(Revised June 2026)

This revision of the Environmental, Social and Governance (ESG)

Risk Management Statement is intended to supplement and refine the Company’s existing related policies, with the objective of continuously enhancing the Company’s framework regarding Environmental, Social and Governance matters.

 

The principal revisions covered in this update involve the following topics:

 

•      Formal management systems to assess ESG risks in financing activities (Refers to main topic page);

•      the Company's ESG Due Diligence Policy concerning Project Finance Transactions (Refers to II-i Agriculture);

•      Whether the company’s agriculture policies are affected by binding credit constraints (Refers to II-iii Due Diligence Coverage);

•      Whether the company discloses that it has signed or adopted external policies related to energy use (Refers to II-iii New energy);

•      Whether the company discloses that it has signed or adopted external policies related to the oil and gas sector (Refers to II-iii Oil and gas);

•      Whether the company discloses that it has signed or adopted external policies related to the mining sector (Refers to II-iii Mining) and;

•      Whether the company describes an ESG risk escalation process for its credit/loan portfolio (Refers to III ESG risk management key measures and ESG risk escalation process).

 

Please refer to the sections under the corresponding headings below for the specific links to the relevant policies.

 

CITIC Securities Company Limited (hereinafter referred to as “CITIC Securities” or the “Company”) fully implements the new development philosophy, actively responds to the national sustainable development strategy, incorporates ESG factors into the Company's enterprise-wide risk management system, continuously strengthens the identification, monitoring, and control of ESG risks in business activities, actively practices the concept of responsible investment, continuously guides and promotes the development of sustainable finance, and promotes ESG culture building, effectively enhancing employees' awareness and practical capacity of ESG risk management, while managing risks, focus on improving the environmental and social benefits of investment and financing business, and supports high-quality and sustainable economic and social development.

 

CITIC Securities has developed and implemented a robust ESG risk management system and the detailed supporting evidence is presented below. This very statement aims to continuously advance the development of the ESG risk management system for investment and financing activities, improve the capability of ESG risk management, and actively respond to ESG-related risks and opportunities. This statement is also mainly intended to guide the Company to  incorporate ESG factors into due diligence, risk approval, and subsequent management in the process of conducting investment, financing, and wealth management business.

I.       ESG Risk Management Organizational Structure

 

To better implement ESG risk management work, CITIC Securities establishes a three-level ESG risk management system that closely cooperates with the Board and its relevant specialized committees, the management level, the internal control department and the business department/business line/subsidiary to manage risks from the aspects of review, decision-making, execution and supervision. Three Lines of Defense for risk management are established at the departmental and line of business levels.

 

The Board is ultimately responsible for ESG risk management. The Board's Development Strategy and ESG Committee conducts research on the Company's ESG governance and provides decision-making consulting recommendations, including ESG governance vision, objectives, policies, ESG risks and major matters; supervises ESG governance matters of the Company, evaluates climate-related risks and opportunities by formulating indicators and monitoring target achievement.

 

The  management level is primarily responsible for the effectiveness of the Company's ESG risk management. Under the enterprise risk management framework, the Senior Management shall establish and improve the ESG risk management structure and mechanisms and processes, evaluate the Company's ESG risk management status, solve the problems in ESG risk management and report to the Board. The Senior Management continuously promotes the construction of ESG culture, strengthens the promotion of ESG risk concepts, and improves employees' abilities to identify and evaluate ESG risks.

 

The Company's business departments/business lines/subsidiaries are responsible for the frontline responsibility of ESG risk management, implementing the Company's ESG risk management policies and related systems, establishing and improving ESG related business risk management processes based on actual business needs, and identifying, evaluating, monitoring, and reporting ESG related business risks.

 

II.     ESG Risk Due Diligence

 

i．   Due Diligence Coverage   

 

CITIC Securities embeds ESG factors into risk management processes of various businesses, and includes ESG related factors in due diligence, decision-making approval and subsequent management of financing activities (including all project financing), equity investment business and investment banking business of relevant departments and subsidiaries of the Company.

