(Chanakya Chakravarti is Global Real Estate Investor and Capital Advisor. The views expressed are personal.)