Shanghai Dongzheng Automotive Finance : 2020 Environmental, Social and Governance Report

May 05, 2021 at 07:01 am EDT

2020

Environmental,

Social and

Governance Report

*For identification purpose only

CONTENT

ABOUT THIS REPORT	2
I.	CORPORATE OVERVIEW	3
	1.1	Company Profile	3
	1.2	Corporate Governance	3
	1.3	Recognitions and Awards	4
	1.4	Key Performance Indicators	5
II.	CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT	6
	2.1	Social Responsibility Philosophy	6
	2.2	Responsibility Management System	6
	2.3	Stakeholder Communications	7
	2.4	Materiality Analysis	9
III.	IMPROVEMENT OF SERVICES QUALITY	11
	3.1	Optimizing Customer Experience	11
	3.2	Promoting Product Innovation	11
	3.3	Protecting Customers' Rights and Interests	11
IV.	ENVIRONMENTAL PROTECTION	12
	4.1	Green Operations Practices	12
	4.2	Development of Internet Finance	14
V.	ACTIVELY GIVING BACK TO SOCIETY	15
	5.1	Employee Career Development	15
	5.2	Protecting Employees' Rights and Interests	16
	5.3	Care about Employees' Life	17
	5.4	Advocating Safe Working	18
	5.5	Enhancing Fair Procurement	18
	5.6	Persistent Efforts in Anti-corruption	19
	5.7	Promoting Financial Knowledge to the Public	19
	5.8	Supporting Social Welfare	20
VI.	OUTLOOK	21
ESG REPORT INDICATOR INDEX	22

2 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

ABOUT THIS REPORT

Overview

This Environmental, Social and Governance Report (the "Report") for the year of 2020 is issued by Shanghai Dongzheng Automotive Finance Co., Ltd.* (the "Company" or "Dongzheng AFC"), which adheres to the principle of materiality, quantitative and consistency and focuses mainly on the disclosure of the sustainable development of the Company relating to corporate governance, economy, environment and social responsibility areas. Unless otherwise specified, this Report covered the period from 1 January 2020 to 31 December 2020 (the "Reporting Period").

Basis of Preparation

This Report was prepared in accordance with the disclosure obligations under the "Environmental, Social and Governance Reporting Guide" (the "ESG Reporting Guide") contained in Appendix 27 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

Reporting Scope

The purpose of this Report is to objectively present the performance of the Company in the aspects of corporate social responsibility, such as economic, products and services, social, environmental, employees' growth and corporate governance. The reporting scope covers Shanghai Dongzheng Automotive Finance Co., Ltd.*.

Access and Response to the Report

This Report is published in electronic version. Please refer to the websites of the Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company (www.dongzhengafc.com).

If you have any comments or suggestions on the environmental, social and governance performance of the Company, please feel free to send an email to ir@dongzhengafc.com.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

CORPORATE OVERVIEW
1. Company Profile
  Shanghai Dongzheng Automotive Finance Co., Ltd.* was established as a limited liability company on 11 March 2015 and converted into a joint stock company with limited liability on 15 August 2018. The Company was listed on the main board of the Stock Exchange on 3 April 2019 (the "Listing Date") (stock code: 2718). As an auto finance company licensed and regulated by the China Banking and Insurance Regulatory Commission (the "CBIRC"), the Company specializes in providing auto finance products and services for the purchase of luxury-brand cars.
  The Company is committed to improving corporate governance, steadily developing its business, while continuing its innovation and evolution. Due to the outbreak of the COVID-19 pandemic and other impacts, consumers' consumption demand for passenger vehicle purchase has reduced, the auto finance industry faced serious challenges and new loans disbursed by the Company has decreased in 2020 comparing with the corresponding period of last year. Moreover, the negative impact on repayment capabilities of some of its customers increased the allowances for impairment losses on loans and advances to customers and finance lease receivables, etc. For the year ended 31 December 2020, the Company recorded operating income of approximately RMB577 million, representing a decrease of 27.84% as compared to approximately RMB799.8 million in 2019. The Company's net profit decreased by 85.88% from approximately RMB389.4 million in 2019 to approximately RMB55 million in 2020. Looking forward to 2021, although the global economy continues to be affected by the COVID-19 pandemic, the pandemic is under effective control within the country and the domestic economy will stage a resumption of rebounds and growth.
2. Corporate Governance
  The Company is committed to achieving high standards of corporate governance to safeguard the interests of the Shareholders and to enhance corporate value and accountability. The Company also acknowledges the vital importance of strengthening corporate governance to the success and sustainability of the Company. The Board is of the view that during the year ended 31 December 2020, the Company has complied with the applicable code provisions as set out in the Corporate Governance Code contained in Appendix 14 to the Listing Rules (the "Corporate Governance Code").
  In accordance with domestic and overseas laws and regulations, the Company has established a corporate governance structure composed of a board of directors, a supervisory committee and senior management and has established a sound corporate governance system framework primarily in accordance with the Articles of Association of the Company, supplemented by various specific corporate governance systems, which set out the authorities and responsibilities of the shareholders' general meeting, the board of directors, the supervisory committee and senior management, forming a corporate governance operating mechanism with each of the branches performing its own responsibilities and monitoring each other with checks and balances among them.
  The Company will periodically review and enhance its corporate governance practices to ensure that it will continue to comply with the requirements of the Corporate Governance Code.
  Details of the Company's corporate governance are set out in the section headed "Corporate Governance Report" of the Company's 2020 annual report.

