Emerging Markets:
A Decisive Decade

We have selected a list of key terms used throughout this Look Forward Journal. We offer these definitions to provide readers with a clear understanding about the scope of each concept, which can vary across different research outlets. 

Emerging markets: For the purpose of the articles of this Look Forward Journal, S&P Global defines “emerging markets” as countries that have been or are transitioning toward middle-income levels, with good access to global capital markets (including  sovereign and domestic corporations and financial institutions), deepening domestic capital markets, and global economic relevance based on economic size, population and share in global trade. In our article series, we focus on Argentina, Brazil, Chile, China, Colombia, Hungary, India, Indonesia, Malaysia, Mexico, Peru, the Philippines, Poland, Saudi Arabia, South Africa, Thailand, Türkiye and Vietnam. Some articles include additional countries within the scope of our definition to emphasize our arguments or to present the reader with additional examples that support our insights.  

Frontier markets: S&P Global defines “frontier markets” as countries with per capita income below $2,500 GDP. These countries face economic challenges and financing needs. They rely on international institutions, including the International Monetary Fund’s Poverty Reduction and Growth Trust, for vital policy and financial support. They have shallow and narrow domestic capital markets that are often underdeveloped. These economies are also characterized by political instability, inadequate regulation, substandard financial reporting, weak liquidity and large currency fluctuations. Their economies are often concentrated in very few sectors or commodities.

In our article Multilateral lending institutions and private sector capital mobilization for climate action and development, we use additional definitions to classify countries. This is because multilateral institutions use country income classifications in their underwriting criteria. The income classification definitions below are fully aligned with World Bank guidance, which is updated regularly. Countries classified within the lower-income, lower-middle-income and upper-middle-income categories can also be classified within our frontier or emerging markets thresholds.

Low-income countries: Countries with gross national income (GNI) per capita equal to or below $1,135.

Lower-middle-income countries: Countries with GNI per capita between $1,136 and $4,465.

Upper-middle-income countries: Countries with GNI per capita between $4,466 and $13,845.

High-income countries: Countries with GNI per capita above $13,845. 

For more details and updates on these definitions, please refer to the World Bank Group country classifications by income level.

SSP3-7.0: A moderate- to high-emissions scenario, akin to a slow transition, in which countries increasingly focus on domestic or regional issues, with slower economic development and lower population growth. A low international priority for addressing environmental concerns leads to rapid environmental degradation in some regions. This SSP projects a global temperature increase of 2.1 degrees C (1.7 degrees C-2.6 degrees C) by 2050 or 3.6 degrees C (2.8 degrees C-4.6 degrees C) by the end of the century.

Energy transition financing gap: In our articles, we discuss a financing gap that refers to the resources needed to achieve each country’s energy transition objectives. Such objectives could be defined by domestic state policy guidelines or fully aligned with the UN’s sustainable development goals. In most cases, the amounts needed to achieve sustainable goals are significant and difficult to finance, leading to a financing gap. 

EU Corporate Sustainability Due Diligence Directive (CS3D): This directive was approved by the Council of the European Union on May 24, 2024. It stipulates that EU-based companies and non-EU companies operating in the European single market with more than 1,000 employees and global revenue exceeding €450 million are legally bound to ensure that their supply chains neither harm the environment nor violate human and labor rights. Implementation will occur in stages between 2027 and 2029, based on company size.

Strategic Opportunity Index™ (SOI™): The Strategic Opportunity Index™ measures the state of a market and its potential to generate opportunity for enterprise, encompassing a range of factors. The SOI™ draws on market-level data for over 90 markets, covering more than 98% of global GDP. The aggregate scores and ranks of each market and the state of the macro environment have been constructed on an annual frequency since 2014. The data provides users with current and historical telemetry on the economic, regulatory, policy, institutional, logistics, supply chain, trade and resource questions through normalized data. 

• The SOI™ Momentum Score measures how the markets have changed over the past 10 years from the perspective of the index. Momentum scores are calculated from compound annual growth rates and normalized to provide a comparable score that focuses on the trajectory of the country, regardless of the current SOI™ ranking. Markets with the most improvement rank highest on momentum scores. This approach helps users understand and identify markets where opportunities are expanding.

• The SOI™ Policy Favorability Score measures the extent to which government policies, regulations and tax code support and encourage new enterprise.

• The SOI™ Institutional Quality Score measures the strength and effectiveness of a country’s institutions, such as legal and financial institutions.

• The SOI™ Logistics Efficiency Score measures the effectiveness and reliability of a country’s logistics and supply chain infrastructure.

• The SOI™ Market Potential Score measures the extent to which the domestic market is open, innovative and attractive for new business opportunities. 

• The SOI™ Resource Availability Score measures the accessibility and adequacy of the necessary resources for conducting business operations in a given market, specifically labor and capital.