1. Summary of the Policy

The purpose of this policy is to define CPE's approach to integrating the consideration of environmental, social, and governance (ESG) risks and value creation opportunities into investments made through its private equity funds and public market funds as well. CPE aspires to consider material ESG issues in the course of its due diligence and investment decision, and in the monitoring of portfolio investments to the extent reasonably practical under the circumstances, subject, in any event, to the provisions of the Partnership Agreements and the Private Placement Memorandums of the funds concerned, and to the duty of CPE as the funds' general partner to seek to maximize the returns on investment for all of its investors of its funds under management and/or advisory.

For the purposes of this policy, ESG covers including, without limitation, the following aspects:

1. (1) E - Environment: Climate change, emissions, use of resource, biodiversity, natural resources, etc.;
2. (2) S - Social: Employee rights, employee health and safety, human rights protection, supply chain management, innovation-driven initiatives, product responsibility, etc.;
3. (3) G - Governance: Corporate governance structure, risk management, protection of investors' rights and interests, anti-bribery and anti-corruption, etc.

CPE will continuously review and, as appropriate, update this policy to ensure its alignment with industry practices, regulatory requirements, and international sustainability trends.

2. Scope of the Policy

This policy will apply to all investments (including but not limited to equities, securities, debts and others with underlying assets such as real property, infrastructure, energy and/or resources) considered by the relevant Investment Committee or made by CPE following the date hereof, and will be interpreted in accordance with applicable local laws and regulations. In cases where CPE determines it has limited ability to conduct diligence or to influence and control the integration of ESG considerations in the investment, for example, in cases where CPE is a minority shareholder, or where other circumstances affect CPE's ability to assess, set, or monitor ESG-related performance goals, it will not necessarily be feasible to implement ESG-related principles. In such instances where CPE believes it to be appropriate, reasonable efforts will be made to encourage these private equity portfolio companies to consider relevant ESG-related principles.

This policy applies to both the daily operations and internal management of CPE, promoting green office practices, protection of employee rights, and the cultivation of a compliance culture.

3. Management Role and Responsibilities

CPE established an ESG Management Committee, composed of CPE's senior management and chaired by the CEO. Members include the President, CFO, CIO, as well as the heads of the Legal Compliance Department, Compliance and Risk Control Department, Beijing Changrui Public Welfare Foundation, and Investor Relations Department. The ESG Management Committee is responsible for formulating ESG-related strategies and for managing and supervising the implementation of ESG policies within CPE. The ESG Management Committee may designate internal specialists to handle ESG-related matters and provide recommendations, while flexibly leveraging external resources when additional relevant expertise is required. The ESG Management Committee holds regular meetings semi-annually and convenes additional meetings as necessary.

The ESG Working Group, established under the ESG Management Committee and composed of seven functional departments — Strategy Department, Investment Department, Investor Relations Department, Financial Management Department, Legal Compliance Department, Compliance and Risk Control Department, and Administration Department — is responsible for implementing the work plans and requirements proposed by the ESG Management Committee. It regularly reports progress and outcomes to the ESG Management Committee and seeks its guidance.

4. ESG-related Principles

Regarding private equity funds, within the specified scope, CPE has adopted the following principles with reference to relevant international industry guidelines:

1. (1) Consider ESG issues associated with target companies when evaluating whether to invest in a particular company or entity, as well as during the period of ownership.
2. (2) Grow and improve the companies in which CPE invests for long-term sustainability and to benefit multiple stakeholders, including on environmental, social, and governance issues.
3. (3) Remain committed to compliance with applicable national, state, and local labor laws in the countries in which CPE invests; support the good labor practices to employees.
4. (4) Use governance structures that provide appropriate levels of oversight in the areas of internal audit, risk management, and potential conflicts of interest, and to implement compensation and other policies that align the interests of owners and management.
5. (5) Require investment teams to consider ESG issues throughout the investment cycle (including preliminary deal screening, due diligence, investment decision making, post-investment management and exit); bring advanced ESG concepts and resources to portfolio companies at the same time.
6. (6) Provide timely information to CPE's shareholders and limited partners on the matters addressed herein, and work to foster transparency about CPE's activities.
7. (7) Encourage CPE portfolio companies to advance these principles in a way that is consistent with their fiduciary duties.
8. (8) Encourage strict policies that prohibit bribery and other improper payments to public officials consistent with international standards such as U.S. Foreign Corrupt Practices Act, similar laws in other countries, and the OECD Anti-Bribery Convention.
9. (9) Participate in learning and sharing ESG management knowledge and experiences with peers in the industry.
10. (10) Organize ESG-related trainings on a regular or irregular basis, and make efforts to deeply understand and reinforce relevant risk management and monitoring measures.
11. (11) Encourage the joint participation of employees, portfolio companies and investors in public-welfare activities.