4 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

1.3 Recognitions and Awards

During the Reporting Period, the Company received the following recognitions and awards from the community:

Awarding
Organisation	Award	Year of Award
Financial Bureau of	2020 Annual Statistics of Advanced Business Entities in the	2020
Pudong New	Financial Sector in Pudong New Area (2020年度浦東新區金融
District of	業年定報統計工作先進單位)
Shanghai
Financial Bureau of	The Second Prize of the Best Enterprise Annual Report of 2019	2020
Pudong New	(2019年度企業年報二等獎)
District of
Shanghai
The Community	2020 Award of Excellence (2020年公益卓越獎)	2020
Chest of Hong
Kong

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

1.4 Key Performance Indicators

Table of Key Performance Indicators

Type of Indicator	Name of Indicator	Unit	2020	2019
Economic Indicators	Operating income	RMB100 million	5.77	8.00
	Net profit	RMB100 million	0.55	3.89
	Basic earnings per share	RMB	0.03	0.19
	Total assets	RMB100 million	62.69	103.28
	Total loans	RMB100 million	62.03	101.96
	Total deposits1	RMB100 million	0.30	1.57
	Return on average total assets	%	0.66	3.92
	Return on average equity	%	1.36	12.00
	Non-performing loan ratio	%	0.36	0.44
	Provision coverage ratio	%	2,037.81	423.97
	Capital adequacy ratio	%	59.37	41.62
Social Indicators	Total tax paid	RMB100 million	1.56	1.59
	Social contribution per share2	RMB	0.24	0.53
	Total headcount	Person	217	304
	Percentage of female employees	%	47	43.75
	Satisfaction rate for customer's	%	100	100
	complaints
Environmental	Electricity consumption in office	10,000 kWhs	18	13.8
Indicators	Water consumption in office	Tonne	30	33.2
	Paper consumption in office	1 million sheets	0.4	0.4
	Oil consumption in office	Litre	9,441.0	15,571.4

Total deposits = Shareholder deposit + Pledged deposits

Social contribution per share = earnings per share + (total tax payments + staff cost + interest payment + charity donations - social cost) ÷ total number of shares at the end of the period

6 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT
1. Social Responsibility Philosophy
2. - Vision: To become the leading automotive finance company in China
  - Mission: To build a wonderful driving experience for customers with quality financial products and services
  - Corporate values: Innovation, integrity, persistence, caring, efficiency and sharing
3. Responsibility Management System
  The Company is committed to establishing a high standard of ESG management system. To orderly fulfil the social responsibility, the Company has established a social responsibility management system, under which all departments of the Company perform their duties properly through coordination and collaboration and carry out social responsibility-related activities in the ordinary course of business, thereby incorporating social responsibility philosophy and stakeholder commitments into daily practices.

Decision Making		Co-ordination	Execution

	• Board of			• The ofﬁce	• Relevant
	Directors and			of the Board	departments
	senior
	management


Reviewing and deciding		Mobilising and	Carrying out various
on signiﬁcant areas of		coordinating various	activities and keeping
social responsibility,		departments to collect	records and submitting
including establishing		relevant performance	relevant materials regularly.
related strategies,		indicators and typical
assessing important		cases relating to
issues and reviewing the		environmental, social and
annual Environmental,		governance matters and
Social and Governance		preparing Environmental,
Reports.		Social and Governance
			Reports.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

2.3 Stakeholder Communications

The Company values communication with stakeholders and has established various communication channels over the course of our daily operation and service, and maintained regular communication with the stakeholders, fully listening to the feedback from and forging a positive interaction with them.

	Expectations and
Stakeholders	Propositions	Means of communication	Responses and measures
The Government	•	Real economy support	•	Documents and guidelines	•	Support for the "Belt and
	•	Implementation of		on policies		Road Initiative"
		macroeconomic policies	•	Work meetings	•	Active promotion of
	•	Promotion of local	•	Information distribution		system and mechanism
		economic development	•	Specific topic reports		reform and innovation
	•	Inclusive finance			•	Active promotion of
		development				supply-side structural
						reform
					•	Implementation of the
						policy of "cutting
						overcapacity, de-stocking,
						de-leveraging, reducing
						costs and improving weak
						links"
					•	Promotion of development
						in consumer finance field
					•	Strengthening supervision
						and constrain on key
						areas
					•	Strengthening leadership
						and assessment
						exchanges
					• Support for key project
						construction
					•	Provision of innovative
						services to small and
						micro enterprises
Regulators	•	Compliance with	•	Regulatory policies	•	Enhancement of corporate
		regulatory requirements	•	Inspection and supervision		governance
	•	Maintenance of financial	•	Progress reporting	•	Improvement in liquidity
		stability				risk management
	•	Assuming social				capability
		responsibilities			•	Improvement of standard
						of internal management
Shareholders and	•	Sustained business	•	General meetings of	•	Improving corporate
investors		operation		shareholders		governance structure
	•	Improving profitability	•	Information disclosure	•	Formulation of corporate
	•	Increasing shareholder	•	Performance roadshows		development plans
		returns	•	Investor research and	•	Timely disclosure of
	•	Increasing corporate value		communication		information
					•	Enhancing investor relation
						management