 

In IPO, refinancing and M&A restructuring projects, use of proceeds shall be strictly verified. If the funds raised by the issuer are invested in projects with high energy consumption and high emissions, the Company shall strictly verify whether the projects comply with relevant policies of the operating place, check environmental compliance, social responsibility fulfillment, and the effectiveness of corporate governance.

 

In daily project audits and risk monitoring, the Company strengthens its attention to the risk assessment of enterprises in high energy-consuming and high-emission industries, prioritizes supporting industries encouraged by national policies, and focuses on industries with high ESG risk hazards.

 

ii．  Key Points of ESG Due Diligence

 

The Company incorporates ESG factors into the due diligence process, and during this process, focuses on whether the project subject has been subject to administrative penalties related to environmental protection or social responsibility, material deficiencies in the corporate governance structure, significant negative public sentiment related to social responsibility misconduct and other ESG risks, and takes necessary risk management measures for the project subject.

 

Environmental responsibility: In accordance with national ecological and environmental protection laws, regulations, and regulatory requirements, focus on the impact of enterprises on the external environment and the measures taken during the production and operation process, including but not limited to the impact of the entire process of enterprise production and operation, project construction, and production capacity operation on the ecological environment, natural resources, and regional ecology, and comprehensively review the environmental governance measures, green transformation plans and environmental compliance management systems implemented by enterprises. ESG due diligence and related risk assessment will be strengthened for clients in high environmental risk industries (such as mining, oil and gas, energy utilization, agriculture, etc).

 

Social Responsibility: Focus on the fulfillment of corporate social responsibility and social compliance management, closely follow the key requirements of social development such as national livelihood security, labor relations, occupational safety and health(OSH), supply chain compliance, etc., and comprehensively verify the social dimension risks and responsibility implementation of project subjects. The core verification scope covers key modules such as labor management, employee rights protection, OSH management, occupational health protection, supply chain compliance, public welfare responsibility, media sentiment risks, etc.

 

Focus on verifying whether the enterprise strictly complies with labor laws and regulations, and whether there are any violations of employee rights and interests; whether a sound OSH management system, emergency response plan, and safety training system have been established, and have major OSH accidents occurred; whether there are compliance risks in the upstream and downstream supply chain, whether the supply chain responsibility control is implemented, and whether the cooperation with non-compliant suppliers is terminated; simultaneously verify the implementation of social responsibilities such as corporate media sentiment and reputation, consumer rights protection, and comprehensively investigate media sentiment risks and other social compliance risks.

 

Corporate Governance: Focusing on the core of compliance and stable operation of the enterprise, the integrity of the corporate governance structure of the project subject, the standardization of the governance mechanism, the compliance of the operation and management, the completeness of the information disclosure mechanism, etc. shall be inspected.

 

At the same time, the professional qualifications, compliance of performance, integrity records and past professional experience shall be checked to see if there are any problems such as senior executive dishonesty, violation of performance, insider trading and undue related-party benefit transfer; strictly verify the business ethics and compliance operation of specific industry enterprises, whether there are any violations such as commercial bribery, unfair competition, fraudulent business operations, financial fraud, etc.; comprehensively sort out various disputes and compliance issues related to litigation arbitration, regulatory inquiries, case investigations, dishonest judgment debtors, and abnormal operations of enterprises, and accurately identify potential risks at the governance level.

 

iii． Key Measures of Due Diligence in Environmentally Sensitive Industry

 

(1) Agriculture

 

The Company focuses on the environmental and social risks of agricultural commodities from production to processing. In the process of conducting ESG due diligence, the policy and practice of the subject project on water resource protection, land fertilizer utilization efficiency, farmland resource protection and soil fertility maintenance measures, climate change management, hazardous waste and pollutant management, advanced agricultural technology development and application, farmers' income guarantee, food hygiene safety, etc. will be evaluated in accordance with relevant laws and regulations.

