Environmental, Social and Governance Report
The year 2021 was a remarkable one for both CITIC and China, with solid progress made on delivering the 14th Five-Year Plan. We remained committed to the building of a better future as outlined in our 14th Five-Year Plan aligned with national strategies, with clear targets and a pathway set towards CITIC’s ESG objectives.
With regard to corporate governance, the Board of Directors (the Board) and the management reviewed and approved the actions required to ensure our various decision-making bodies are well defined, regulated and efficient. Moreover, the Board strengthened its strategic oversight of ESG initiatives during Board sessions, communication meetings and management meetings. The aim of these sessions was to gain a consensus on the ESG work plan, review its progress, evaluate the Company’s ESG reports and provide strategic advice and recommendations to management. The management of CITIC promotes ESG as a driving force for corporate development and has incorporated it into the Corporate Strategy, while encouraging all staff to put ESG into practice.
In 2021 we developed a systematic approach towards risk control at the organisational level, covering policy, process, technology and culture. This included establishing a clear and structured risk governance system with “four layers and three channels”. Thirty-four risk management systems and procedures were then developed and reviewed with reference made to our risk profile. For our integrated financial services sector, we established a unified credit control mechanism covering key customers and concentration risk management. We also implemented a risk technology system with a unified view and data management function, which will lay a solid foundation for the digital transformation of risk management. Our culture of risk management and compliance is summarised in a new motto introduced during the year — “compliance is everyone’s responsibility”. The newly released Comprehensive Risk Management Measures incorporated descriptions of climate and environment risks and explores methods to include such risks into management.
To prevent and control pollution, we developed a “two increases, one decrease” low-carbon strategy to help us meet our carbon peaking and carbon neutrality goals. What’s more, our financial services companies began providing financing solutions for low-carbon industrial transformation. Our industrial subsidiaries are also committed to reducing the carbon impacts of the industrial chain and ecosystem by promoting the low-carbon transformation of our existing high-carbon businesses; we have also committed to reducing high-environmental impact investments and disinvesting in high energy-consuming/high emissions projects. In 2021 we carried out a system-wide carbon emissions audit to identify our carbon footprint.
As innovation is critical to the future of the Company, we strengthened our commitment to science and technology under the 14th Five-Year Plan. We also identified the top 10 science and technology innovation projects and selected a first tier of technology leaders to create a culture of innovation.
CITIC Dicastal’s Qinhuangdao aluminium wheels plant was named a “Lighthouse Factory” (a factory utilising advanced manufacturing and AI technology) — a first in the automotive wheels industry. CITIC Heavy Industries, CITIC Special Steel and CITIC Engineering participated in national research projects and made a number of breakthroughs in high-end manufacturing, including special materials and intelligent construction, that increase China’s autonomy and control of technology related fields.
As a socially responsible company, we increased our capital investment in support of village revitalisation and made total donations of RMB120 million to community projects. During the Henan flood, CITIC Securities, China Securities and CITIC-Prudential Life contributed more than RMB30 million towards disaster relief in the province.
In September 2021, CITIC’s ESG rating was upgraded from BB to BBB by MSCI — the second time in two years that CITIC’s ESG rating has been upgraded, showcasing CITIC’s growing brand influence and investment value.
Under the new vision, goals and strategies outlined in CITIC’s 14th Five-Year Plan, we will continue striving to become a leading example of social responsibility in the years ahead.
Statement of the Board of Directors
The Board of Directors of CITIC adheres to the requirements of the Environmental, Social and Governance Reporting Guidelines of the Hong Kong Stock Exchange and continues to improve the Company’s ESG governance structure and system. We have also strengthened the Board’s ESG oversight and involvement and promoted the integration of ESG principles into the Corporate Strategy, major decisions and business practices.
Role of the Board of Directors
The Board has ultimate responsibility for the ESG strategy and reporting of CITIC Limited. The Risk and Audit Management Committee continuously monitors CITIC’s performance on key ESG issues and works with other special committees and functional departments to incorporate ESG into internal control, risk management and strategic planning. It also advises the Board on relevant ESG matters.