8 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

	Expectations and
Stakeholders	Propositions	Means of communication	Responses and measures
Customers	•	Improving service quality	•	Marketing activities	•	Enhancing customer
		and efficiency	•	Customer service hotline		experience
	•	Provision of a richer	•	Surveys	•	Innovation of financial
		selection of financial	•	Digital platforms such as		products
		products		mini programs of WeChat,	•	Protection of consumers'
	•	Safeguards for information		APP		rights and interests
		and fund security			•	Development of consumer
	•	Service channel expansion				finance
	•	Enhancing customer			•	Promoting financial
		experience				knowledge to the public
Employees	•	Improving employees'	•	General meetings of	•	Improving the
		benefits		employee representatives		compensation and welfare
	•	Protecting employees'	•	Employee satisfaction		system
		rights and interests		feedback	•	Multiple channels for
	•	On-job trainings and	•	Visits and interviews		collecting employee
		development				suggestions
	•	Enriching free-time			•	Improving training systems
		activities			•	Organization and
						construction of staff home
					• Offering care to employees
						in need
Suppliers	•	Fair procurement	•	Negotiation	•	Improving the procurement
	•	Cooperation for win-win	•	Cooperation agreement		management system
		outcomes	•	Tendering and bidding	•	Enhancing business
						cooperation
Partners	•	Mutually beneficial	•	Meetings	•	Continually deepening
		cooperation	•	Project cooperation		banking cooperation
	•	Communications and			•	Enhancing exchanges and
		exchanges				cooperation with industry
						peers
Communities	•	Caring for disadvantaged	•	Visits and seminars	•	Promoting financial
		groups	•	Charity events		knowledge to the public
	•	Organizing charity events			•	Employee voluntary
						activities
					•	Supporting public charity
Environment	•	Environmental protection	•	Policies on energy	•	Green finance
		with low carbon		conservation and emission		development
	•	Sustainable development		reduction	•	Persistence in green
			•	Green public service		services
				activities	•	Green operation practices
			•	Collection and disclosure
				of environmental
				performance

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

2.4 Materiality Analysis

Under the materiality analysis model, the Company further identifies social responsibility issues and performs a materiality assessment and selection on top of our work done in 2020 with due regards to the expectations and needs of various stakeholders, as well as the development strategy of the Company. The Company analyses and compares the materiality of different social responsibility issues on the sustainability development of the Company and the stakeholders and thus identifying the issues of materiality in regard to the Company and the stakeholders, which are specifically disclosed with commensurate responses in this Report.

Analysis of macro-economy and hot topics of the industry
Making reference to the guidelines from the industry and ESG Reporting Guide

Identification	• Identfiying issues of social responsibilities materially related to the Company based
	on its development strategy

Evaluation	• Pioritizing the initially identified issues by materiality based on surveys of materiality
collected from our customers, staff and other stakeholders

	• Establishing an analysis matrix of materiality, assessing the materiality of issues and
Selection	giving more disclosure on issues of greater materiality

10 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

High

Materiality Analysis Matrix

Materiality to stakeholders

02 11

14 07

		12	01

		15	03
			06
			10
	17	16

19	09	05	13

18		20	04
08

		Materiality to the sustainable		High
		development of Dongzheng AFC
1	Employee career	6	Persistence in	11	Improving corporate	16	Optimising credit
	development		anti-corruption		governance		structures
			campaigns
2	Protecting	7	Safeguarding	12	Improving	17	Improving employee
	employees' rights		compliance		information		incentives
	and interests		operation		disclosure
3	Development of	8	Green operation	13	Improving fair	18	Promoting caring
	internet finance		practices		procurement		culture
4	Innovating financial	9	Supporting social	14	Financial risk	19	Assistance to the
	products and		welfare		prevention and		underprivileged
	services				control
5	Promoting financial	10	Improving services	15	Protection of	20	Enhancing energy
	knowledge to the		quality		consumers' rights		conservation and
	public				and interests		emission reduction

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

IMPROVEMENT OF SERVICES QUALITY
1. Optimizing Customer Experience
  Dongzheng AFC has been providing professional and meticulous services to build the best customer experiences. Focusing on the constant improvement of simplicity, flexibility and timeliness, the Company markets its products to high-end luxury car customers, with a view to providing customers with exclusive financial solutions and VIP services. In this regard, the Company has carried out numerous work to improve our service quality by strengthening business training in terms of staffing; maintaining system updates and upgrades in terms of system; and constantly optimizing product processes from customers' perspectives in terms of process.
2. Promoting Product Innovation
  The Company focuses on product innovation by continuously increasing its efforts and investments on product research and development. With a focus on the business experience of financial consumers, and adhering to the service concept of "customer first", the Company continues to develop featured financial products to meet customers' diversified needs for automotive financial services. With a commitment to building a better driving experience for customers with quality financial products and services, we continue to promote the comprehensive upgrading of the risk decision-making system, and actively optimize business processes and product models. In addition, we continuously improve product service quality based on customer needs. The Company will continue to launch more high quality financial products and services in the future.
3. Protecting Customers' Rights and Interests
  The Company attaches great importance to the needs and opinions of customers, who are important assets of the Company. In order to maintain customer satisfaction and improve customer loyalty, as well as to enhance its brand profile and position in the industry, the Company formulated the "Measures on Customer Service Management" to protect the customers' rights and interests in accordance with relevant laws, rules and regulations such as the "Measures for the Administration of Automotive loans", the "Administrative Measures on Governing the Automotive Finance Company" etc.
  The Company establishes and improves the rapid response mechanism for customer problems, such as 1) manned hotline service available from 8:45 to 17:45 on every working day; 2) time limit for handling consultations and enquiries, where consultations and enquiries are immediately handled or handled after confirmation; 3) responses to customer complaints, where responses are given from 2 to 5 working days under normal circumstances; and 4) complex complaints or problems that cannot be solved immediately, in which case, the head or manager of the department will designate and engage specific staff in active communications with customers. The mechanism to address customer complaints is embedded in our online and offline service process, which connects to our front office, middle office and back office so that customer complaints are resolved by the Company throughout the company-wide network based on the concept of protection of customer rights and interests, eliminating issues involving "indifference", "routing" and "industrial practice". By fully implementing the service concept of "customer first", the Company actively responds to customer needs and resolves their business issues. In 2020, the Company received a total of 7 complaints (including complaints on staff attitude, pricing for loan interest and charges, transaction issues, loan collection and credit disputes, process, etc.) referred by the regulator. The Company has resolved them by providing feedback to the satisfaction of the customers without any repeated customer's complaint.

