Asset managers interested in socially responsible investments are quick to admit that environmental, social and governance (ESG) problems often run deeper in emerging markets. Corporate transparency and disclosure tends to be weaker there, and it's challenging to master the nuances of each market. But investors also tell you they wouldn't miss this opportunity for the world.

Sustainable investing in emerging markets has grown to more than $300 billion, estimates a survey of emerging market equity managers conducted by Mercer LLC in 2009. This includes assets in either a sustainable investing-labeled fund or a mainstream fund that has made some commitment to integrate ESG into its core investment process.

Trillium Asset Management Corp., which is solely devoted to sustainable and responsible investing, purchased its first emerging market stock five or six years ago. It's currently doing a thorough review of emerging markets, developing an emerging market strategy and considering the rollout of an emerging market socially screened fund, says chief investment officer Stephanie Leighton.

"We want to go where the growth is," says Leighton, who is also a co-portfolio manager of the Green Century Balanced Fund subadvised by Trillium.

By 2017, emerging markets are expected to account for 50% of world gross domestic product (GDP), according to J.P. Morgan's 2010 report, EM Moves into the Mainstream as an Asset Class. Goldman Sachs Global ECS Research has estimated emerging markets could reach 55% of global market capitalization by 2030.

International stocks already account for 10% to 15% of the assets held by Trillium and the Green Century fund, and clients are asking for more non-U.S. exposure, says Leighton. While she and her colleagues won't invest in major abusers of the environment or human rights, "We probably need to loosen up a little on ESG," since emerging markets are in the earlier stages of the process, she says.

Leighton, who is also Trillium's bank analyst, says Brazilian banks look attractive right now, particularly Banco Bradesco SA (which trades on the New York Stock Exchange as BBD). Of the BRIC countries (Brazil, Russia, India and China), Brazil has the strongest ESG practices. The banking sector should benefit from the country's strong economy, inflation that's in check and a population that is still largely under-banked.

Banco Bradesco, one of the largest private-sector banks in Brazil, has traditionally focused on low- and middle-income earners-a rapidly growing segment of the country's population. A leader in ESG due diligence among its emerging market bank peers, it has told Trillium that it's taking measures to monitor the socio-environmental risks associated with the projects it finances, including hydroelectric plants. Trillium notes, though, that it has a long way to go to be a global leader in sustainability.

India's HDFC Bank Ltd. (NYSE: HDB), Trillium's initial emerging market purchase, is experiencing annual earnings growth of 30% as more of the population becomes middle class and purchases homes. Analysts predict this growth will continue over the next three to five years, notes Leighton. HDFC, which has sponsored school and water projects, received the Economic Times Corporate Citizen of the Year award in 2005 for its longtime commitment to community development.

Although India in general offers big growth opportunities, "it's not a slam dunk," Leighton cautions. Investors should consider inflation, poverty and differences in information and customs when evaluating specific companies.