China Art Financial : Environmental, Social and Governance Report 2020

Environmental,Social and Governance Report

2020

CONTENTS

1.	ABOUT THIS REPORT	2
2.	ENVIRONMENTAL PROTECTION	3
	2.1. ENVIRONMENTAL POLICY AND COMPLIANCE	3
	2.2.	ENERGY EFFICIENCY MANAGEMENT	3
	2.3. NON-HAZARDOUS WASTE MANAGEMENT	4
	2.4.	ENVIRONMENTAL PERFORMANCE	4
3.	EMPLOYMENT AND LABOUR PRACTICES	5
	3.1.	EMPLOYMENT AND LABOUR	5
	3.2.	DEVELOPMENT AND TRAINING	8
	3.3. HEALTH AND WORK SAFETY	9
4.	OPERATIONAL PRACTICES	10
	4.1.	SUPPLY CHAIN MANAGEMENT	10
	4.2.	ANTI-CORRUPTION	10
	4.3.	PRIVACY PROTECTION	10
5.	COMMUNITY INVESTMENT	10
6.	HKEX ESG GUIDE CONTENT INDEX	11

China Art Financial Holdings Limited Environmental, Social and Governance Report 2020

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

1. ABOUT THIS REPORT

China Art Financial Holdings Limited is pleased to present our Environmental, Social and Governance Report ("ESG Report") for the year ended 31 December 2020. The report involves environmental and social impacts, policies and initiatives of the Company and our major subsidiaries, (collectively called "the Group" or "We") demonstrating our continuous commitment to sustainability. Additional information in relation to the Group's corporate governance and financial performance can be referred to our Annual Report 2020.

This ESG Report covers the ESG performance of our office in Hong Kong and Yixing, Jiangsu Province, the People Republic of China ("PRC"). The core operating activities conducted in Yixing include the art and asset lending business, art and asset auction business and art and asset sales business. This Report highlights our sustainability activities spanning over the reporting year from 1 January 2020 to 31 December 2020.

We prepared this ESG Report in compliance with the "Environmental, Social and Governance Reporting Guide" (the "ESG Reporting Guide") under Appendix 27 of the Main Listing Rules Rule 13.91 of The Stock Exchange of Hong Kong Limited ("HKEX"). Those aspects and key performance indicators ("KPI") defined in the ESG Reporting Guide which are considered to be relevant and material to the Group's businesses and operations will be presented under four subject areas, namely: Environmental Protection, Employment and Labour Practices, Operational Practices and Community Investment. In addition, a complete list of index in compliance with the ESG Reporting Guide is also available at the end of this Report for an easier reference.

In order to define what are relevant and material to our business in relation to sustainability, the key is to understand what issues our stakeholders are most concerned with. We define our stakeholders as people who affect our business or who are affected by our business. Our stakeholders include the shareholders, employees, clients, suppliers, customers, environment and community. In our daily business, we actively exchange information with our stakeholders through our transparent platform while we are devoted to continuous improvement of our communication system. We are committed to maintaining a long-term partnership with our stakeholders and are actively engaged in addressing their concerns with follow-up actions in a timely manner.

If you, as one of our stakeholders, have any questions about the content of the ESG Report or comments on the Group's sustainability issues, please contact us via [e-mail].

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2. ENVIRONMENTAL PROTECTION

1. Environmental Policy and Compliance
   Being the foundation of a sustainable economy, a sustainable environment is crucial to the well-being of human beings. Because of this, we, as part of the planet Earth, believe our planet deserves our best thinking associated with appropriate investment. In accordance with our environmental vision, the Group is committed to upholding high environmental standards to fulfil relevant requirements under applicable laws or ordinances throughout our operation, including all necessary requirements under the Environmental Protection Law of the PRC where applicable.
   As a company that is principally engaged in financial and auction related services, we generally bear a low impact on carbon emission and the environment. Nevertheless, the Group continues to manage our environmental footprint via active reduction of our resource consumption and carbon emissions at all business levels.
   The Group continues to address the environmental issues in relation to global warming, pollution, and biodiversity of the environment. Recognising that a corporate citizen must be accountable for their industry's impacts on the environment, we are determined to take a proactive role in caring for the environment. We can help reduce the consumption of natural resources, minimise our discharges, wastes, greenhouse gas emissions, as well as other pollutants regulated under national laws and regulations, so as to build a sustainable future for our generations and their generations.
2. Energy Efficiency Management
   Similar to the previous years, electricity consumption of our corporate office accounts for our major contribution to the greenhouse gas emission and energy footprints. The Group adopted a number of energy-saving initiatives and efficiency practices to reduce greenhouse gas emission and conserve energy usage, encompassing:
3. • indoor temperature is maintained at an optimal level for comfort;
   • LED lighting system is set in the offices;
   • employees are encouraged to turn off the computers, monitors and other personal electronic devices before they leave the office;
   • office machines such as copiers and TV monitors are set to turn off automatically after office hours;
   • telecommunication system is encouraged to avoid unnecessary travel arrangement; and
   • signages are put on at appropriate areas to raise the awareness of energy saving.