12 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

In addition, the Company conscientiously implements the "Guideline Opinions on Improving the Protection of Consumer Rights and Interests in Finance" promulgated by the State Council of the PRC. Besides fully appreciating and actively safeguarding the information security rights, property safety rights and other basic rights of financial consumers, we focus on safeguarding financial information security of individual consumers to protect the legitimate rights and interests of the customers. In 2020, the Company specified requirements for collecting, storing and accessing customer information and was in strict compliance with such requirements in the ordinary course of business by means of training to protect customer information and fund security. For example, disclosure of customer information to any person or any institutions without authorization is strictly prohibited, while the operation process for enquiries on personal credit reports is strictly regulated. Prior written authorization from individual loan applicants and related persons shall be obtained for enquiries into their personal credit reports and for providing the basic financial credit information database of the People's Bank of China with the information pertinent to the borrowers and related persons, which shall also be included in the borrower's contract.

IV. ENVIRONMENTAL PROTECTION

4.1 Green Operations Practices

	Category	Unit	2020	2019
	Water consumption in office	Tonne	30	33.2
	Electricity consumption in office	10,000 kWh	18	13.8
	Paper consumption in office	1 million sheet	0.4	0.4
	Exhaust gas emissions	Kg	83.7	165.6
	- Sulfur oxides	Kg	0.1	0.2
	- Nitrogen oxides	Kg	83.6	165.4
	Total greenhouse gas emissions	Tonnes of carbon
		dioxide equivalent	171.6	284.2
	- Direct greenhouse gas emissions (Note 1)	Tonnes of carbon
		dioxide equivalent	22.3	36.7
	- Indirect greenhouse gas emissions (Note 2)	Tonnes of carbon
		dioxide equivalent	149.3	247.5

Notes:

Direct greenhouse gas includes greenhouse gas emissions from natural gas and gasoline consumption
Indirect greenhouse gas includes greenhouse gas emissions from electricity and municipal heating consumption

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

Energy Saving and Emission Reduction Measures

The Company is in compliance with the relevant laws and regulations, including the "Environmental Protection Law of the People's Republic of China" and "Energy Conservation Law of the People's Republic of China". By upholding the business philosophy of energy saving and environmental protection, the Company implements the electronic office processes and reduces delivery of paper printed materials. As for electricity consumption, employees are reminded to power off computers and water dispensers before leaving the office to eliminate waste. Furthermore, professional personnels are organized to conduct regular inspections of equipment and facilities at the Company's office premises, and provide repair work on a timely basis to reduce running loss and ensure efficient operation. As for water consumption, we enhance efficient consumption of water by strengthening the maintenance and management of water equipment and encouraging employees to save water and reduce waste of water resources. As for energy consumption, we exercise strict control over vehicle use for office needs, enhance fuel management, and make reasonable arrangement of vehicle routes to reduce fuel consumption, as well as to minimize pollutant emissions. Domestic waste of the Company is collected and handled by personnel designated by a specialized property management company. Multiple measures are taken to foster an environmentally friendly office environment that efficiently consumes energy and constantly reduces carbon emissions. During the Reporting Period, the Company reported total emissions of nitrogen oxides, sulfur oxides and particulate matters, amounting to 83.6kg, 0.1 kg and 8.0 kg, respectively.

Waste Treatment

During the working process of the Company, no significant hazardous waste was generated. A qualified professional agency is appointed to carry out specialized treatment of hazardous wastes existing in office waste. The Company is mainly engaged in providing financial services to its customers without substantial use of packaging materials during the course of business. Meanwhile, regarding to sewage and waste disposal, domestic sewage generated by the Company is discharged into the municipal sewage treatment system for unified treatment, and domestic garbage is collected and handled by personnel designated by a specialized property management company.

The Company proposes the strategy of "recyclable use" and "non-hazardous disposal" to minimize the adverse impacts on the environment. Sewage generated from daily office and services is transported to the municipal sewage pipeline without any violation of discharge regulations.

In 2020, the Company actively responded to and promoted the concept of waste sorting by focusing on recycling of paper, plastics, wooden materials, hardware, and other waste generated from our daily operations and offices so that they can be turned into useful resources.

14 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

Improvement of Resource Use Efficiency

The Company promotes use of natural lighting, implements centralized management of vehicles and unified deployment, and avoids unnecessary vehicle air-conditioning in order to greatly improves energy efficiency. Policies for shutting off utilities after work, as well as mechanisms to recycle remaining water at the pantry and reuse cleaning water, are formulated. Meanwhile, we strengthen the administrative measures for use of vehicles and fuel consumption by implementing a fuel card policy. We also achieved effective water conservation by implementing the "weekly inspection" program. Our security patrol covered the security check of the buildings. Use of vehicles was optimized, as inspections were conducted over their access to oil products, volume, and fueling sites. The results are reported for supervision and management so that conservation practices are adopted by various departments.

In order to further enhance the environmental awareness of all employees, the Company has included articles governing water, energy and electricity conservation to prevent waste of resources into its work system documentation, which specifies the rules and principles for using air conditioners, computers, electric lights and other high-power equipment. All employees are also required to conserve water. During the Reporting Period, the Company had no finished products, nor were packaging materials used for finished products. During the Reporting Period, our electricity consumption was 180,000 kWh. The electricity consumption per capita was 829 kWh/person, and the water consumption per capita was 0.14 tonnes. The copy paper consumption was 1,843 sheets/person.

Environmental Responsibility

Since the inception, the Company has regarded protection of the environment and resources as an important responsibility. The Company has been in strict compliance with the relevant laws and regulations, such as the "Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution", the "Environmental Protection Law of the People's Republic of China", the "Energy Conservation Law of the People's Republic of China" and the "Water Law of the People's Republic of China". Some of the businesses have already adopted electronic and paperless means to lower carbon emissions for environmental protection. In active response to and facilitation to the development of green financial reform and pilot innovation zone, the Company continues to pursue the green development values. For "fully creating a new landscape of innovation and development through new orientation, thinking, and action", we actively promote the management and development of electronic and online business by innovating our management models and product channels. Meanwhile, the Company has launched the WeChat enquiry platform to provide access to checking account repayment records and details, online customer services, etc., further expanding the service scope and enlarging the customer base.