In 2021, CITIC’s Comprehensive Risk Management system attached great importance to ESG and its related risks and is trying to include climate, environment and social responsibility risks into the risk management system, with recommendations made to the management such as hiring external consultants to suggest improvements to the Company’s ESG reports and practices. The Board also made recommendations on integrating ESG principles into the Company’s operations and holding reverse investor roadshows.
ESG Management Approach
CITIC has identified the key ESG issues of concern to the Company’s stakeholders through surveys and regular communication with them; an analysis of ESG issues material to these stakeholders has since been prepared. The Board discussed ESG risks and opportunities important to the Company’s development, operations and management, as well as the concerns of stakeholders. This exercise has enabled us to clarify the focus of our ESG efforts, make improvements to our ESG strategies, policies and systems, and promote ESG as a strong driver for the Company’s development.
Targets, Indicators and Progress Review
CITIC and its relevant subsidiaries have set annual or medium- to long-term targets for their key ESG performance indicators, including greenhouse gas emissions. The Board has reviewed these targets and will continue to review progress against the targets on a regular basis. In 2021 CITIC held training sessions for its management team and staff on climate change, ESG ratings in the capital market and ESG development trends.
About This Report
This is the eighth annual ESG Report issued by CITIC, which provides details of our ESG governance structure and progress made against our environmental, staff, customer, industrial and community targets in 2021. Unless otherwise specified, the scope of disclosure of the annual report applies to the ESG report. We take responsibility for the truthfulness, accuracy and completeness of the Report. To ensure the accuracy and credibility of our ESG performance indicators, we engaged PricewaterhouseCoopers Zhong Tian Certified Public Accountants Limited to perform a limited assurance engagement on selected key data in this Report and to issue an independent assurance report. The key performance indicators (KPIs) presented in this Report cover the period from 1 January 2021 to 31 December 31 2021, with some extending to 31 March 2022. This Report was approved by the Board on 31 March 2022.
Reporting Principles
This Report has been prepared in accordance with the principles of materiality, quantitative approach and consistency recommended by Hong Kong Exchanges and Clearing Limited.
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Materiality |
The Company covers the 12 major ESG issues that stakeholders have identified as most important through regular communications and surveys with government authorities, regulators, shareholders and investors, clients, suppliers and partners, industry trade unions and associations, NGOs and charity or community organizations, board of directors, management and staff. Among these, anticorruption, health and safety, resource utilization, career development and training are identified as important issues that internal stakeholders care about. Anticorruption, health and safety, product responsibility and employment standards are issues external stakeholders concern about. This ESG report will respond to these material issues for a better communication with stakeholders. |
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Quantitative approach |
The Company discloses relevant KPIs supported by quantitative data. The statistical standards, methods, assumptions and/or calculation tools as well as conversion factors related to emissions/ energy consumption are clearly disclosed. For more details, please read the Environmental Responsibility section. |
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Consistency |
Unless otherwise stated, there have been no changes in the statistical methods employed or the key performance indicators covered in this Report, or any other relevant factors affecting meaningful comparisons. |
Feature story: Contributing to a green and low-carbon future
On 22 September 2020 President Xi Jinping announced to the world that China will strive to peak its carbon emissions by 2030 and achieve carbon neutrality by 2060. This vision, which will bring about extensive and profound changes in China’s economy and society, will contribute to the sustainable development of China and benefit the world at large.