 

The Company's investment and financing business prefers to support companies or projects that adopt standardized cultivation and breeding technology, agricultural resource conservation technology, emission reduction and carbon sequestration technology, high level of utilization of manure resources, scientific and reasonable use of fertilizers and pesticides, protection of water ecological environment, and protection of farmers' rights and interests; the Company will not provide investment or financing for land reclamation agricultural development projects that damage ecosystems, such as those that damage forests, wetlands, and grasslands.

 

In the ESG due diligence for the biological related industry target, the Company will further evaluate the policies and practices of the target project regarding wildlife habitat protection, forest ecological protection, water area development, strict prevention of invasive alien species, and measures to restore adverse effects in accordance with relevant laws and regulations. The Company will not provide investment or financing for companies or projects that develop and construct within the core areas and buffer zones of nature reserves, destroy habitats of rare, endangered, and endemic species, and emit pollutants beyond the standard.

 

(2) Forestry

 

In the process of carrying out due diligence on ESG of forestry enterprises, the Company focuses on and evaluates the policies and practices of the subject project related to logging rate and regeneration capacity, natural forest protection, natural landscape protection, fire prevention and extinguishing measures, pest control, clean production process, forest carbon sequestration management, etc. in accordance with relevant laws and regulations.

 

The Company's investment and financing business prioritizes companies or projects that focus on the construction of protective forests, reserve forests, economic forests, and carbon sequestration forests, and have passed ISO 9000 Quality Management System/ISO 14000 Environmental Management System certifications, hold valid Forest Stewardship Council (FSC) certification; the Company will not provide financing for companies or projects that illegally or excessively logging or destroy forest resources.

 

(3) Coal power generation

 

In the process of carrying out ESG due diligence of coal power generation enterprises, the Company pays special attention to and evaluates the policies and practices of the target project on the use of clean coal, coal-fired power unit retrofits for energy conservation and emission reduction, ultra-low emission retrofits, carbon emission reduction plan and scheme in accordance with relevant regulations.

 

The Company reduces the proportion of investment and financing in the traditional coal-fired power industry in principle, unless the subject company has effective Carbon Capture and Storage (CCS) technology or technologies with equivalent carbon emission reduction effects.

 

(4) New energy

 

In the process of conducting ESG due diligence for new energy related enterprises, the Company focuses on and evaluates the policies and practices of the target project regarding the development and application of new energy innovation technology and intelligent equipment, and the impact on the surrounding ecological environment in accordance with relevant regulations.

 

The Company's investment and financing business generally supports hydropower and wind power projects, actively supports new clean energy projects such as solar power generation, geothermal energy, biomass energy, and ocean energy, and prioritizes ecological restoration new energy projects such as photovoltaic desertification control, mine restoration photovoltaic, and water wind power integration.

 

(5) Oil and gas

 

In the process of conducting ESG due diligence on oil and gas related enterprises, the Company focuses on and evaluates the policies and practices of the target project on hazardous waste and pollutant management, leakage and oil spill risk prevention and emergency disposal measures, comprehensive utilization of oil and gas associated resources, energy-saving development and processing technology and equipment, land reclamation, and carbon emission reduction of the main customers of the enterprise in accordance with relevant regulations.

 

The Company's investment and financing business will comprehensively evaluate the factors related to sustainability mentioned above, and tend to support projects such as hazardous waste utilization, associated resource utilization, energy-saving mining, soil and environmental remediation, and energy utilization rate improvement.

 

(6) Mining

 

In the process of carrying out ESG due diligence of mining related enterprises, the Company focuses on and evaluates the subject project in accordance with relevant regulations on hazardous waste and pollutant management, noise and dust control, energy-saving mining and processing technology and equipment, land reclamation and mine restoration, protection and remedial measures of surrounding ecology and water resources, safety and rights protection of miners.

