2. The Emerging Market Challenge
Large universe of investable companies
“Grow now, clean up later“
Quality of information is spotty at best
Government and market regulators lagging behind OECD
Few offshore listings
Local managers with limited ESG sensitivity
Language and cultural challenges
High ESG pressure
Rapidly increasing pollution
Neglect of human resource development
Low Transparency
2
3. Vietnam
86 million population and favorable demographics
Pragmatic policies avert overheating in 1H’08
Swift measures after global crisis in 3Q’08
Resilient despite lower exports and capital inflow
Export mix and new markets soften the blow
GDP growth at 5.5% in 2009
Attractive valuation and expected EPS growth
1,700 State-owned Enterprises to be privatized
Political stable and low social inequality
Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit
3
4. Economic Indicators
2005 2006 2007 2008 2009 2010e 2011e
Industrial production (% change y-o-y) 25.5 16 18.2 15.9 8.6 17.5 11.5
Exports (% change y-o-y) 22.5 22.1 22.7 29.9 -10.0 15.0 20.0
Imports (% change y-o-y) 15.7 33.4 41.2 28.5 -14.0 26.0 3.0
Total external debt (% of GDP) 23.8 22.9 23.4 23.6 24.5 25.5 25.0
Limited 2009 damage to export success story
Agricultural price volatility explains discrepancy between export vs. production growth
Large amounts of imports linked to large direct foreign investments
External debt levels continue to be very well managed
Source: EIU Vietnam Country Forecast 2010
4
5. FDI and Inflation
Foreign Direct Investment Inflation
FDI in % of GDP 2007 2008 2009 Foreign direct investment flow stays high
India 2.1 3.4 2.4E
Disbursed FDI result in positive BOP
China 4.0 3.8 1.6E
Vietnam 9.4 10.7 7.8 Inflation 9.2% y-o-y as of 30 April, 2010
Sources: GSO, Bloomberg, Credit Suisse
5
7. Growth and ESG Development
GDP growth in past 20 years second only to China
Accelerates from 5.3% in Q4 2009 to 5.8% in Q1 2010
Growth causes ecological strain which is 10 yr delay compared to China
GDP Growth p.a. - BRIC vs. Vietnam
Deteriorating water and air quality
600
China Vietnam India Brazil Russia 9.8%
500
Disclosure standards applied selectively
400 7.2%
300 6.6%
Poor monitoring and limited institutions 200 3.0%
100 1.7%
0
Developing regulation and political agenda
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Bottom-up social and environmental awareness developing
Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit
7
8. SRI Strategy
Vietnam Holding Asset Management Ltd.
Engagement | Analysis | ESG Assessment
Culture
Selection
INrate VNH Forum
Know-How Leadership
Valuation
Integration Value Approach Engagement
Sector Analysis Portfolio Call Schedule
ESG Indicators Analysis Macro & Micro Follow-up Request for Disclosure
Exclusion Fundamentals Voting Policy
Key Issues Due Diligence Action Items
Investment Universe
Research Partnership
Return
Vietnam Holding Ltd.