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1. Non-HazardousWaste Management
   We are as committed as ever to conserving precious resources, believing that every small step will make a difference. Besides implementation of energy saving initiatives in the office, the Group also promotes other eco- friendly measures to reduce disposal of non-hazardous waste in our operation.
   Contributing to our efforts to reduce paper usage, we have encouraged paperless solution for the operation. The electronic information system is encouraged for documents storage, material sharing or internal administrative documents. It considerably improves operational efficiency while helping create a paperless operation system, thereby contributing to waste reduction and resource conservation. When using paper, employees are encouraged to use double-sided paper, black and white or recycled papers when printing or photocopying documents.
2. Environmental Performance
   Despite the nature of our business has no direct adverse impact on the environment and natural resources, the Group, considering it as our principal value, will continue our commitment in environmental protection and strive to promote environmental protection activities in harmony with economic development.

In accordance with the ESG Reporting Guide set out by the Hong Kong Stock Exchange, our environmental performance of "Energy Use and Emissions" and "Resource Use" during the reporting period are tabulated as below.

	Table 1 - Energy Use and Emissions
Energy Use and Emissions	Unit	2020	2019
Electricity	kWh	127,447	130,052
Unleaded petrol	L	9,364	7,287
Greenhouse gas emissions	CO2e (kg)	125,538	123,770
Nitrogen Oxides	g	5,642	4,151
Sulphur Oxides	g	138	107
Particulate Matter	g	415	306
	Table 2 - Use of Resources
Use of Resources	Unit	2020	2019
Paper	Piece	29,100	66,573
	(kg)	(146)	(333)

In the future, the Group will continue to raise employees' awareness in environmental protection on an ongoing basis and perform our business with an environmentally conscious approach.

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3. EMPLOYMENT AND LABOUR PRACTICES

3.1. Employment and Labour

Human capital has always been considered by the Group as the most important asset for our long-term operation and business development, thus the Group is committed to upholding an open, fair, just and reasonable human resource policy.

Equality and diversity is highly respected in our corporate philosophy during the process of employment, remuneration, promotion and termination. In our employee inclusion, we strictly follow the relevant laws and regulations and our employment policies to select candidates based on skillsets, experience and expertise and offer equal employment opportunities to different genders, age groups and nationalities.

Employees hired by the Group are mainly located in Hong Kong and China. In Hong Kong, the Group safeguards the rights of our employees by strictly complying with relevant employment laws and regulations, including the Mandatory Provident Fund Schemes Ordinance by participating in the Mandatory Provident Fund retirement benefit scheme for our eligible employees, the Minimum Wage Ordinance, Employment Ordinance and the Employees' Compensation Ordinance by offering competitive wages, medical insurance, disability and invalidity coverage, maternity leave and other compensation to our employees. In China, we have participated in welfare schemes concerning pension insurance, unemployment insurance, maternity insurance, occupational injury insurance and medical insurance in accordance with the local regulations including the Regulations on the Administration of Housing Provident Funds and the Social Insurance Law of the PRC.

The Group is fully aware that exploitation of child and forced labour violates human rights and international labour conventions. Therefore, the Group strictly complies with the relevant laws and regulations related to child labour and forced labour.

In accordance with the ESG Reporting Guide, the details of the Group's workforce during the reporting period are tabulated as well as presented in graphs below.