 

For coal mining related enterprises, policies and practices related to the processing and utilization of coal associated resources, the development and application of green coal washing technology, and the carbon reduction situation of the Company's main customers will also be evaluated. The Company will not finance small coal mines whose mining areas overlap with those of large coal mines and coal mines that overlap with natural protected areas, scenic spots, and drinking water source protected zones. The Company will not provide investment or financing to coal mining companies or projects that fail to achieve closed-loop circulation of coal preparation wastewater, have substandard dust emissions, or fail to meet statutory coal resource recovery rates.

 

For iron ore smelting related enterprises, policies and practices in areas such as water and energy consumption in the smelting process, waste heat recovery and utilization, flue gas desulfurization and denitrification, residue and sewage treatment will also be evaluated. The Company will not provide investment or financing to companies or projects that use high water consumption process equipment such as wet dust removal for blast furnace gas and traditional wet dust removal of converter primary flue gas that need to be phased out.

 

(7) Transportation

 

In the process of conducting ESG due diligence on transportation related enterprises, the Company pays special attention to and evaluates the policies and practices of the target project on carbon emissions intensity, energy consumption level, energy-saving technology, clean energy use, pollutant emission management, etc. in accordance with relevant regulations. The Company's investment and financing business actively supports companies or projects related to intelligent research and development innovation of transportation equipment, energy-saving and carbon reduction transformation and upgrading of traditional transportation facilities, promotion of new energy transportation equipment, and construction of smart green logistics systems.

 

III.   ESG Risk Management Key Measures and ESG Risk Escalation Process

 

The company has established an internal ESG risk escalation process, under which significant ESG risks identified in customers or projects within the credit/loan portfolio are escalated for enhanced review and decision-making.

 

ESG risk management of CITIC Securities has covered investment and financing business, wealth management business and other fields. The Company continues to improve its risk identification, monitoring, early warning, and escalation mechanisms, incorporating ESG factors into credit rating, risk approval, and subsequent management. When ESG risk warnings are triggered, further management measures such as strengthening risk alerts, strengthening risk monitoring, and reporting related levels are taken. The Company stays true to its core business mandate and pursues business innovation in a prudent manner. In the process of evaluating new business and products, it identifies various potential risks and pays attention to ESG risk factors.

 

In the practice of credit risk management, the Company should pay more attention to the credit risk assessment of enterprises in high energy consuming industries, prioritize supporting the direction encouraged by national policies, and prioritize supporting green industries. For the investment and financing business, the Company will strictly follow the regulatory requirements to implement the requirements for capital investment, and actively implement the requirements of the state to promote energy conservation and carbon reduction in high energy consuming industry.

 

The Company integrates ESG concepts with established credit rating methodologies, and incorporates ESG performance indicators such as dishonesty records and major ESG-related regulatory penalties of the rated entity and its group into its internal credit rating model. The Company maintains ESG news tags in the media sentiment of the Credit Risk Management System, incorporates major ESG risks into the daily continuous monitoring system, timely issues media sentiment warning risk reminders, and formulates response measures based on the severity of risks.

 

In private equity investment risk management, the Company conducts ESG due diligence on investees, focusing on verifying their environmental compliance, evaluating the impact of their business activities on the environment, and paying attention to their practical situation in the field of labor rights; using industry labels such as dual carbon, environmental protection, and new energy as investment themes and strategies; paying attention to the growth and attractiveness of the industry in which the investment target is located, and whether it falls within the scope of national policy encouragement for development; paying attention to whether the governance structure of the investment target company is complete, and whether there are significant litigation/arbitration events.

 

In the practice of risk management in investment banking, combined with the requirements of green finance policy and green bond policy in the securities industry and market demand, the Company strongly supports the issuance of green bonds and the equity financing and project financing of enterprises in the field of green industry. In the construction of risk triggering and escalation mechanisms, ESG-related risk factors of issuers, originators, credit enhancement providers and other key participating entities are incorporated into daily risk monitoring and identification. When relevant risk factors may trigger substantial risks in the project, risk inquiries and investigations may be carried out as appropriate, or they may be included in the major risk watchlist for key monitoring. If they are included in the major risk watchlist, they will be further reported in accordance with relevant regulations.

