The significance of the social dimension in BRICS development

The ESG paradigm that became so prevalent in the corporate sector of the global economy in recent years often prioritized more stringent environmental standards, with the Social and the Governance elements being accorded at times secondary importance. This has also been the case with many emerging markets, where the rush to secure higher ESG ratings was accompanied by a relatively lower emphasis placed on the attainment of higher social responsibility standards. For BRICS economies, however, in view of their socio-economic fundamentals characterized by high income and regional inequalities, the key priorities within the ESG triad need to focus on the social and governance areas.

In terms of the existing ESG rankings across countries (with all the reservations regarding their methodology and the relevance of such rankings at country level) BRICS+ economies do not perform too well – an ESG risk ranking compiled by Global risk profile[1] suggests that most of the BRICS5 economies have a “medium” ESG risk, while for India ESG risks are estimated as “high”, mostly on account of the significant environmental concerns. For a wider set of BRICS11/BRICS+ economies some of the ESG ratings are even worse – as is the case with Ethiopia (very high), Egypt (high) and Iran (high). The only BRICS11 economy with a low ESG risk rating is Argentina.

One of the reasons why the social element needs to be prioritized within the ESG strategies of BRICS+ corporates is the high levels of income inequality across the largest BRICS+ economies. As measured by the Gini coefficient income inequality in South Africa and in Brazil are among the highest in the world. Inequality levels in other BRICS are notably higher than in European economies and close to US levels. There is a further dimension to these imbalances in the form of high regional inequalities across BRICS – for example between coastal and inland regions in China or between Moscow/oil-rich regions vs the rest in Russia.

Another socio-economic dimension is the high share of the population across BRICS living in poverty. Focusing on poverty reduction is becoming all the more critical, as the long-term trend of poverty decline observed in the developing world has either slowed down or was reversed[2]. According to the estimates derived from the Poverty and Inequality Platform (PIP) of the World bank the share of poor people living on less than USD 6.85 (2017 PPP) a day increased in 2023 by 0.2 percentage points compared to September 2022 from 46.7% to 46.9%. The absolute figure of people living in poverty reached 3.634 bn, of which more than 42% is accounted for by South Asia (an increase of 24 million people in absolute terms) and nearly 27% by Sub-Saharan Africa.   

A further facet to the socio-economic challenges across many emerging markets is the legacy of past episodes of lost savings that affect trust and business confidence at corporate and national economy levels. One example of such legacy issues is the 1990s period in Russia, when the population lost its savings multiple times as a result of the freezing of deposits in the banking sector, bank failures, pyramid schemes, exchange rate devaluations, etc. But despite the socio-economic imbalances and the lingering legacy issues that are yet to be fully addressed in state-owned companies, CEO remuneration is at times either on par or well in excess of Western benchmarks, while ESG is more of a “green fad” that accords at times only token attention to social issues.  

In view of the above, a corporate governance agenda that employs the ESG paradigm to address the notable socio-economic imbalances in the BRICS+ space may include the following:

  • An ESG strategy for the largest corporates that explicitly prioritizes social development, including higher standards of social security support
  • An explicit recognition of the need to cater to the interests of a wider array of stakeholders for BRICS corporates, including employees and local communities
  • A cap on CEO and top management remuneration levels, particularly for state-owned companies

At the level of macroeconomic policy, the prioritization of social development will need to target lower poverty levels and improved conditions for “human capital” development – the resulting macroeconomic policy mix will need to include:

  • Fiscal policy (taxation): progressive income taxation and a tax burden that provides sufficient revenues to support a stronger social safety net
  • Fiscal policy (spending): outlays prioritize education, health care, digital inclusion, financial inclusion
  • Monetary policy: a conservative approach that aims at low inflation, a stable exchange rate and lower dollarization
  • Active labour market policies, targeting low unemployment
  • Greater use of economic policy rules geared towards lowering the scale of volatility in key macroeconomic aggregates

A greater prioritization of economic policies of the BRICS members around these macroeconomic priorities may provide greater scope for economic policy harmonization and coordination across the BRICS/BRICS+ platform. Such policy coordination in turn may improve the possibilities for creating BRICS+ trade and investment alliances along with the centrality of social protection and the provision of high social security standards.

Overall, with Western economies advancing the ESG agenda, developing countries could render such a paradigm more socially focused, with all three elements – environmental, social, governance – geared towards attenuating the sizeable socio-economic imbalances observed across the BRICS+ space. While for Western companies and national economies levels of inequality and poverty are not as extreme and there is a tendency there to focus more on the environmental agenda within the ESG strategies, the socio-economic landscape in BRICS+ argues in favour of according significantly more weight to community development, lowering inequality levels and poverty reduction. If BRICS+ is to project a more balanced and just approach to global governance on the international stage, its credibility would be enhanced by a more socially focused corporate and economic development agenda.  


The ESGI (Environmental, Social and Governance Index) is a unique tool that encompasses three major issues in risk analysis, aggregated to a global scoring through a weighted geometric mean. These concerns are weighted as follows:  environment (30%), human rights (50%) and health & safety (20%).


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