Vietnam Holding (VNH) has been firmly committed to applying sound sustainability criteria at the heart of its investment approach for ten years now. VNH fully integrates Environmental, Social and Governance (ESG) standards into its investment process and chooses to invest only in enterprises which meet its requirements in both financial and ESG matters.
In 2009, VNH became a signatory to the United Nations Principles on Responsible Investing (UNIPRI), aligning its investment policy to the UNPRI principles. Since 2012, ESG factors have been fully incorporated into VNH’s investment process and engagement strategy. VNH reports on its responsible investment activities every year through PRI Transparency Reports, the largest global reporting project on responsible investment.
ESG issues are considered throughout the investment process and based on four steps: initial screening; due diligence; investment decision; and investment monitoring. This is complemented by an ESG data matrix which is constructed for each portfolio company.
During the initial screening step, companies involving products and services with known negative impacts will be excluded. The fund’s exclusion criteria cover businesses that, for example, deal in tobacco, firearms, distilled alcohol and gambling, among others.
Each short-listed investment is thoroughly studied for controversial business practices in an intensive due diligence process. Companies engaged in pollution, child labour, bribery or other damaging practices in corporate governance are excluded from investment consideration. Any shortcomings for best practices are noted to be followed up through the Company Engagement Programme.
After an investment is made, ESG activities of an investee company are systematically updated through meetings with its board members, executive officers, and senior managers as well as its distributors, suppliers and competitors. Detailed monitoring of company publications, relevant news and market developments is ongoing.
At VNH, we assign a high priority to the engagement mandate entrusted to us by our shareholders and have been devoted to engaging portfolio company executives through face-to-face meetings as part of our Company Engagement Programme since 2012. This focuses on improving a portfolio company’s financial performance and emphasizing the necessity to systematically implement ESG factors. By enhancing our knowledge on specific issues, we are able to support investee companies in both financial and ESG aspects: from influencing better governance to helping them take positive steps toward improving sustainability policies, practices and performance. This not only helps us in our investment decisions but also adds value by influencing positive change at the investee companies.
Portfolio manager and Dynam CEO Vu Quang Thinh is a leading member of the Vietnam Corporate Governance community. In 2017, he became a member of the National Advisory Council on Corporate Governance under the Vietnam Corporate Governance Initiative (VCGI). Since 1999, he has been involved in a number of initiatives funded by the World Bank, the Asian Development Bank and other donors helping Vietnam to improve its corporate governance framework and supporting State-Owned Enterprises with enhancing their corporate governance practices.
Thinh is an active founder member of the Vietnam Institute of Directors (VIOD), a professional organization promoting corporate governance standards and best practice in the Vietnamese corporate sector. It was formed in March 2018, with support from the State Securities Commission of Vietnam, the Ho Chi Minh City and Hanoi Stock Exchanges (HOSE) and with technical assistance from the International Finance Corporation and Swiss Secretariat for Economic Affairs.
Since 2010, VNH has hosted forums and workshops to help foster awareness of sustainability principles within Vietnam’s investment community:
The Long-term Value of Investor Relations
Strategic Management: Short-term View vs Sustainability
Economic Growth: Managing the Environmental Impact
Building Effective Boards: Strategic Role for Sustainable Growth
ESG Reputation in a Digital World
Managing Corporate Reputation with Responsible Business Practices
Carbon Footprint: Corporate Solutions for Sustainable Growth
Interest in these forums has grown over the years, attracting up to 250 participants including senior executives of both investee and other public and private companies keen to learn more about sustainability and share information about best practices. Covered extensively in the local media, the workshops have proven value in influencing the strategy and operations of VNH portfolio companies. The next workshop is scheduled to take place in Q4 2020 with a fresh focus on how corporate governance is evolving in Vietnam.
According to the United Nations Framework Convention on Climate Change (UNFCCC), Vietnam is one of the five countries most vulnerable to climate change. Focusing solely on the Vietnamese market, we are strongly aware of climate-related risks and opportunities presented to the country, investee companies and thus our investing in the long term. We support the Paris Agreement and the Task Force on Climate-related Financial Disclosures (TCFD) by conducting carbon footprint studies on our portfolio, integrating climate change risks and opportunities into our core processes and helping our companies to do more on reporting their carbon emissions. We also are in the process of mapping our portfolio activities to the UN Sustainable Development Goals and measuring the portfolio’s net external impact.