Western investors shouldn't be dambusters but ethics are needed in emerging markets

Global Outlook HSBC made a rather large play of saying it was highly unlikely to finance the controversial coal port planned near Australia's Great Barrier Reef on environmental grounds.

This was hailed as a great victory for environmentalists and corporate responsibility wonks, and rightly so, though we've not found out if the bank ever really fancied the deal made business sense in the first place.

Still, an ethical flag was planted.

However, being a big emerging markets bank presents multiple ethical dilemmas every day. By the nature of the countries in which these banks operate, their daily in-trays consist of demands for money to build big infrastructure projects as troubled economies attempt to drag themselves into the 21st century.

Take Laos in South-east Asia, where an almighty regional spat has been going on over plans to build a dam across the Mekong River, just 2km from the Cambodian border. Laos is desperate for the revenues it will bring, while Thailand and Cambodia like the idea of getting access to the 260MW of electricity it will sell them. But many in Cambodia and Vietnam also fear the impact on their fisheries and agriculture.

HSBC is involved as a shareholder in Malaysia's Mega First Corp, which is behind the building and construction of the Don Sahong dam.

It's not the only Western company with an interest. The pension fund manager Fidelity is a far bigger investor, owning the thick end of 10 per cent of Mega First's shares, according to FT data.

In many ways, Don Sahong is a replay of events surrounding the construction of another Laos dam, the Xayaburi hydropower project at the other end of the country. Once again, Western investors are involved in Xayaburi's Thai developer, Karnchang. Morgan Stanley Investment Management and Goldman Sachs Asset Management are among those on its shareholder list, according to FT data.

As with Don Sahong, there were arguments on both sides of the debate, with environmental and agricultural concerns being weighed against the economic benefits for Laos, which desperately needs the money. Vietnam, in particular, is still smarting from the Xayaburi consultation process, or lack of it.

This week Laos made some concessions on the consultation for Don Sahong, offering the project up for closer scrutiny from neighbours.

But the suspicion remains among some in the region that this is merely rhetoric. Earlier this month, reports from one NGO claimed work on Don Sahong had already begun.

Western investors like HSBC argue, justifiably, that such projects can provide huge local benefits as well as costs. But they should at least bring pressure to bear to make sure that due process is followed and avoid exacerbating regional tensions.