4.1 Special Principles on Climate Change

CPE actively responds to international standards and domestic dual carbon goals by incorporating climate-related physical risks and transition risks into the full investment assessment process. Continuously carry out carbon emission accounting for investment portfolios and own operations, promote portfolio companies to establish climate risk management systems, prioritize layout in high-quality sectors such as green low-carbon development, energy conservation, and environmental protection, thereby facilitating the green transformation of industries.

4.2 Special Principles for Ecosystems

CPE aligns with the framework requirements of the Taskforce on Nature-related Financial Disclosures (TNFD), integrating ecosystem and biodiversity conservation into investment due diligence and risk management. Conduct thorough investigations into risks related to ecological red lines, nature reserves, and habitat destruction associated with investment projects. Through mechanisms such as negative lists and post-investment supervision, constrain behaviors that cause ecological damage and promote portfolio companies in fulfilling their responsibilities for ecological protection.

4.3 Special Principles on Human Rights

CPE strictly adheres to international labor standards and domestic labor laws and regulations, respecting and safeguarding the basic human rights of its employees, employees of invested enterprises, and relevant personnel in the supply chain. Strictly prohibit violations such as child labor and forced labor, promote portfolio companies to establish fair employment practices, occupational health systems, and compensation and benefits frameworks, and uphold workplace diversity and inclusion.

4.4 Special Principles on Technology Ethics

CPE focuses on data security, algorithmic compliance, and the boundaries of technology application in areas such as artificial intelligence, biotechnology, and digital health. It upholds the bottom line of technology for good and prevents compliance and reputational losses arising from ethical risks.

5. CPE's Approach to Implementation of ESG Policy in Investments

5.1 Preliminary Screening and Due Diligence

CPE conducts ESG risk screening and ESG due diligence during the pre-investment stage to identify potential risks and value opportunities. Based on the level of risk impact, ESG risks are classified into three tiers — high, medium, and low — and differentiated assessment and response plans are formulated accordingly.

1. (1) High Risk (Category A): investment targets with material ESG issues which are defined as those issues that CPE in its sole discretion determines have or have the potential to have a direct substantial negative impact on the corporate’s ability to create, preserve, or erode economic value, as well as environmental and social value for itself and its stakeholders;
2. (2) Medium Risk (Category B): investment targets that have or have the potential to have a negative impact on a limited scale and that such impact could be recovered;
3. (3) Low Risk (Category C): investment targets that have low or no negative impact on society and the environment.

Upon evaluating whether or not to invest in a target company or a target entity, the environmental, public health, safety and social issues related to such target companies shall be, without exception, taken into consideration. To further implement the above approach, all proposed investment targets presented to the Investment Committee for discussion MUST include their ESG assessment reports; an ESG continuing improvement proposal MUST also be submitted where the target company or target entity is categorized as ESG medium and/or high risk. If the investment teams think it necessary, they could submit application to the ESG Management Committee for an approval to involve external counsel to conduct a due diligence assessment of the investment targets.

5.2 Investment Decision-Making

When making decisions, the Investment Committee considers ESG assessment results as a key reference, comprehensively evaluating risk-return profiles, strategic alignment, and long-term sustainable value. As the general principle, CPE would not invest into such corporates with material ESG issues.

5.3 Post-Investment Management

To manage ESG risks and value creation opportunities in its investments, and subject to CPE's determination of what is reasonable and appropriate for each investment as described, where there are material issues identified during the diligence process, the investment teams and relevant Investment Committee MUST submit reports to the ESG Management Committee for further assessment and evaluation. The ESG Management Committee will advise and provide suggestions on the same for the Investment Committee’s consideration on such investments. Where management of, or performance on, an ESG issue is considered by CPE to need improvement, CPE will work with the management of the invested portfolio company to support the development of a corrective action plan.

CPE requires its portfolio companies to:

1. (1) Establish appropriate ESG policies and supervise and review them;
2. (2) Appoint senior management personnel to take responsibility for ESG related matters;
3. (3) Board of Director of the portfolio company shall submit ESG annual report to CPE;
4. (4) Report to CPE where any material ESG issues raised;
5. (5) Maintain records keeping on ESG documents.

5.4 Exit

Conduct a comprehensive assessment of the ESG performance of portfolio companies prior to exit, summarize lessons learned, and provide reference for subsequent investments.

6. Documentation

CPE will keep all documents related to ESG assessments, due diligence, tracking, meetings, and reports to ensure that the work is traceable and verifiable. The relevant records cover key issues risk management, post-investment tracking, and the implementation of improvements.