China Alpha is committed to identifying, assessing, and managing environmental risks within our investment processes. As fund management companies, we recognize that environmental risks, including those related to climate change, loss of biodiversity, pollution and changes in land use, can have significant impacts on the financial performance of our investments and the broader economy. As a result, we have a policy in place to ensure that we integrate environmental considerations into our decision-making processes to promote sustainable investment practices and contribute to the transition towards a low-carbon economy.

​

This disclosure is prepared as required 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 and the Guideline on environmental Risk Management (Asset Managers) issued by the Monetary Authority of Singapore.

 

1. GOVERNANCE & STRATEGY

​1.1. Board

Each China Alpha member's most senior decision-making body is its Board of Directors (the “Board”). The Boards have the ultimate responsibility for environment oversight and is accountable for overseeing China Alpha’s environment commitments, including environmental risk management, progress and relevant framework and disclosures. The Boards also appoint climate their environment lead to execute the environmental strategy and policies. The Boards will discuss environment issues at least annually to review and approve environmental investment considerations escalated from the investment and risk management teams.

Overall, the Boards commit to devoting sufficient resources to environmental risk management and promoting a environment-informed risk culture, including through capacity building and training, to manage environmental risk.

 

​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 environmental management responsibilities. The Investment Committee meets regularly to discuss internal developments on environmental issues and the progress against the environment goals while informing the Boards of key updates.

 

2. INVESTMENT MANAGEMENT/RESEARCH AND PORTFOLIO CONSTRUCTION

Environmental considerations are incorporated into fundamental analysis and investment decision-making processes to manage environmental risks and opportunities. 

​​

2.1. Pre-investment Analysis  

An environmental screening tool is developed to systematically identify the physical and transition impact of environment 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 environmental 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 environmental 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 environmental issues identified and work with portfolio company management to enhance climate risk management and disclosure.

 

3. PORTFOLIO RISK MANAGEMENT

​​3.1. Risk Identification and Assessment

Environmental risks are incorporated during the evaluation of an investment target and risk management.

 

3.2. Risk Monitoring and Reporting

The identified material environmental 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 environmental risks. The assessment results will be reported to the Investment Committee regularly for ongoing monitoring.

​

3.3. Stewardship

In the circumstances that the portfolio level risk score exceeds pre-determined threshold, the Risk Management Team will inform the relevant Investment Team, and the relevant Investment Team will engage with the High-Risk Targets on environmental issues identified and work with portfolio company management to enhance environmental risk management and disclosure. 

 

China Alpha may actively cast votes at investors’ meetings with the aim to enhance the investee companies’ overall ESG performance and facilitate their sustainable development.  China Alpha may also consider collaborative engagements with other fund managers/ investors for efficiency, enhanced influence and legitimacy.