As the leading corporate in the domestic securities industry, CITIC Securities Company Limited (hereinafter referred to as "CITIC Securities" or the "Company") has always adhered to the operation philosophy of "practice the China’s strategy, serve the real economy". The Company earnestly implements the new development concept, builds the new development pattern, and actively takes responsibility for the country, society and natural environment.
In order to play a guiding role of financial institutions in promoting national economic transformation, and in response to the Guidelines for Establishing the Green Financial System issued by regulators, CITIC Securities actively responds to the global trend of responsible investment and integrates ESG concepts into its business and investment process, so as to promote the joint realization of economic, social and environmental benefits with a long-term, value-based investment mindset.
The Company has formulated the CITIC Securities Company Limited. Responsible Investment Statement, covering the management structure of responsible investment, the integration of ESG factors into the investment process, responsible investment strategies and applications, and research and communication, etc., to continuously and systematically push forth the promotion and practice of responsible investment at the company level and contribute to the national sustainable development strategy with actual actions.
I. Management Structure of Responsible Investment
In order to effectively promote the development of responsible investment and better implement the investment decision-making mechanism that takes ESG factors into consideration, the Company has established an ESG governance structure consisting of the Development Strategy and ESG Committee of the Board of Directors, the ESG Leadership Group, functional departments and subsidiaries to continuously improve ESG management, including responsible investment.
The Development Strategy and ESG Committee of the Board of Directors is fully responsible for supervising ESG matters, controls the Company's ESG strategies, policies and targets, conducts research on major investment decisions and provides recommendations, and promotes the orderly implementation of the Company's ESG work.
Functional departments and subsidiaries form the Company's ESG Working Group, which is the specific executor of the Company's ESG work and is responsible for building and promoting the linkage for the construction of responsible investment mechanisms. The ESG Working Group regularly reports the ESG work of the department to the ESG Leading Group.
II. Overview of ESG Factors Integrated into the Investment Process
In the investment process, the Company integrates ESG factors into the preliminary screening on investment targets, investment and research team analysis, investment decision-making, and post-investment management.
i. Screening of Investment Targets
The Company employs preliminary screening of investment targets concerning multi-channel ESG information such as regulatory announcements, regulatory penalties, industry information, information disclosure of listed companies, negative public opinion and third-party databases.
ii. Investment and Research Team Analysis
The investment and research team conducts qualitative or quantitative analysis, including but not limited to consideration of ESG factors, on the investment targets of strategic positions.
iii. Investment Decision-making
The Company encourages the internalization of the three important factors as binding indicators in regular business decisions: environmental responsibility, social responsibility and corporate governance. The Company fully considers the ESG-related risks and opportunities at the corporate level in the process of investment strategy construction.
iv. Post-investment Portfolio Management
The Company's fund portfolio management and risk management integrate ESG performance evaluation and risk evaluation, and focus on the changes in ESG ratings of the portfolio and the resulting risk exposure.
III. Cases of Investment Strategy and Application
The Company has constructed corresponding responsible investment strategies for different asset classes and different business segments, including positive screening, negative prudence, impact investment, ESG integration and active ownership, etc., to incorporate the concept of responsible investment into its investment decision-making system, thus to accurately understand the ESG-related risks and opportunities, and implement the investment principle of "uphold justice while pursuing interest".
CITIC Securities Responsible Investment Strategy and Application
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Responsible Investment Strategy |
Strategy Application |
Related Product Categories |
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Positive screening |
In the selection of the underlying industries, the Company focuses on industries that are highly aligned with ESG concepts. The selection is also based on internal and external ratings, including ESG scoring and rating changes of the underlying investments. |
Fixed income |
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Negative prudence |
In the selection of investment targets, the Company conducts prudent assessments before making investment decisions on the investment targets with significant negative social and environmental impacts. The Company manages PE investments throughout the project process, carries out independent due diligence on projects including ESG factors, issues project risk evaluation opinions and conducts further risk evaluation on those with significant impact. China Asset Management (“China AMC”), a subsidiary of CITIC Securities, excludes specific sectors and stocks that do not meet ESG criteria by developing sustainable investment strategies and related guidelines. |
Listed equity Private equity Fixed income |
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ESG integration |
