CITIC PE attends 2018 China M&A Annual Conference

BEIJING and SUZHOU, China, Nov. 13, 2018 -- On November 10, 2018, Mr. Thomas Zhai, Managing Director of CITIC PE and Head of Portfolio Management, attended the 4th China M&A Annual Conference. Jointly organized by the Asset Management Association of China and the Chinese Museum of Funds, the China M&A Annual Conference is regarded as the most influential event in China's M&A sector. This year's overarching theme was "Social Responsibility of Buyout Funds" and the conference focused on how to implement ESG (Environmental, Social and Governance) into the investment decision-making process. As a pioneer of China's green finance and on behalf of CITIC PE, Mr. Zhai introduced the importance of ESG in the investment process, its global development, and shared the firm's experience in implementing ESG standards.

More than 600 guests from government agencies, financial institutions and corporations attended the conference, including Mr. Wei Yingning, former Vice Chairman of China Insurance Regulatory Commission; Mr. TuGuangshao, General Manager of China Investment Corporation; Mr. Wang Boming, Director-General of China Securities Market Research and Design Center; Mr. Zhang Chenghui, former Director-General of the Research Institute of Finance, Development Research Center of the State Council; Mr. Zhou Naixiang, Member of the Standing Committee of Jiangsu Provincial CPC Commission and Secretary of Suzhou Municipal CPC Commission; and Mr. Wu Qingwen, Member of the Standing Committee of the Suzhou Municipal CPC Commission and Secretary of the Party Working Committee of Suzhou Industrial Park.

Mr. Zhai's panel speech "How to implement ESG in Private Equity" indicated that ESG is not a new concept but has gained awareness in international capital markets in recent years as increasingly more investors and fund managers are starting to incorporate ESG into their investment analysis and decision-making process.

CITIC PE views ESG as the foundation of long-term value creation for investors, portfolio companies, employees and society as a whole. Since the company's establishment in 2008, CITIC PE has introduced an ESG policy, which was updated and further improved in 2018. It has gradually formed its own corporate governing system for portfolio companies, which is periodically reviewed and upgraded. At the same time, the firm has included ESG as an important factor in its investment decision-making process and set up an ESG committee and a working group, which are responsible for long-term ESG strategy and short- to mid-term execution. In 2018, CITIC PE published its first annual ESG report in English and Chinese to communicate the firm's principles on value investment, green finance and social responsibility, support the development of ESG and raise industry awareness.

Mr. Zhai noted that CITIC PE has always been committed to green finance. It has integrated ESG into every step of its investment process, including the initial screening, due diligence, investment decisions, post-investment management and project exit. During the sector selection phase, the firm evaluates how each sector plays a role in social sustainability. As part of the investment analysis and decision-making process, the firm assesses the target company's current ESG status and risks, then formulates a plan to reduce these potential risks and improve its ESG governance.

ESG considerations vary between different industries. Mr. Zhai believes that understanding these differences is crucial to implementing ESG into a firm's practices. For example, resource conservation, waste disposal and hazardous disposal are key measurements in the medical services industry; in the consumer goods industry, product safety, material procurement, supply-chain management and recruitment are the main criterion; and as for the financial services industry, the concerns are primarily data security, customer privacy and business ethics.

Over the years, CITIC PE has incorporated ESG practices into all five of its core sector focuses: Technology & Internet, Industrial & Energy, Business Services, Consumer & Retail, and Healthcare Services. Since 2011, the firm has been investing in environmental preservation projects such as water treatment facilities, waste management facilities, renewable energy systems as well as ecological resorts. It partners with the management teams of portfolio companies to strategize long-term development plans, improve the companies' business performance, and address social and environmental challenges in rapidly evolving circumstances.

CITIC PE's investment strategy has transformed from minority investments to control deals, which allows it to further implement its governing methodologies in its portfolio companies. As the controlling shareholder, CITIC PE can initiate long-term, strategic plans and execute operational decisions to improve the performance of the companies.

Mr. Zhai believes that all companies need to understand the strategic value of ESG and develop a fundamental policy before executing an ESG program. For example, CITIC PE has a clear vision of its ESG principles and can identify and prioritize its ESG considerations tailored for various industries, clarify key performance indicators (KPIs) to measure improvement in ESG performance, and communicate with other market practitioners on broader collaborative initiatives. CITIC PE has provided support in putting responsible investment into practice through an effective governance structure and employee training programs.

The firm is committed to being a responsible corporate citizen by contributing to benevolent activities through its charitable organization Beijing Changrui Foundation. The Foundation's public welfare initiatives focus on medical assistance and educational welfare. Hundreds of children and handicapped individuals have benefited from free educational and healthcare programs offered by Changrui Foundation.

CITIC PE recognizes that its employees are its most important asset and are key to the company's success. It creates a unique corporate culture in accordance with rigorous business processes, places great importance on staff training, and aspires to practice true responsible investments.

Ten years since the establishment of CITIC PE, the company currently manages over USD 15 billion (RMB 100 billion) for institutional investors globally. Going forward, it will continue to raise ESG standards, improve its ESG practice, and educate its investment teams and portfolio companies. CITIC PE is a firm believer in green finance and will continue to support the development of different industries and of society for a long-term, sustainable growth.（Reporter: Di Wang）