4.2 Development of Internet Finance

To secure customer channels, the Company actively explored cooperation with automotive e-commerce platforms to increase brand exposure and improve financial penetration and financial conversion rate. As regards customer services, the Company has always persisted in the technology-enabled strategy by prioritizing our investments and budgets for the information technology field according to our plan over the years. The Company established the complete business system coverage, the front end of which is connected to the remote electronic credit reference and pre-approval model for loan submission forms, significantly improving the submission efficient and customer experience. This has laid a solid foundation for attracting the customers via the internet. Furthermore, the Company continues to upgrade its automated approval model to achieve the differentiation approval strategy for customers with different classifications. With the OCR and other technologies introduced, the loan approval and deduction is fully automated without any manual intervention, significantly improving the operating efficiency. In addition, our collection system and second-generation credit reference system have been connected online. Empowered with technologies, the Company has demonstrated its environmental-friendly development in risk control and operations.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

ACTIVELY GIVING BACK TO SOCIETY
5.1 Employee Career Development

		Number of		Turnover
31 December 2020	Classification	people	Percentage	rate
		(person)	(%)	(%)
Total number of employees		217		36%
By gender	Male	114	53%	23%
	Female	103	47%	13%
By employment type	Full-time	217	100%	36%
	Part-time	-	-	-
By age group	Below 30 years (inclusive) old	69	32%	10%
	31 to 40 years (inclusive) old	120	55%	23%
	41 to 50 years (inclusive) old	24	11%	3%
	Over 50 years old	4	2%	-
By region	Shanghai employees	149	69%	15%
	Non-Shanghai employees	68	31%	21%
By academic	College qualifications	52	24%	13%
	Bachelor	117	54%	16%
	Master degree and above	38	18%	6%
	Other	10	5%	2%
Newly recruited employees	-	27	11%	2%
Employees of ethnic	-
minorities		12	5%	2%
Trainees	-	217	85%	36%

Note: Turnover rate = total number of turnover/(total number of employees+ total number of turnover)

16 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

The Company is conscientiously implementing and fulfilling the requirements of the Chinese relevant laws and regulations, including the "Labour Law" and "Labour Contract Law". Fair treatment is given to our employees of different ethnicities, genders and cultural backgrounds, as great efforts have been made to ensure justice and fairness in such areas as recruitment, training, remuneration, career development and promotion, and to prevent discrimination. The Company pays attention to employee development by assisting them in pursuing all-round career development and planning, which will in return improve their core competence and professional knowledge and skills.

		Training time
	Number of people	per capita
	(person)	(hours)
Male employees	114	7.81
Female employees	103	7.79
Senior management	5	7.80
Middle-level management	15	7.87
Frontline employee	197	7.79

The Company has established an employee training system that is comprehensively tailored to all employees, which also focuses on various areas, including business and product expertise, occupational conduct and safety, management skillsets, and leadership. In this regard, our employees at different positions with different ranks are provided with customized training programs. Trainings are provided throughout the Company to enable both male and female employees to enjoy equal training opportunities. In addition, the Company has provided its employees at different levels with targeted training activities based on the frontline-,middle-, and high- levels. The establishment of a comprehensive training system enables employees at all levels to receive on-the-job training within the department, while receiving online and offline education at the company level. In 2020, the Company organized 94 training sessions with a training coverage of 100%.

5.2 Protecting Employees' Rights and Interests

According to Chapter 9 of the "Labour Law", the Company makes full contribution to the "Five Insurances and One Fund" (being pension insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance and housing provident fund) for all employees on time pursuant to local standards. The Company arranges the work/rest schedule for its employees according to the labour time, labour intensity and statutory holidays as stipulated in Chapter 4 of the "Labour Law", and provides paid leave for qualified employees. In addition to strict compliance with the regulations related to national statutory holidays, the Company will also organize various non-work activities for its employees. The Company regularly organizes physical checks for all employees, and encourages its employees to participate in cultural and sports activities to further enhance their physical fitness. The Company has formulated rules and organized employee training so that its employees can strengthen their ability to prevent fire accidents and implement emergency measures to prevent occupational safety risks. During the Reporting Period, the Company did not identify any employee injury or fatal accident during the course of business.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

The Company has expressly regulated working hours, leave and vacation policies, labour protection and workplace conditions. The Company did not identify any case of forced overtime work, and complied with the laws and regulations regarding employee health, safety and the environment. The Company was committed to protecting human rights, establishing a respectful, honest and fair working environment for employees and customers. The Company was in compliance with all applicable laws and regulations, particularly those that have a significant impact on the Company and laws related to labour. These laws and regulations include the "Labour Law of the People's Republic of China" and the "Labour Contract Law of the People's Republic of China". The Company did not identify any major non-compliance case during the Reporting Period. The Company strictly prohibits use of forced labour and child labour. The Company has set up strict requirements for selecting employees, pursuant to which, the applicants are required to provide identity documents, the highest academic qualification, professional certificate and certificate of resignation for the verification purpose when recruiting employees. Where any department of the Company is found in violation by using child labour or forced labour, the Company will immediately terminate related labour contract, identify the causes, hold the involved personnel accountable, and impose penalties against such personnel for misconduct. During the Reporting Period, the Company did not identify use of forced labour and child labour.

5.3 Care about Employees' Life

The Company actively mobilized and organized a variety of cultural and sports activities and team-building activities that are popular among our employees, and took these activities as an important platform to promote the unity and development of the Company, so that our employees will always maintain a high- spirited spirit for their daily work.

