9.3. The Role of ESG Integration in Emerging Market Investments Jürg Vontobel
Founder, Vietnam Holding Asset Management
In most emerging markets, the availability of relevant and reliable environmental, social, and governance (ESG) information remains the key challenge for ESG integration. This is also true for Vietnam, where very few companies report meaningful ESG data. Therefore, it is impossible to gather reliable ESG information through pure desk research. Vietnam currently has the second-highest economic growth rate in Asia, and thus the environmental challenges continue to be immense. Vietnam also has one of the longest coastlines relative to the size of the country. As a result, the climate change challenges, including rising sea levels and saltwater intrusion into the Mekong Delta, continue to loom large.
An Active-Engagement Approach Combined with Public Engagement VietNam Holding Asset Management (VNHAM) is a value investment manager dedicated to sustainable equity investments in Vietnam. Its flagship fund, VietNam Holding (VNH), signed the UN-supported Principles for Responsible Investment (PRI) in 2009. VNHAM constantly screens the listed company universe in Vietnam by applying a quantitative analytical process based on key value investment and financial parameters. The firms that qualify for an in-depth financial review are simultaneously submitted to an ESG analysis. Visiting analysts submit an elaborate questionnaire based on the methodology of the Swiss ESG research firm Inrate. In the fund manager’s proprietary analytical process, ESG performance is weighted equally with the companies’ financial performance. VNHAM reviews its portfolio companies’ incremental ESG progress. The openness and willingness of a company to address sustainability challenges proactively is a prerequisite for VNHAM to invest in the companies. The main challenge is that VNHAM’s analysts based in Ho Chi Minh City are mostly in contact with the middle-management levels of the companies. They very seldom have the opportunity to convince the top management of the benefits of sustainability principles, despite increasing publicity of environmental challenges and growing ESG awareness. To overcome this hurdle, 64
