Establishing a Reservoir of Ethical Investments

Partnering with responsible companies

As mentioned at the beginning, responsible investing is a core element of our business. By hard-wiring sustainability into our mindset, we aim to deliver value over an extended period. Our aim, as always, is first to meet and then exceed our corporate social responsibility commitments. This is not a solitary endeavour because the standards we set for our own teams apply to the businesses in which we invest.

A worthy example of a portfolio company with an ethical business structure and a highly proactive approach to responsible water management is the Hanoi-headquartered pharmaceutical group Traphaco. This is Vietnam’s second largest publicly listed drug manufacturer, which celebrates its 50th anniversary this year. Traphaco was founded in 1973 as part of the Railway Medicinal Service, privatised in 1999 and finally made a joint-stock company in 2001.

Already a domestic leader in the manufacture of herbal supplements and traditional remedies, the company now targets the production of Western medicines. This business expansion is central to Traphaco’s growth story.

Establishing a Reservoir of Ethical Investments

The company has already invested in a bespoke manufacturing plant in Hung Yen, Northern Vietnam, where it produces its complete range of Western therapeutics.

Pioneering a sustainable value chain

Environmentally conscious water initiatives also sit at the heart of Traphaco’s strategic development, business plans, and day-to-day operations. It opened an environmentally friendly green factory as early as 2002. The premises includes a herbal cultivation area designed to international green standards. And last year, it was the only pharmaceutical company included in the Vietnam Business Council for Sustainable Development’s top-ten list of sustainable domestic enterprises. Traphaco has also pioneered a sustainable value chain within Vietnam’s pharmaceutical industry, from planting herbs to manufacturing medicines.

Regularly monitoring waste

At its facilities in Hung Yen, a quarter of the firm’s VND 477 billion (US$20m) investment was directed toward a waste treatment system. Central to this is a reverse-osmosis structure that feeds water through a semi-permeable membrane to remove contaminants. As a result, the pH of the company’s wastewater in 2020 and 2021 was 7.9 and 7.3, respectively. This is within a range deemed entirely safe.

Meanwhile, an independent unit checks the firm’s wastewater quality every three months to ensure it meets the necessary standards before being discharged into the common drainage system.

The effective use of water resources

Every month, Traphaco asks its supplier, the Hanoi Clean Water Company, to provide updates on water quality. Simultaneously, the company assesses the water quality within its internal pipelines twice a year. Besides, the company is also diligent about the water it uses. By 2021, Traphaco had reduced its year-on-year water consumption by 27%.

That said, the business is not resting on its laurels and has additional schemes to reduce water usage. At its plant in Hung Yen, the company harnesses water from a reverse osmosis system to cool equipment in the factory. It has also streamlined its hygiene processes to sterilise equipment and clean all factory areas.

Continuous production, for example, has helped limit the number of times machines need to be cleaned, reducing the consumption of water and waste volumes. Any waste is retreated and used for irrigation and campus sanitation. Yet, these are not solely top-down initiatives, with Traphaco’s staff encouraged to avoid water and energy wastage in common areas.

At Kenno, long-term, active ownership is a central pillar of our investment philosophy. It is vital as we seek to grow our clients’ capital and establish closer relationships with investee companies. With Traphaco, we have a partner whose philosophy aligns with our own.

Published 03/2023

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