Over the years, the Company has successively established basketball team, yoga, cheerleaders and other clubs, and organized various activities to continuously satisfy employees' spiritual and cultural needs. In addition, each department of the Company actively organized a variety of team building activities in 2020, which have been well received and widely participated by employees. These activities not only enriched our employees' life after busy work, but also strengthened team cohesion and continuously enhanced employees' sense of belonging.

18 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

Advocating Safe Working
The Company actively creates a safe and healthy working environment for our employees. In order to effectively respond to the COVID-19 pandemic and ensure the safety of our personnel and workplace, the Company urgently formulated and issued the "Measures for Office Management during the Epidemic Prevention and Control", "Guidelines for Work during the Epidemic" and other systems in early 2020, which clearly regulated the working methods during the epidemic from the company level, department level and employee level, ensuring each department of the Company carried out their work efficiently in an orderly manner on the premise of safe working during the epidemic. The Company has taken various countermeasures in a timely manner, including rotation and flexible working mechanism; daily monitoring of employees' health; daily disinfection of office premises; preparing sufficient epidemic prevention materials for office workers; timely checks on employees; arranging quarantine and nucleic acid testing for those who have visited high risk areas, etc. so as to effectively ensure the safety of personnel and workplace.
Enhancing Fair Procurement
The suppliers of the Company mainly provide IT solutions, daily office supplies, transportation vehicles and decoration services, business process outsourcing, and information consultation for the Company. Effective supply chain management represents an important part of the Company's operations. Though supply chain management is not a major business segment for a service provider, long-term and stable cooperation established with suppliers can enhance our corporate image and lower business risks, thereby promoting the Company's development. In this regard, the Company has formulated relevant regulations on supplier evaluation, selection and supervision.
In 2020, Dongzheng AFC continued to improve its procurement fairness system and procurement procedures. For the evaluation of suppliers and admission approval, the Company has established evaluation criteria for quality, price, health, environment, safety, ethics, and other indicators, which are given weight in different areas. For the purpose of assessment, the Company has strictly complied with these criteria to identify high quality suppliers that meet the standards. To select a supplier, its performance is evaluated according to the evaluation criteria, and its reputation, as well as the suitability for establishing long-term and stable cooperation, which constitute important references. In addition, the Company has strengthened its regulation and standardization of procurement management, as well as the management of contract performances by our suppliers, by improving the "Administrative Measures for Procurement" and formulating various outsourcing management systems to further strengthen the Company's follow-up management and evaluation process for supplier services. For the purposes of potential situations and issues arising from the performance by our suppliers of the contracts, the Company has explored various means, including daily communications, regular meetings, and post-procurement assessment, to acquire details of the suppliers in an in-depth and comprehensive manner. By identifying these potential risks in our analysis, the Company will recommend procurement strategies so as to improve the contract performance quality of our suppliers significantly.
For large-scale procurement or infrastructure projects, the Company has established specific tender policies to ensure a fair and impartial selection process. As for the approved suppliers, the Company will continue to monitor their performance and regularly check whether their behaviors meet the Company's evaluation criteria. As of the end of 2020, the Company had 27 major suppliers, including 23 suppliers in Shanghai and 4 suppliers outside Shanghai.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

Persistent Efforts in Anti-corruption
The Company actively carried out people-oriented rectification of undesirable work practices such as indolence and extravagance according to those regulations. The Company deeply recognizes the importance of compliance and steady development to the Company, and believes that lawful and regulated operations represent the strongest foundation for the Company to achieve prosperity and growth. The Company is required to incorporate pragmatism and efficiency into all aspects of its operations to prevent extravagance and reduce waste.
The Company strictly abides by the laws and regulations on anti-commercial bribery, such as the "Anti- Money Laundering Law of the People's Republic of China" and the "Prevention of Bribery Ordinance of Hong Kong". Besides striving for the incorruptibility practices, the Company will enhance the employees' self-discipline awareness to prevent violation of employee rules and policies. To this end, the "Business Accountability Management Policy" and the "Employee Code of Conduct" has been formulated, in which case, all employees are prohibited from accepting gifts from or offering gifts to customers, or participating in various consumption and entertainment activities arranged by customers. Systems related to anti-fraud and anti-commercial bribery, as well as the code of conduct of employees, are formulated to prevent corruption and crack down on bribery.
At the same time, the Company also strictly abides by the "Anti-Unfair Competition Law" and other relevant laws and regulations to manage and restrict its own act, with a view to eliminating all kinds of unfair competition behaviours such as employee bribery. The Company actively protects the rights and interests of financial consumers, and strives to make contribution for creating a sound business development environment for the society.
In 2020, the Company organized anti-corruption and anti-bribery training for employees. The Company strives to create incorruptible business atmosphere, enhance employees' self-discipline awareness, avoid violations of regulations by employees, and promote the sustainable development of the Company and society.
During the Reporting Period, the Company did not identify any internal corruption, and there was no corruption-specific lawsuit filed and completed against the Company or employees.
Promoting Financial Knowledge to the Public
To implement the relevant requirements of the regulators and improve the quality of services, in 2020, the Company launched the special promotion campaigns, such as "Financial knowledge to the General Public" and "Anti-money Laundering Education", which fully take the advantages of online media for promotions among our corporate and potential customers and expanded the publicity range. In addition, the Company has also joined forces with 8 regional cooperative dealers to promote the relevant law education. By continuing to institutionalize and normalize the promotion of financial knowledge, the Company will introduce a brand-new mechanism to protect the legitimate rights and interests of financial consumers in all directions.

20 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

Whilst conscientiously implementing the legal and regulatory requirements under the Law of the People's Republic of China on Anti-money Laundering, the Anti-Money Laundering Regulations for Financial Institutions, and the Measures for the Administration of Anti-Money Laundering and Counter Terrorist Financing by Banking Financial Institutions, the Company has prepared anti-money laundering education courseware based on the anti-money laundering characteristics of automotive finance companies according to the regulations relevant to anti-money laundering, and held seminars within various departments of the Company to conduct explanation and interaction in respect of anti-money laundering knowledge. These seminars have successfully raised the awareness of the personnel at various departments of the Company on the criminal behavior of "money laundering".