ASrIA | UN PRI | CDP
8
9. ESG Integration
Investment Analysis
ESG and Financial analysis
Investment context
Availability of market data Integrate ESG to investment process
Key Issues
Portfolio Assessment
ESG Grading
Core Indicators
Controversial Practices Proactive and progressing investees
Product Screening
Analysis and Data reveal ESG awareness
9
10. Investment Process
Sector Approach
Key Issues Material Investment Proposal and Update
Actionable
Priorities 1. Investment Return
2. Compliance
3. Risk : reputation, disruption of business etc.
4. Opportunities: differentiation, new markets etc.
Monitor improvement through active engagement
10
11. ESG Assessment
GRADING SYSTEM
Business Ethics
Criteria
Labour Controversial
Human rights
Practices
Score 124 Sustainability Criteria
38 CRITERIA
Environment
Governance INrate methodology
Reporting
124 CRITERIA
Sustainability Benchmark
Controversial Practices Implications
Grade
HIGH Average LOW
Sustainability Industry/region
Score MSCI Emerging Markets Asia ex JP
Sustainability management
BEST
PASSIVE PROACTIVE
clearly above
Industry/region
average
PASSIVE IN PROGRESS
average
Exclusion
Industry/region
WORSE
PASSIVE PASSIVE Controversial Practices & Products
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12. Exclusion
Clear Exclusion
Sin Stocks
5% Threshold
Weapons and Defense
Child Labor and Forced Labor
0% Threshold
Nuclear Energy
Potential Exclusion
Genetically Modified Plant Organisms (GMO)
Production and R&D
Distribution 0% Threshold
Usage
Continuous monitoring of controversial products and practices
12
13. Engagement
Direct Engagement
Encouraging disclosure of ESG topics
Board member and analyst call schedule
Monitoring and follow-up on key issues
Communicating rating and improvement
Engagement Cooperation
Investor opinions and information exchange
Voting with likeminded investors (investment pooling)
Filing AGM and EGM resolutions
Addressing larger corporate audience for sector and country issues VNH Forum
13
14. Wider Engagement
Forum Topic Partners / Experts Location Participants
VNH Forum
Aug 07 Building Value with SCIC / HSG Hanoi 125
Corporate
Governance
Building ESG awareness
Apr 08 Strategic SCIC / HSG HCMC 214
Management
Senior executives from SOEs
& VNH investee companies
Sep 08 Board SCIC / HSG Hanoi 120
Management HCMC
Practices
Showcase global best practice
Jun 09 Economic Crisis - HSG HCMC 26
Lessons Learnt
Within Vietnamese context
May 10 Long-term Value of SCIC, Bloomberg / Hanoi ca. 210
Covered by local media Investor Relations ASrIA , Boa Viet HCMC
Securities, VCCI,
JW Thompson
14
15. Associations and Partnership
State Capital Investment Corporation (SCIC)
Addressing ESG issues with a large corporate audience
VNH Forum co-organizer
Association of Sustainable and Responsible Investment in Asia (ASrIA)
ESG training workshop
VNH Forum partner
Vietnam Chamber of Commerce and Industry
Founding member of Business Council for Sustainable Development (BCSD)
VNH Forum partner
Vietnam Cleaner Production Centre (VNCPC)
Green Credit Trust Fund
Marketing assistance
15
16. VNH Portfolio
Distribution Return on NAV Vietnam Holding -32% DWS Vietnam -43%
7.1% 6.5%
PXP Vietnam -46% Dragon VEIL -55%
7.8% 5.5% 40%
4.7% FTSE ETFs -44%
4.1% 20%
15.6%
2.3%
2.1%
0%
1.6%
15.8% 1.0%
25.9% -20%
Agro-chemicals & fertilizer Construction & Materials
-40%
Food & Beverage Health Care
Industrial Goods & Services Banks
-60%
Oil & Gas Automobiles & Parts
Personal & Household Goods Utilities
-80%
Retail Financial Services
Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May
Insurance 07 07 07 08 08 08 08 08 08 09 09 09 09 09 09 10 10 10
Performance factors: Sourcing in over-the-counter market
Value Investment style Corporate Governance emphasis
16
17. VNH Foundation
Corporate Social Responsibility
Segregates profits from philanthropy
Separate staff & board
Identify projects for maximum benefit
Initial focus on Agent Orange victims
Identifying donors with similar objective
100% of co-sponsor‘s contributions flow to projects
Swiss supervision and Swiss tax exemptions for donors
17
18. Background
History
Founders: VietNam Holding Asset Mgmt Ltd. / Juerg Vontobel
Objective: Children-related philanthropy in South-East Asia
Incorporated: June 2007 in Zurich, Switzerland
Board: 1 Executive member, 3 independent members, no overlap to investment
Financials
Expenditures to date: CHF 410’000
VNHAM Donations: USD 820’000
Third-party Donations: CHF 115’700
18
19. Projects
Scholarships in Ninh Tuan Province
Scholarships for 1’720 children. Literacy rate only 74% in Ninh Tuan. Parents can’t afford
primary schools.
Orthopaedic Hospital in Danang
Equipment donation to increase annual operation capacity increase from 780 to 4000.
Training by staff of Bruderholz Hospital, Basel Land CH.
Handicapped Children in Quang Tri Province
Corrective orthopaedic surgery for 173 children in former DMZ. Operations performed in
Danang.
Children Home in Songklah Province, Thailand
Building and financing a functional centre for 30 homeless children and HIV orphans.
19
20. Vietnam’s Integrated SRI Fund
Keeping with our diversified value approach
Integrate ESG assessment on material issues
Actively promote best practices
Introduce systematic SRI approach to Vietnam
We improve value for shareholders
Actively engaging with enterprises
Promoting ESG awareness in Vietnam
Achieving superior investment returns
Financially supporting our VNH Foundation
20
21. Thank you
Contact
V IET N AM H OLDING A SSET MANAGEMENT LTD.
Ho Chi Minh City
1202 Fideco Tower
81-85 Ham Nghi, District 1
Vietnam
Tel. +84 83 823 0465
Fax. +84 83 823 4792
Zurich
Gartenstrasse 19
CH - 8002
Switzerland
Tel. +41 43 500 2810
Fax. + 41 43 500 2815
www.vietnamholding.com | info@vnham.com
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