Climate-related Risk Management Disclosure
This disclosure relates to the Collective Investment Scheme (CIS) funds managed under China Alpha Fund Management (HK) Limited (the “Company”). It has been prepared concerning the Requirements under the Fund Manager Code of Conduct and the Circular to licensed corporations on the management and disclosure of climate-related risks by fund managers (20 August 2021) published by the Securities and Futures Commission in Hong Kong.
The Company's most senior decision-making body is the Board of Directors (the “Board”). The Board has the ultimate responsibility for climate oversight and is accountable for overseeing the Company’s climate-related commitments, including climate risk management, progress and relevant framework and disclosures. The Board also appoints its climate lead to execute the climate strategy and policies. The Board will discuss climate issues at least annually to review and approve climate-related investment considerations escalated from the investment and risk management teams.
Overall, the Board commits to devoting sufficient resources to climate risk management and promoting a climate-informed risk culture.
1.2. Investment Committee
The Investment Committee, comprising the Chief Investment Officer (CIO), Portfolio Managers, Risk Manager and Chief Operating Officer (COO), is tasked for the management and implementation of climate-related management responsibilities. The Investment Committee meets regularly to discuss internal developments on climate-related issues and the progress against the climate goals while informing the Board of key updates.
2. INVESTMENT MANAGEMENT
Climate-related considerations are incorporated into fundamental analysis and investment decision-making processes to manage climate risks and opportunities.
2.1. Pre-investment Analysis
A climate screening tool is developed to systematically identify the physical and transition impact of climate on an investment target by assessing its sectoral and regional exposures. This serves as a pre-investment screening tool for the Investment Team to gauge the security-level climate exposure of any potential investments before a trading decision is made.
2.2. Investment Execution
Investment targets with a “Moderately High” or “High” risk score in either transition risk or physical risk (“High-Risk Targets”) will not be excluded immediately during this process. Depending on the investment size, the Risk Management Team may, if necessary, conduct an ad-hoc risk assessment on the portfolio-level climate risk to see the impact of the High-Risk Targets on the portfolio risk exposure.
2.3. Post-investment Monitoring
In the circumstances that the portfolio level risk score in either the physical risk or transition risk in any ad-hoc assessment or regular assessment exceeds the Company’s pre-determined benchmark, the Risk Management Team will inform the Investment Team, and the Investment Team will engage with the High-Risk Targets on climate issues identified and work with portfolio company management to enhance climate risk management and disclosure.
3. RISK MANAGEMENT
3.1. Risk Identification and Assessment
Climate risks are incorporated during the evaluation of an investment target and risk management.
3.2. Risk Monitoring and Reporting
The identified material climate risks are monitored ongoingly throughout our portfolio evaluation and analysis processes.
The Risk Management Team will conduct the risk materiality assessment for each fund portfolio on a regular or ad-hoc basis, as appropriate, to determine if there have been any material changes to the fund portfolio’s exposure to climate-related risks. The assessment results will be reported to the Investment Committee regularly for ongoing monitoring.
Where the portfolio-level risk exceeds the Company’s pre-determined threshold, the Risk Management Team will inform the Investment Team to engage with the High-Risk Targets as soon as possible.