5.8 Supporting Social Welfare

As part of the society, the Company persists in actively fulfilling social responsibilities. Over the years, the Company has been actively fulfilling corporate citizenship responsibilities by advocating and participating in charity undertakings throughout the Company, including donation, as well as striving for harmonious development between enterprises and the society. Since its inception, the Company has been committed to building a stable and sustainable community.

In 2020, an unexpected COVID-19 outbreak swept through China and took the entire country by storm. Every Chinese citizen has been taking the initiative to combat this outbreak. In fulfilling the social responsibility as an financial institution, the Company has also launched the donation campaign "Expeditious Assistance to Hubei and Wuhan", which received active participation and response from all employees of the Company.

In addition, the Company insists on taking a series of practical measures to play the role of financial institutions in the fight against the pandemic, so as to win "the Tough Battle of pandemic Prevention and Control" with quality financial services. The Company, based on specific situation of particular customers who are affected by the pandemic, actively provides humanistic care, supports people's livelihood, strengthens employee care, and undertakes social responsibility.

Despite the pandemic impacting on the operation of the Company, our caring action on "boundless love for dedicated doctors" has fully demonstrated strong sense of social responsibility, mission, proactiveness, and gravity. These actions convey the spirit of love and compassion to those in need across the country.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

VI. OUTLOOK

The year of 2021 marks the commencement of China's "14th Five-Year Plan". Dongzheng AFC will continue to pursue its business development that supports the major national strategic plans and serves the regional economic development. With a major focus on the real economy, we will actively implement environmental measures, take the initiative to shoulder social responsibilities, and promote economic, environmental, and social sustainability.

Responsibility Management: Dongzheng AFC will continue to improve the overall social responsibility management, and will assign related social management responsibilities to the responsible officer at each level to achieve normalized professional management. Furthermore, the overall internal control procedures of the Company will take into consideration the social and environmental factors to identify the opportunities and risks that the social and environmental factors bring to the Company.

Risk Control: Dongzheng AFC will continue to enhance its comprehensive management of credit risks, anti-money laundering risks, and market risks so as to effectively exercise risk control and prevention measures in key areas. By pursuing the compliance philosophy and fulfilling the anti-money laundering duties, Dongzheng AFC will promote the development of compliance values. Furthermore, we will thoroughly enhance the risk awareness of our employees at all levels, while regulating the employee conducts.

Products and Services: We will continue to expand geographically and optimize our dealer network by further extending strategic cooperation with automakers and dealers and focusing on retail finance products and services; optimize our product and service structure by developing more innovative products and providing more customized services; and strengthen technical investment to improve the product and service competitiveness and operation capabilities through the application of information technology.

Talent Development: We will increase investments in human resources, maintain continuous improvement in the various aspects such as recruitment, training, promotion, welfare package, employee care, and corporate culture development. Furthermore, a talent echelon through a talent development program will be built so that our employees will gain continuous growth and achieve their own value.

Environmental Protection: Besides adhering to the mission of environmental protection, we will continue to promote paperless operation, pursue low-carbon operation practices, and support the green development and environmental protection through scientific and technological innovation. Meanwhile, we will actively promote green office and resources conservation to reduce our environmental impacts. By working with all community members, we will promote the development of a harmonious relationship between man and nature.

Looking into the future, Dongzheng AFC will continue to actively respond to the expectations of the stakeholders, and improve our social responsibility management system. With a greater determination to advance the high- quality development, we facilitate further integration of the sustainability strategy into our corporate operation strategy. While pursuing our own healthy and sustainable development, we will further assume economic, social, and environmental responsibilities and serve as a greater contributor to the economic sustainability in the country.

22 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

ESG REPORT INDICATOR INDEX

		Reference		Reference
Subject Areas and		Page		Page
Aspects	General Disclosures	Number	Key Performance Indicators	Number

Environmental

A1 Emissions	Information on the policies; and Page 12-13	A1.1	The types of emissions and	Page 12
	compliance with relevant laws and		respective emissions data.
	regulations that have a significant	A1.2	Greenhouse gas emissions in	Page 12
	impact on the issuer relating to air		total (in tonnes) and, where
	and greenhouse gas emissions,		appropriate, intensity (e.g. per
	discharges into water and land, and		unit of production volume, per
	generation of hazardous and non-		facility).
	hazardous waste.	A1.3	Total	hazardous	waste	This
			produced	(in	tonnes)	and,	indicator is
			where	appropriate,	intensity	insignificant
			(e.g. per unit of production	and is not
			volume, per facility).			applicable
								as the
								Company is
								a financial
								services
								company
		A1.4	Total non-hazardous waste	Page 12
			produced	(in	tonnes)	and,
			where	appropriate,	intensity
			(e.g. per unit of production
			volume, per facility).
		A1.5	Description	of	measures to	Page 13
			mitigate emissions and results
			achieved.
		A1.6	Description of how hazardous	Page 13
			and non-hazardous wastes are
			handled, reduction	initiatives
			and results achieved.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

Reference

Subject Areas and

Page

Aspects

General Disclosures

Number

Key Performance Indicators

Number

Use of

Policies on the efficient use of

Pages

A2.1

Direct

and/or

indirect

energy

Page 12

Resources

resources, including energy, water

12-14

consumption

type

(e.g.

and other raw materials.

electricity, gas or oil) in total

(kWh in '000s) and intensity

(e.g. per unit of production

volume, per facility).

A2.2

Water

consumption

total

Page 12

and intensity (e.g. per unit of

production

volume,

per

facility).