Throughout the process of investment analysis and decisions, the Company takes ESG factors into consideration in order to comprehensively assess the sustainable development capability and social responsibility fulfillment of investment targets. The Company's Asset Management Department continuously enhances the engagement of ESG in the investment and research system. The Asset Management Department optimizes systems and data sources to assist with the establishment of an internal rating framework and refers to external ESG scores to conduct a pre-, medium-, and post- whole process evaluation and tracking of the underlying companies’ ESG performance, realizes functions such as public opinion monitoring and ESG return-based style analysis, and integrates ESG factors as an important investment strategy into the overall business. China AMC, a subsidiary of CITIC Securities, has developed a "six-in-one" ESG investment process, which is currently being applied in some accounts to improve the traditional investment process by incorporating ESG considerations. The six-step process includes: strategy development, fundamental analysis, portfolio management, risk management, communication with listed companies and routine tracking. Key ESG issues of concern include environmental policies, environmental sustainability of products and services, employees, supply chain, business ethics and corporate governance. In the fixed income business, the Company considers the ESG factors of individual companies, internally rate various types of credit entities and applies the ratings in business management. |
Listed equity Fixed income |
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Impact investment |
While pursuing financial profits, CITIC Securities is also committed to creating positive ESG impacts. The Company focuses on the important issues of China's future economic and social transformation and sustainable development. The Company actively participates in investments where the use of capital assets is in quality education, precision poverty alleviation, rural revitalization, etc. |
Listed equity Fixed income |
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Sustainability investment |
CITIC Securities participates in green bond and carbon neutral bond investments, focusing on investment targets related to environmental protection, clean energy, new energy industry and other sustainable development themes. |
Listed equity Fixed income |
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Active ownership |
The Company actively exercises our shareholder rights and guides shareholding companies to create positive environmental and social impacts and helps them improve their ESG standards by actively communicating with them on ESG issues, etc. China AMC, a subsidiary of CITIC Securities, on the one hand, communicates with listed companies through participation in communication groups of relevant international organizations to improve corporate climate information disclosure and practices. For example, by participating in the corporate communication working groups of international initiatives such as Climate Action 100+ (CA100+), China AMC provides climate disclosure advice to local companies to help promote the achievement of the Paris Agreement climate targets. On the other hand, China AMC independently communicates with listed companies. In FY 2021 alone, China AMC has communicated with about 20 companies, including 2 companies that received an MSCI ESG rating upgrade. |
Listed equity |
Guided by the concept of responsible investment, the subsidiary China AMC has issued a number of ESG concept-related asset management products, including NN (L) International China A-Share Equity Fund, which was jointly issued with NNIP in the European market in March 2020, and is the world's first cross-border responsible investment product investing in the Chinese equity market, as well as the world's first UCITS product managed by a Chinese fund company. The fund strictly follows the EU-standard responsible investment framework for stock selection and integrates ESG factors into the whole investment process, which is the first practice of international ESG investment philosophy and methodology in the Chinese equity market. China AMC's ESG integration has received the highest global rating of A+ in the Strategy and Governance module of the United Nations Principles for Responsible Investment (PRI) 2020 Annual Evaluation Report. The fund also received the 2021 International Finance Forum (IFF) Global Green Finance Award - Project Innovation Award.
IV. Research and Communication
CITIC Securities conducts an in-depth analysis of industry and market trends, a forward-looking analysis of ESG risks and opportunities faced by various industries and companies, and develops comprehensive research and communication in the field of responsible investment.
CITIC Securities has a professional investment and research team and actively conducts ESG research. The team focuses on how to practice ESG investment concepts in the local capital market and has formed in-depth thematic research serieses such as the ESG policy research series, the ESG rating system research series, the ESG investment strategy research series, the ESG industry specialization and corporate services series, the ESG event review and regular tracking series. The ESG research explores localized ESG investment strategies, provides an effective reference for investors to make ESG investments, and helps investors avoid ESG risks and obtain long-term sustainable investment returns.
Focusing on the "localized" approach and investment application of ESG evaluation system, CITIC Securities has developed an ESG scoring system that takes into account the international perspective and China’s development stage and now covers all A shares. Based on the scoring results, the Company has compiled the CITIC Securities ESG 100 Index.
CITIC Securities organizes a number of ESG-related conferences and forums, actively participates in the preparation of ESG-related standards, and assists industry associations and other relevant organizations to jointly provide references for corporate ESG information disclosure and governance, so as to more widely disseminate ESG concepts and promote ESG investment. The Company also invites third-party professional institutions to conduct ESG training for the heads of key internal functional and business departments to deepen the understanding and relevant applications of ESG among employees.
China AMC, a subsidiary of CITIC Securities, signed the United Nations Principles for Responsible Investment (UN PRI) in March 2017, becoming the first public fund company in China to join the organization. Committed to implementing the six principles of PRI, China AMC continues to explore methods to tackle ESG-related issues in China and actively pushes forward the promotion and practice of responsible investment worldwide, demonstrating commitment and vision to implement the responsible investment strategy.
V. Future Visions
The Company is committed to continuously strengthening the building of sustainable development and responsible investment, regularly training employees on ESG concepts and ESG investment methodologies, continuously improving the Company’s ESG governance system, strengthening external communication and cooperation on ESG investment, and helping to promote sustainable economic and social development.