Table 3 - Workforce
	2020	2019
Total Number of Full-Time Employees	27	32
Turnover rate by Gender (%)
Male	17	23
Female	0	10
Turnover rate by Age Group (%)
Under 30 years old	7	16
30-50 years old	10	8
over 50 years old	0	0
Turnover rate by Geographical Region (%)
Hong Kong	0	23
China	17	10

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TOTAL WORKFORCE BY GENDER AS AT 31 DECEMBER

Female	Female
37%	31%

Male	Male
63%	69%
2020	2019

TOTAL WORKFORCE BY AGE GROUP

Above 50 years old	Above 50 years old
26%	22%
Under	Under
30 years old	30 years old
4%	16%

Between 30 and		Between 30 and
50 years old	2020	50 years old	2019
70%	63%

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TOTAL WORKFORCE BY EMPLOYMENT TYPE

Senior level	Senior level
41%		28%
Entry level	Entry level
30%	44%

	Middle level		Middle level
2020	30%	2019	28%

TOTAL WORKFORCE BY GEOGRAPHIC REGION

Hong Kong	Hong Kong
22%	19%

People's Republic		People's Republic
of China	2020	of China	2019
78%	81%

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3.2. Development and Training

The Group see each of the position is of unique professional and technical needs. Thus, we ensure that our professional training and development programs continuously evolve and create a listening culture through support and coaching.

For every new joiner, we provide a proper orientation training and mentoring in order to help them adapt to the new working environment quickly. Continuous internal training is committed by the Group in different ways including comprehensive training for specific skill developments and professional training for relevant employees. Through a variety of on-the-job learning sessions, we are able to nurture and retain excellent talents and strengthen the competitiveness of the Group. During the reporting period, we have organized a series of training sessions, which were designed to help our employees to improve their skills of project management and execution.

In accordance with the ESG Reporting Guide, the details of the of training and development programs provided by the Group during the reporting period are tabulated as well as presented in graphs below.

Table 4 - Training and Development
	Unit	2020	2019
Employee Training
Average hours of training received per employee	hours	7.0	11.9
Average hours of training per employee by gender
Female	hours	6.7	7.6
Male	hours	7.1	13.9
Average hours of training per employee
by employment category
Senior level	hours	6.4	21.1
Middle level	hours	6.0	7.1
Entry level	hours	8.8	9.1

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3.3. Health and Work Safety

Bearing in mind that the operational efficiency of an enterprise and the maintenance of a healthy and safe working environment are closely related, the Group has been attaching great importance to a comfortable and safe working environment for our employees which protect them from any potential occupational hazards.

The Group is in compliance with the Occupational Safety and Health Ordinance, by ensuring that the employees are working in a safe environment. We have developed and adopted health and safety policies, including prohibition of smoking in workplace, abuse of alcohol and drugs, identification and prevention of risks and hazards in working area, and follow-up actions for accidents or personal injuries. Such policies are set out in our employee handbook for our employees to comply with. We also update the health and safety policies from time to time to ensure that the policies are best fit to the Group's core businesses.

The Group has offered various facilities to address the health and safety needs of our employees, encompassing:

• installing air purifiers in areas where are relatively crowded such as conference and meeting rooms;
• ensuring ample space between workstations and clean and tidy common space such as corridors and pantry; and
• maintaining sufficient ventilation and lighting system in the offices.

During the reporting period, the Group has achieved zero work-related fatalities and lost days due to work injury.

Believing that sense of belonging is the key for the healthy growth of every commercial organization. the Group promotes open and direct communication between employees and management. Regular and festival gatherings such as Christmas and Chinese New Year dinners are organized to enhance the harmonious sprit of different levels of staff members throughout the Group.

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4. OPERATIONAL PRACTICES

As a responsible corporate citizen, one of our missions is to disseminate the pursuit of sustainability into our core business. The Group has developed a series of management systems and procedures to be aligned with the Corporate Governance required by the HKEX.