A2.3 Description

of energy use

Page 14

efficiency initiatives and results

achieved.

A2.4 Description of whether there is

Page 14

any issue in sourcing water

that is fit for purpose, water

efficiency initiatives and results

achieved.

A2.5 Total packaging material used

This

for finished

products (in

indicator is

tonnes) and, if applicable, with

not

r e f e r e n c e

t o

p e r

u n i t

applicable

produced.

as the

Company is

a financial

services

company

The

Policies on minimising the issuer's

Page 14

A3.1

Description

the

significant

Page 14

Environment

significant impact on the environment

impacts of activities on the

and Natural

and natural resources.

environment

and

natural

Resources

resources

and

the

actions

taken to manage them.

Climate

Significant climate-related issues

N/A

A4.1

Description

the

significant

This

Change

which impacted the issuer, and the

climate-related issues which

indicator is

measures taken to manage them.

have

impacted,

and

those

not

which may impact, the issuer,

applicable

and the measures taken to

as the

manage them.

Company is

a financial

services

company

24 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

		Reference		Reference
Subject Areas and		Page		Page
Aspects	General Disclosures	Number	Key Performance Indicators	Number

Social

Employment

Information

the

policies;

and

Page 15

B1.1

Total

workforce by

gender,

Page 15

compliance with relevant laws and

employment type,

age

group

regulations that have a significant

and geographical region.

impact

the

issuer

relating to

B1.2

Employee

turnover

rate

Page 15

compensation

and

dismissal,

gender,

age

group

and

recruitment

and

promotion, working

geographical region.

h o u r s , r e s t p e r i o d s , e q u a l

o p p o r t u n i t y , d i v e r s i t y , a n t i -

discrimination, and other benefits and

welfare.

Health and

Information

the

policies;

and

Page

B2.1

Number and rate of work-

Not

Safety

compliance

with

relevant

laws

and

16-18

related fatalities in each of the

applicable

regulations that have a significant

past three years including the

as there

impact on the issuer relating to

reporting year.

was no

providing a safe working environment

death tolls

and protecting

employees

from

caused by

occupational hazards.

work during

the past

three years

including

the

Reporting

Period

B2.2 Lost days due to work injury.

Page 16-17

B2.3

Description

occupational

Page 16-18

health

and

safety

measures

adopted,

how

they

are

implemented and monitored.

Development

Policies

improving employees'

Page 16

B3.1

The percentage of employees

Page 16

and Training

knowledge and skills for discharging

trained

gender

and

duties at work. Description of training

employee category (e.g.

activities.

senior

management,

middle

management).

B3.2

The average

training

hours

Page 16

completed

per

employee

g e n d e r a n d e m p l o y e e

category.

Labour

Information

the

policies;

and

Page 17

B4.1

Description

measures

Page 17

Standards

compliance

with

relevant

laws

and

review

employment practices

regulations that have a significant

to avoid child and forced

impact on the issuer relating to

labour.

preventing child and forced labour.

B4.2

Description of steps taken to

Page 17

eliminate such practices when

discovered.

Shanghai Dongzheng Automotive Finance Co., Ltd. | 2020 Environmental, Social and Governance Report

Reference

Subject Areas and

Page

Aspects

General Disclosures

Number

Key Performance Indicators

Number

Supply Chain

Policies

on managing

environmental

Page 18

B5.1

Number

suppliers

Page 18

Management

and social risks of the supply chain.

geographical region.

B5.2

Description of practices relating

Page 18

to engaging

suppliers, number

of suppliers where the practices

are

being

implemented,

how

they

are

implemented

and

monitored.

Product

Information on the policies; and

Pages

B6.1

Percentage

total products

This

Responsibility

compliance with relevant laws and

11-12

sold or shipped subject to

indicator is

regulations that have a significant

recalls for safety and health

not

impact on the issuer relating to

reasons.

applicable

health

and safety,

advertising,

as the

labeling and privacy matters relating

Company is

to products and services provided

a financial

and methods of redress.

services

company

B6.2

Number

products

and

Page 11

service

related complaints

received and how they are

dealt with.

B6.3

Description

practices

The

relating

observing

and

Company

protecting intellectual property

maintains

rights.

and

protects

intellectual

property

rights in

accordance

with the

laws of the

PRC

B6.4

D e s c r i p t i o n

o f q u a l i t y

This

assurance

process

and recall

indicator is

procedures.

not

applicable

as the

Company is

a financial

services

company

B6.5

Description of consumer data

Page 12

protection

and

privacy

policies,

how

they

are

implemented and monitored.

26 2020 Environmental, Social and Governance Report | Shanghai Dongzheng Automotive Finance Co., Ltd.

Reference

Subject Areas and

Page

Aspects

General Disclosures

Number

Key Performance Indicators

Number

Anti-

Information on the policies; and

Page 19

B7.1

Number

concluded

legal

The

corruption

compliance with relevant laws and

cases

regarding

corrupt

Company

regulations that have a significant

practices brought

against the

did not have

impact on the issuer relating to

issuer or its employees during

relevant

bribery, extortion, fraud and money

the reporting period and the

lawsuits

laundering.

outcomes of the cases.

during the

Reporting

Period

B7.2

Description

preventive

Page 19

measures and whistle-blowing

procedures,

how

they

are

implemented and monitored.

Community

Policies

community

engagement

Page 19-20

B8.1

Focus areas

contribution

Page 19-20

Investment

to understand the needs of the

(e.g. education, environmental

communities where

the issuer

concerns,

labour

needs,

operates and to ensure its activities

health, culture, sport).

take

into

consideration the

B8.2

Resources contributed

(e.g.

Page 20

communities' interests.

money or time) to the focus

area.

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Shanghai Dongzheng Automotive Finance Co. Ltd. published this content on 05 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2021 11:00:02 UTC.

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