In the practice of risk management of financial products, the Company should fully consider the influence of ESG factors of managers, conduct stricter reviews of internal governance, integrity and legal compliance matters of managers, strictly conduct due diligence, and cooperate with managers with historical violations and bad integrity records with caution. The Company dynamically monitors existing cooperative managers or products, timely identify ESG risk issues, evaluate customer complaints and social impacts, actively communicate with customers from the perspective of protecting investors, effectively fulfill the responsibilities of product distributors, and deliver superior product services.

 

IV.   Climate Change Risk Management

 

CITIC Securities incorporates climate change into its enterprise risk management framework to further understand and more effectively manage environmental risks in business development and operations, and seize the opportunities brought by environmental risks.

 

With reference to disclosure framework of the Guidelines No. 14 of Shanghai Stock Exchange for Self-Regulation of Listed Companies—Sustainability Report (Trial) and the IFRS S2 Climate-related Disclosures issued by the International Sustainability Standards Board (ISSB), we, at the Company level, actively identify, assess and manage the impact of climate change-related physical and transition risks and opportunities for our operations and businesses. We assess the potential financial impact of identified key risks and opportunities and conduct the risk management and strategic planning in active response to climate change.

 

CITIC Securities studies regulatory requirements and industry standards related to climate risk stress testing in all jurisdictions where the Company operates, evaluates and analyses the applicability of external experience of climate risk management in securities companies, explores the risk transmission channels of potential impacts of climate change on securities companies, designs climate risk stress scenarios, and includes climate risk factors in comprehensive stress testing factors.

i.       Climate Change Management Framework

 

ž  Governance:  The Board of Directors’ Development Strategy and the ESG Committee oversee the climate risks including, management approaches, policies, strategies, targets, risks, opportunities, action plans, and other major decisions. Relevant functional departments implement specific works on addressing climate change.

 

ž  Strategy:  Continuously identify the short-term, medium-term, and long-term climate change impacts on Company’s operations and business, and comprehensively consider the countermeasures in Company’s development strategies. Support low-carbon development and promote low-carbon transformation by practicing low-carbon operations and leveraging capabilities and resources in business areas.

 

ž  Risk Management: Identify and assess the major risks and opportunities posed by climate change to the Company's operations and business, develop relevant management response mechanisms.

 

ž  Metrics and Targets:  Disclose greenhouse gases emissions data and main works and achievements in the green finance sector. Set corresponding metrics and targets for major climate risk and opportunities, including business and daily operation, to demonstrate the Company's energy-saving and carbon-control measures and achievements.

ii.     Identification of climate risks and opportunities

 

Risk	Description	Impact Cycle	Potential Financial Impact	Responses
Acute Physical Risk	•The Company, its customers and the physical operating units in which investments are made may be exposed to property losses or operational disruptions due to extreme weather events such as typhoons, floods, storms.	Short-term	•  Depreciation of fixed assets •  Decrease in portfolio value •  Decrease in operating income •  Increase in credit risk	• Strengthen risk prevention measures against extreme climate disasters and conduct training on emergency rescue capabilities.
Chronic Physical Risk	• Factors such as rising sea levels and increasingly extreme weather have a greater impact on specific sectors related to physical assets or natural resources, including the real estate, transportation, energy, forestry, agriculture and tourism, which may cause increased costs and disruption of services in these sectors, leading to an increased probability of default. • The possibility of climate disaster increases as the climate change intensifies, which may also affect the market valuation of some clients and investment targets.	Mid-term Long-term	•  Increase in operating cost •  Decrease in portfolio value •  Increase in credit risk •  Change in income structure
Policy/ Legal Risk	• The operation of the Company, clients and investment targets can be affected by the formulation and release of environmental and climate-related policies and regulations.   • Traditional industries such as steel, petrochemicals, thermal power, etc., may face the risks of increase in operation costs and deterioration of financial situation.   • The Company, its customers and investment targets may be subject to legal liability, regulatory measures, disciplinary punishment, property losses or business reputation losses due to non-compliance with climate-related policies or laws.	Mid-term Long-term	•Decrease in portfolio value •Increase in credit risk •Decrease in operating income	• Combined with regulatory requirements, pay attention on the external environmental impact on enterprises during the process of production and operation, focus on the environmental risk score of the projects in areas with high environmental risk in due diligence, and strengthen credit risk management.   • Consistently reinforce the management in climate change, environmental and social risk, incorporate ESG into decision making investment system, and precisely grasp the risks and opportunities under ESG scope.   •Promote and participate in green finance innovation, focus on industries related to clean energy, and use capital allocation to guide the transformation of industrial and energy structures into low carbon structure.
Market Risk	• The market preference may shift due to the policies of low-carbon transitions, causing capital to flow out from the carbon-intensive sectors into low-carbon sectors. Due to the structure change of market supply and demand, the Company, its customers and investment targets may face business risks such as lower product prices, rising raw material prices, and products that cannot meet the market demand. If customers and investment targets in "high energy consumption, high emissions,  and overcapacity industries” and traditional high- emission industry fail to achieve low carbon transformation, it will lead to losses in corporate capital and income and affect the interests of investors and creditors.	Short-term Mid-term Long-term	• Depreciation of fixed assets • Increase in credit risk • Decrease in portfolio value