In recent years, we have achieved remarkable results on our low-carbon transformation journey. To promote green finance and financial transformation, CITIC Bank has built up a green credit balance that by the end of 2021 stood at RMB66,195 billion, an increase of 1.61% from the year before; the Bank has committed to continue increasing the proportion of this balance in the years ahead. Currently, China Securities and CITIC Securities are among the top two issuers of green bonds in the industry, with carbon neutral equity projects continuing to grow and advances made in carbon market trading and carbon financial innovation. We have also integrated green, low-carbon changes in our global industrial chain. CITIC Dicastal can now produce 650,000 tonnes of lightweight automotive components annually, saving 200 million litres in fuel consumption and reducing CO2 emissions by more than 500,000 tonnes per year compared to traditional steel components. In steel production, CITIC Metals’ investment in niobium resources has promoted the development of niobium-containing steels as well as the use of lightweight and low-carbon steels. During the year, the Company continued to produce innovations in energy saving, emissions reduction and green low carbon technologies. At CITIC Special Steel, metallurgical processes and plant efficiency have been improved through a three-pronged approach of reducing carbon emissions at source, enhancing process control and upgrading end-of-pipe management. As a result, carbon emissions intensity was 30% lower than China’s steel industry. CITIC Pacific Energy is promoting the green transformation of thermal power generation and accelerating the development of its clean energy business by improving plant efficiency, enhancing peak shaving and participating in the supporting services market.
As a state-owned enterprise and a conglomerate, CITIC is committed to carrying out the national strategy, including green and low-carbon transformation, in order to fulfil the 14th Five-Year Plan. We will also strive to become a pioneer among state-owned enterprises in contributing to our dual carbon objectives and to become an ESG role model in the capital market. On 10 May 2021 the CITIC Group organised a seminar, The Road to Peak Carbon and Carbon Neutrality, during which we announced we will achieve peak carbon by 2025 and carbon neutrality by 2050. This will involve a two increases, one decrease approach. The first increase is about providing more green financing solutions for the low-carbon transformation of industries. The second increase is based on reducing the carbon impact of the industrial chain and ecosystem. Finally, the decrease refers to the transformation of the Group’s existing high-carbon businesses from high environmental impact investments to low-carbon investments. The new businesses we launch will be done with a view to minimising their impacts on the environment.
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Comprehensive Financial Services Segment: |
In this business sector, our objective is to become a leader in green finance and serve the green and low-carbon transformation of the economy. This will begin by growing our green finance business, increasing our market share in this business, developing a green finance business model that promotes financial transformation, and participating in the carbon trading and carbon finance market. To achieve these goals, we will capitalise on the internal synergies of the Group, particularly with regard to CITIC’s advanced manufacturing and advanced materials businesses. We will also work towards higher industry standards in green finance and participate in the establishment of a green finance rating system by the People’s Bank of China and other financial regulatory authorities. |
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Advanced Intelligent Manufacturing Segment: |
To enable low-carbon technologies to thrive, we are helping to establish a new energy vehicle industrial chain. This entails promoting green transportation to help society save energy and reduce emissions. It also involves the adoption of 5GtoB and making use of this technology to develop smart mines, specialised robots and digital equipment to improve production efficiency and reduce energy consumption. Together with our strategic investment platform, we will be aiming for breakthroughs in low-carbon energy-saving technologies. |
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Advanced Materials Segment: |
Our focus with this business is to safeguard the low-carbon industrial chain by ensuring an adequate supply of key resources for green energy transformation. This will be achieved through the modification of production processes to reduce emissions and increased use of clean energy and carbon capture and carbon storage technologies. We will also seek to increase our investments in copper, aluminum, lithium and other materials such as niobium, which play a significant role in reducing carbon emissions. It is estimated that niobium can reduce the weight of steel by 10%. Between 2001 and 2021, China produced 870 million tonnes of niobium-containing steel, which helped to reduce CO2 emissions by 170 million tonnes. |
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New Consumption Segment: |
With the aim of promoting low-carbon consumption, we are promoting digital industrialisation and industrial digitalisation by adopting 5G technology in our businesses and advocating a green, low-carbon lifestyle. |
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New-type Urbanisation Segment: |
We believe low-carbon cities are the future, with construction and design at the outset and urban management — including industrial and domestic waste treatment — at the end. Our objective in this business is to participate in the construction of smart cities and |
The “14th Five-Year” period is critical for China to expedite the building of a greener and higher- quality economy. CITIC is committed to being a leader in this effort to transform itself as a green and low-carbon enterprise by leveraging on is portfolio synergies and by embark-ing on a green and clean development path. We aim to lead our peers in the market in carbon peaking and carbon neutralization so as to contribute to our national goals.