1. Supply Chain Management
   In case we need to select our suppliers and contractors in the process of our business operation, we do not just consider economical and commercial factors in the tendering processes but whether they comply with all the applicable laws and regulations; safeguard employees' health and safety; and mitigate environmental impacts or not are also taken into account.
   Furthermore, the Group encourages all business partners to develop energy-saving and consumption-reducing policies in order to work together in our pursuit of sustainable development.
2. Anti-Corruption
   Insisting on the honesty, integrity and fairness in all aspects of our business, and upholding a high standard of business ethics and prohibition of any forms of bribery and corrupt practices, the Group is in compliance with the Prevention of Bribery Ordinance (Cap 201 of the laws of Hong Kong).
   A series of corporate policies were set up by the Group on anti-fraud,anti-bribery,anti-extortion and anti-money laundering. The Group has also set up an email channel for whistle blowing or other complaints lodged by the employees, and is committed to offering the maximum protection to whistle-blowers.
   With principles of "Commitment, Assurance of High Quality, Fair Deals and Faithfulness", all employees perform their duties with utmost level of good faith, determination and professionalism, and ensure that the reputation of the Group will not be tarnished because of misconduct and corruption behavior.
   During the reporting period, we have complied with the relevant laws and regulations relating to bribery, extortion, fraud and money laundering that have an impact on the Group, as well as the corporate policy of anti-corruption, and no cases of anti-corruption have been concluded.
3. Privacy Protection
   Throughout the operation, the Group unavoidably collects and holds personal information of individual customers. The Group has constantly monitored its compliance with applicable regulations and laws to ensure that all personal data are securely kept and used exclusively for matters relating to our operation. We are committed to ensuring all collected personal data kept will be free of unauthorized or accidental access, processing, erasure or other use.

5. COMMUNITY INVESTMENT

We are committed to and take pride in contributing to the community. We encourage our employees and their family members to contribute their skills and time to the community by volunteering in our community development and outreach programs.

In the coming future, the Group will continue to attach great importance to community services, and encourage our staff members to be actively engaged in voluntary services and join hands together to disseminate the spirit of services in the community where we all depend on.

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6. HKEX ESG GUIDE CONTENT INDEX

Aspects, General	Relevant Section in
Disclosures and KPIs Description	ESG Report	Remarks
Aspect A1: Emissions

General Disclosure	Information on:	Environmental Protection
	(a) the policies; and
	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to air and
	greenhouse gas emissions, discharges
	into water and land, and generation of
	hazardous and non- hazardous waste
KPI A1.1	Types of emissions and respective	Environmental Protection
	emissions data
KPI A1.2	Greenhouse gas emissions in total and,	Environmental Protection
	where appropriate, intensity
KPI A1.3	Total hazardous waste produced and,	-
	where appropriate, intensity

T h e G r o u p h a s not identified any hazardous wastes that were produced by our core business.

KPI A1.4	Total non-hazardous waste produced and	-	No significant non-
	intensity		hazardous wastes
			were produced in our
			core business.
KPI A1.5	Description of measures to mitigate	Environmental Protection
	emissions and results achieved
KPI A1.6	Description of how hazardous and	Environmental Protection
	non-hazardous wastes are handled,
	reduction initiatives and results achieved

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Aspects, General		Relevant Section in
Disclosures and KPIs	Description	ESG Report	Remarks
Aspect A2: Use of Resources
General Disclosure	Policies on efficient use of resources	Environmental Protection
	including energy, water and other raw
	materials
KPI A2.1	Direct and/or indirect energy consumption	Environmental Protection
	by type in total and intensity
KPI A2.2	Water consumption in total and intensity		The Group believes
			t h a t o u r w a t e r
			c o n s u m p t i o n i s
			m a i n l y u s e d f o r
			domestic use purpose
			and no issues are
			addressed at this
			moment.

KPI A2.3	Description of energy use efficiency Environmental Protection
	initiatives and results achieved
KPI A2.4	Description of whether there is any issue in
	sourcing water, water efficiency initiatives
	and results achieved

The Group believes t h a t o u r w a t e r c o n s u m p t i o n i s m a i n l y u s e d f o r domestic use purpose and no issues are addressed at this moment.

KPI A2.5	Total packaging material used for finished
	products, and if applicable, with reference
	to per unit produced

Use of packaging m a t e r i a l i s n o t applicable to our core business.

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Aspects, General		Relevant Section in
Disclosures and KPIs	Description	ESG Report	Remarks
Aspect A3: The Environment and Natural Resources
General Disclosure	Policies on minimizing the issuer's	Environmental Protection
	significant impact on the environment and
	natural resources

KPI A3.1	Description of the significant impacts of -
	activities on the environment and natural
	resources and actions taken to manage
	them

T h e G r o u p d o e s not aware of any significant impacts of activities on the environmental and natural resources.

