Integration of ESG into Private Equity in Viet Nam


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Thomas Jakobsen, Head of Sustainability - Anpha Capital - Vietnam

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Integration of ESG into Private Equity in Viet Nam

  1. 1. RESPONSIBLE INVESTMENT: SCOPE AND STRATEGY 2 Scope of RI RI Strategies RI Strategy Definition Types Seeking to invest in compa- Core RI Best-in-class nies with a commitment to responsible business prac- Positive Pioneer tices, or that produce positive screening products and/or services. screening Includes Best-in-class and Thematic Pioneer screening investments Ethical Avoidance of investment in Negative targeted companies, indus- exclusions screening tries and countries Simple Broad RI screening Avoidance of investment in Engagement targeted companies, indus- Engagement tries and countries ESG is incorporated into Integration investment analyses and Integration decision making Combination of different strate- gies are possibles (*) Source: IFC
  2. 2. HOW RESPONSIBLE INVESTMENT IMPROVES RISK/REWARD RATIO 3 Upside from corporate governance premium(*) - Europe: 19% Reward - Asia Pacific: 24% - North America: 18% - South America: 24% Environment Social } Business opportunities Downside protection from risk management Risk - Environment: for example water effluents - Social: for example occupational health and safety - Governance: for example fraud or missed opportunity (*) Source: Mc Kinsey & Co
  3. 3. INVESTMENT PROCESS - TWIN TRACK APPROACH 4 Origination Analysis Structuring Execution Monitoring Exit Negative Thorough review Commitments ESG team Quarterly review Encouragement screening of of target’s ESG of target for connects with of progress on of investee unethical matters with improvements investee ESG company to products assistance of in ESG company commitments continue to Identification relevant external Negotiation of representatives Review letter prioritize ESG ESG of best in advisors ESG Joint monitoring sent to investee matters post Team class Quantify monitoring fee plan for post company board sale of stake corporates intangibles using funding stage Engagement on proprietary model shareholder voting Focus on Diligent analysis Finalization of Execution of Operations Review of exit oustanding of management terms sheet: SPA, shareholders oversight, options - trade investee team and Shareholder agreement and financing sale, listing or companies business plan rights/ side agreements expertise re-cap Investment Exploit relationship Review of sector fundamentals downside protection/ Other post acquisition Negotiation and execution of Team network Build valuation financing value-add SPA model using FCF instrument to shareholders Alignment of Exhaustive interests, commercial, legal liquidity events and financial due diligence
  4. 4. ESG MATTERS IN SELECT INVESTMENT THEMES 5 Retail Food & Education Health care Financial Infrastructure Beverage Services enablers supply chain effluents resource waste disposal little direct effluents resource efficiency impact - large resource management Environ- impact based on use of funds management mental staff wellbeing occupational staff wellbeing staff wellbeing staff wellbeing occupational staff turnover health and staff turnover staff turnover staff turnover health & safety safety occupational professional chemical safety Social chemical safety health & safety development professional and traning development and training reporting quality division of quality control corporate gov- transparency divsion of roles management roles division of ernance quality control division of roles quality roles framework and division of roles Governance management corruption committees corruption integrity credit risk towards managment accreditation division of roles
  5. 5. CG TOOLKIT - COMPANY STATUS 6 Principle Company Company Legal Legal Comment compliant not framework framework to legal compliant complies does minimum to legal to OECD not fully minimum principles comply to OECD principles II. THE RIGHTS OF SHAREHOLDERS AND KEY OWN- ERSHIP FUNCTIONS A. Basic shareholder rights x Basic rights in place B. Rights to participate in fundamental x Fundamental decisions made w/ decisions 65% majority C. Shareholders AGM rights x Advance notice period of 7 days D. Disproportionate control disclosure x Ownership disclosure required E. Control arrangements allowed to function x Mandatory tender offer rule at 25% F. Exercise of ownership rights facilitated x No requirements in place G. Shareholders allowed to consult each other x No legal obstacles to consultation III. EQUITABLE TREATMENT OF SHAREHOLDERS A. All shareholders should be treated equally x Limited protection of minority shareholders, limited redress B. Prohibit insider trading x Weak insider trading rules, no en- forcement C. Board/managers disclose interests x Prevalent related-party transac- tions
  6. 6. CG TOOLKIT - TRACKING COMPANY PROGRESS 7 Principle Unacceptable Acceptable Extra steps to Major CG CG practice CG ensure good CG - contribution Leader - Does not practices - Goes significantly to comply with Complies beyond Improving legislation with compliance CG legislation to legislation nationally II. THE RIGHTS OF SHAREHOLDERS AND KEY OWNERSHIP FUNCTIONS A. Basic shareholder rights B. Rights to participate in fundamental decisions C. Shareholders AGM rights D. Disproportionate control disclosure E. Control arrangements allowed to function F. Exercise of ownership rights facilitated G. Shareholders allowed to consult each other III EQUITABLE TREATMENT OF SHAREHOLDERS A. All shareholders should be treated equally B. Prohibit insider trading C. Board/managers disclose interests IV ROLE OF STAKEHOLDERS IN CORPORATE GOVERNANCE A. Legal rights of stakeholders respected B. Stakeholder redress C. Performance-enhancing mechanisms D. Stakeholder disclosure E. Whistleblower protection F. Creditor rights law and enforcement
  7. 7. ANPHA CAPITAL 8 Formed in 2006, raised two funds which listed on Frankfurt Stock Exchange in 2007, management spin-out in 2008 First Vietnamese fund management company to sign the United Nations Principles of Responsible Investment (UN PRI) Launching Vietnam’s first SRI (Sustainable and Responsible Investment) equity index together with an external consulting company Managed by a team of international and local professionals with outstanding track records and significant asset management experience Solid Investment Responsible Fundamentals Investment Early Application to World Class Development Professionals
  8. 8. CONTACTS Nikhil Singh - Chief Investment Officer +84 (0) 90 260 9626 Thomas Jakobsen - COO/Head of Sustainability +84 (0) 903 757 565 ANPHA CAPITAL FUND MANAGEMENT COMPANY Address : 7 Vo Van Tan Street, District 3, Ho Chi Minh City, Vietnam Phone : + 84 (8) 3825 8107 Fax : +84 (8) 3825 8108 Website :
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