 

Risk	Description	Impact Cycle	•  Potential Financial Impact	Responses
Reputation Risk	• As the society's concern about topics related to climate change and low carbon gradually increase, failure to meet stakeholder expectations may lead to the impact on Company' s reputation, thereby affecting the Company's income and development, institutional rating results and the public credibility.	Short-term Mid-term Long-term	•Decrease in operating income •Downgrade of related ratings •  Decrease in brand value • Loss of investors’confidence
Technology Risk	• Energy-saving and environmental protective technology, such as renewable energy, new energy, etc., may achieve major breakthroughs due to the market transition to low-emission technologies. Therefore, traditional energy and production technology may be gradually eliminated, resulting in adverse impact on debt repayment ability and market valuation of the customers and investment targets with limited ability to upgrade technology.	Short-term Mid-term Long-term	• Decrease in operating income •Increase in credit risk •Decrease in portfolio value
Market Opportunities	•In order to implement the major development decisions of national "dual carbon", relevant policies, such as carbon neutrality, climate change investment and financing, etc., have been introduced in succession, which served as guidance for green finance business and market, and brought new development opportunities for the Company.   •The Company expands new potential to growth and supports customers' sustainable and low-carbon transformation by focusing on climate-friendly products and services to conduct business, researching and innovating climate-friendly products, actively developing green finance businesses such as green bonds, green equity financing, and green asset-backed securities, and providing financial services to customers in green industries such as environmental protection, energy conservation and clean energy.	Short-term Mid-term Long-term	• Increase in operating income • Increase in portfolio value	•Actively promote and participate in sustainable finance innovation, and guide the transformation of industrial structure and energy structure to green and low carbon with capital allocation.   •Support domestic and international green industry equity financing and ESG-related product underwriting, continue to expand its green bond volume, and strengthen the innovation of products and services.   •Actively participate in carbon trading, market industry exchanges and cooperation, and standard formulation.   •Publish ESG investment related research reports, hold sustainability forums, etc., and strengthen ESG research and industry exchanges.   •Procure clean energy and increase the share of clean energy in its energy mix.
Adaptability	•Keep up with the progress of global climate-related policies and development, increase the exchange and communication of climate-related risks and opportunities between industries, analyse the degree of market cooperation with policies such as carbon neutrality, carbon peaking, and green finance, and provide investors with reliable products and services.	Mid-term Long-term	•Increase in reputation and influence •Increase in operating income
Enhanced Efficiency of Resources	•Promoting energy conservation and emission reduction by building green office areas/data centres, improving resources and energy efficiency, and implementing paperless office, which help to reduce operating costs.	Short-term Mid-term Long-term	•Reduction in operating costs