Aspect B1: Employment
General Disclosure	Information on:	Employment and Labour
		Practices
	(a) the policies; and
	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to
	compensation and dismissal,
	recruitment and promotion, working
	hours, rest periods, equal opportunity,
	diversity, anti-discrimination, and
	other benefits and welfare
KPI B1.1	Total workforce by gender, employment	Employment and Labour
	type, age group and geographical region	Practices
KPI B1.2	Employee turnover rate by gender, age	Employment and Labour
	group and geographical region	Practices

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Aspects, General		Relevant Section in
Disclosures and KPIs	Description	ESG Report	Remarks
Aspect B2: Health and Safety
General Disclosure	Information on:	Employment and Labour
		Practices
	(a) the policies; and

	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to
	providing a safe working environment
	and protecting employees from
	occupational hazards
KPI B2.1	Number and rate of work-related fatalities -

No work - related f a t a l i t i e s w e r e occurred during the reporting year.

KPI B2.2	Lost days due to work injury	-	No lost days due to
			work injury were
			recorded during the
			reporting year.
KPI B2.3	Description of occupational health and	Employment and Labour
	safety measures adopted, how they are	Practices
	implemented and monitored
Aspect B3: Development and Training
General Disclosure	Policies on improving employees'	Employment and Labour
	knowledge and skills for discharging duties	Practices
	at work. Description of training activities
KPI B3.1	The percentage of employees trained by	Employment and Labour
	gender and employee category	Practices
KPI B3.2	The average training hours completed	Employment and Labour
	per employee by gender and employee	Practices
	category

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Aspects, General		Relevant Section in
Disclosures and KPIs	Description	ESG Report	Remarks
Aspect B4: Labour Standards
General Disclosure	Information on:	Employment and Labour
		Practices
	(a) the policies; and

	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to
	preventing child and forced labour
KPI B4.1	Description of measures to review	-
	employment practices to avoid child and
	forced labour
KPI B4.2	Description of steps taken to eliminate	-
	child and forced labour practices when
	discovered
Aspect B5: Supply Chain Management
General Disclosure	Policies on managing environmental and	Operational practices
	social risks of the supply chain
KPI B5.1	Number of suppliers by geographical	-
	region
KPI B5.2	Description of practices relating	-
	to engaging suppliers, number of
	suppliers where the practices are being
	implemented, how they are implemented
	and monitored

The Group does not aware of any cases on child and forced labour in our core business.

No such incidents were reported during the reporting year.

Not identified as material aspect

Not identified as material aspect

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Aspects, General		Relevant Section in
Disclosures and KPIs	Description	ESG Report	Remarks
Aspect B6: Product Responsibility
General Disclosure	Information on:	Operational practices
	(a) the policies; and
	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to health
	and safety, advertising, labelling and
	privacy matters relating to products
	and services provided and methods of
	redress
KPI B6.1	Percentage of total products sold or	-	Not identified	as
	shipped subject to recalls for safety and		material aspect
	health reasons
KPI B6.2	Number of products and service related	-	Not identified	as
	complaints received and how they are dealt		material aspect
	with
KPI B6.3	Description of practices relating to	-	Not identified	as
	observing and protecting intellectual		material aspect
	property rights
KPI B6.4	Description of quality assurance process	-	Not identified	as
	and recall procedures		material aspect
KPI B6.5	Description of consumer data protection	-	Not identified	as
	and privacy policies, how they are		material aspect
	implemented and monitored

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Aspects, General	Relevant Section in
Disclosures and KPIs Description	ESG Report	Remarks
Aspect B7: Anti-corruption

General Disclosure	Information on:	Operational practices
	(a) the policies; and
	(b) compliance with relevant laws and
	regulations that have a significant
	impact on the issuer relating to bribery,
	extortion, fraud and money laundering
KPI B7.1	Number of concluded legal cases regarding	-
	corrupt practices brought against the issuer
	or its employees during the reporting
	period and the outcomes of the cases

No concluded legal c a s e s r e g a r d i n g corrupt practices were brought against the issuer or its employees during the reporting cases.

KPI B7.2	Description of preventive measures and	Operational practices
	whistle-blowing procedures, how they are
	implemented and monitored
Aspect B8: Community Investment
General Disclosure	Policies on community engagement to	Community Investment
	understand the needs of the communities
	where the issuer operates and to ensure
	its activities takes into consideration
	communities' interests
KPI B8.1	Focus areas of contribution	Community Investment
KPI B8.2	Resources contributed to the focus areas	Community Investment

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