ESG has become a must-answer question, and Haitong Hengxin (1905.HK) has created a sample of the financial leasing industry

Since the United Nations Principles for Responsible Investment report first put forward the concept of ESG investment in 2006, ESG has become increasingly important and has become an indispensable part of corporate strategic planning around the world.

With the intensification of global environmental problems and the increasing expectations of society's fairness, transparency and responsibility, the performance of enterprises in environmental protection, social responsibility and corporate governance has increasingly become a key criterion for investors, consumers and other stakeholders to evaluate the value of enterprises.

Good ESG performance can not only help enterprises reduce operational risks and improve efficiency, but also enhance brand image and attractiveness, thereby attracting more investment and cooperation opportunities and enhancing the market competitiveness of enterprises. In addition, more and more regulations require companies to disclose ESG-related information, which is also driving the adoption of ESG practices.

In the field of financial leasing, Haitong Hengxin is an excellent student of ESG practice, integrating ESG concepts into its own business, and has won awards and commendations from many institutions, such as the "Best ESG Financing Award of the Year" in the "Jinquan Award", and the title of "Leading Enterprise in Serving the Real Economy" in the "Tengfei Award" of the Global Leasing Industry Competitiveness Forum.

Recently, Haitong Hengxin released the latest 2023 ESG report, from which we can see some grass snake gray line on how Chinese financial leasing companies can promote ESG construction with high quality.

1. Create a green leasing ecosystem

ESG is a concept with a very broad connotation, and in the highly differentiated cultural backgrounds of the East and the West, different institutions and investors often have different emphases in their interpretations, but there is a broad consensus on the importance of the environmental dimension.

Focusing on the domestic market, under the guidance of the "3060" national strategy, all walks of life are trying their best to develop in the direction of green economy. Specific to the financial sector, the development of green finance has become a top-down consensus in the financial industry, and Haitong Hengxin has taken the initiative to increase investment in green leasing business in line with this trend of industrial transformation.

In 2023, Haitong Hengxin's green leasing business invested more than RMB13 billion, accounting for about 23%, and the scale of green leasing assets was approximately RMB23.7 billion by the end of 2023.

From an in-depth perspective, Haitong Hengxin has laid out the fields of green travel, new energy, sewage and solid waste treatment, and is gradually building a multi-field integrated green leasing industry ecosystem from point to line, from line to surface.

Whether it is from the perspective of the dual carbon strategy or based on the current AI transformation, the scale of power and energy will be put forward globally, and the development of new energy will be one of the biggest industrial transformation directions in the next few decades, and it is also one of the key support businesses clearly proposed by Haitong Hengxin.

It is reported that Haitong Hengxin provides financial leasing services for distributed photovoltaic, monocrystalline silicon furnace, photovoltaic silicon wafers and silicon rods, P-type battery silver paste and other enterprises, and has invested a total of 95 related industrial chain projects, with an amount of about 1 billion yuan.

For enterprises that are good at using their own endowments and have an innovative spirit, Haitong Hengxin will allocate more resources to help them complete industrial upgrading. Weifang, Shandong Province has abundant saline-alkali tidal flat resources, and a local enterprise has invested in the construction of a "salt-light complementary" photovoltaic power station integrating power generation, salt production and energy storage according to local conditions, with a total installed capacity of 5.8MW, and with the help of Haitong Hengxin, the project has been completed in October 2023 for grid-connected power generation.

In addition to the significant investment in infrastructure, the end application is also a top priority. For example, Haitong Hengxin provided financial leasing services for 50 new energy electric buses for a public transport company in Jiaozuo area, with a financing amount of nearly 30 million yuan.

In addition, Haitong Hengxin also actively helps all walks of life to achieve green industry transformation. In 2023 alone, Haitong Hengxin will invest in 200 projects in the field of energy conservation and environmental protection, with an investment amount of about 6.1 billion yuan.

2. Multi-dimensional service to the national strategy

From the perspective of the industry, it is a financial development path with Chinese characteristics to comply with policy guidelines and promote a high degree of integration between finance and the real economy.

As an important part of the real economy, small and micro enterprises play an irreplaceable role in activating the market, solving employment, and creating GDP. But for a long time, the financial support for small and micro enterprises has been far from enough.

Financial leasing companies can give full play to their own "financing + financing" characteristics, which can not only effectively control risks, but also meet the capital needs of many small and micro enterprises. Based on this, Haitong Hengxin has proposed a variety of financial solutions, which have helped many small and micro enterprises and improved the quality and efficiency of inclusive financial development.

In 2023, Haitong Hengxin formulated four micro-project guidelines, including "Micro Mobility", "Micro Logistics", "Micro Urban Distribution", and "Small Distributed Photovoltaic Power Station", to improve the approval efficiency of small and micro projects. During the same period, Haitong Hengxin provided more than 14.9 billion yuan of financial support to 7,623 micro, small and medium-sized enterprises.

In terms of specific industries, Haitong Hengxin's purpose of serving the national strategy has also been fully demonstrated.

In the context of high-quality macroeconomic growth, industrial transformation and upgrading, new quality productivity such as advanced manufacturing and digital economy should be tilted with more resources.

In 2023, Haitong Hengxin's related advanced manufacturing business invested approximately RMB16 billion, accounting for more than 28%, and the scale of advanced manufacturing assets was approximately RMB22.6 billion by the end of 2023.

In order to strengthen support for strategic emerging industries such as advanced manufacturing and digital economy, Haitong Hengxin has actively expanded financing channels and issued special bonds and asset securitization products to support the rapid development of related industries.

In April 2023, Haitong Hengxin successfully issued a technology innovation corporate bond (digital economy) (Phase I), which is also the first corporate bond in the financial leasing industry to support technology innovation enterprises in the field of digital economy. As of the end of 2023, Haitong Hengxin has issued a total of 5 tranches of asset-backed securities with a cumulative issuance scale of 6 billion yuan and labeled as scientific and technological innovation.

III. Conclusion

Taking ESG as an important development strategy of the company may increase operating costs in the short term, but it actually cultivates the long-term competitiveness of the company, and as the ESG construction becomes more and more perfect, the probability of experiencing long-tail risks decreases, and it is easier to achieve stable and continuous growth in performance.

This point has been reflected in Haitong Hengxin. After suffering the impact of the epidemic, Haitong Hengxin's performance recovered rapidly, and the compound growth rate of the company's net profit from 2020 to 2023 reached 12.92%.

Supported by good performance, Haitong Hengxin has provided generous dividends to investors. In 2023, the company will pay a total interim dividend and a final dividend of 0.09 yuan per share, with a dividend yield of 11% based on the closing price on April 22.

Looking ahead, ESG is not an add-on question, but a must-answer question. Practicing ESG concepts in business development and realizing the resonance of commercial value and social value is not only the internal pursuit of modern enterprises, but also the external measurement standard for their sustainable development. For an excellent practitioner like Haitong Hengxin, the market should give a new judgment on its comprehensive value.