Fosun International Limited (656) Earnings Call Transcript & Summary

Hello, everybody. Welcome to Morgan Stanley's Annual Sustainable Futures Conference. So before we start, please note that this presentation is not for members of the press. If there are members of the press, please do not participate in this presentation and reach out separately. Comments made on this presentation are not for attribution by members of the press. The views expressed or represented by Morgan Stanley speakers do not represent the views of Morgan Stanley or Morgan Stanley Research. For important disclosures, please see the Morgan Stanley Research disclosure website at www.morganstanley.com/research disclosures. If you have any questions, please reach out to your Morgan Stanley Sales Representative. So now that's out of the way, thank you very much for tuning into our fireside chat with Fosun International. I'm Ehsernta Fu, from Associate of Sustainability Research at Morgan Stanley. Here with us today, we have -- we are pleased to have Ms. Ning Jin, Executive Director, IR and Treasury of Fosun International. So for our fireside chat today, Ning is going to first kick us off by giving a presentation on Fosun's sustainable journey and some updates on the company's ESG achievements after which I'll ask Ning some questions on Fosun's sustainability efforts. So now without further ado, let me pass the time to Ning for the presentation.

Thank you, Ehsernta, for the introduction, and hello, everyone, over the Zoom. I'm Ning from Fosun International. I'm based in London, covering the IR and the treasury functions. So it's being a great privilege to be here last year and also this year to share Fosun's progress on the sustainable development with you all. And at the same time, I'm very keen to learn from all the ESG leading corporates on this event about your sustainability strategy and initiatives. So also, I would appreciate the feedback from you after this session. So I would like to start with a brief introduction of Fosun and our business. So please, Ehsernta, for the Slide 2. So as a global conglomerate focusing on the family consumption, our vision is to create a happy life for family around the world. Therefore, a long-term sustainable development is always set as a priority of our strategy and also the day-to-day operations. And this year marks the 30 years anniversary of Fosun. Now our business layout, including 4 major sectors; health, happiness, wealth and intelligent manufacturing. And as a global corporate, we operate across many regions, including Europe, U.S., Asia, et cetera. We also have the largest insurance company, Fidelidade in Portugal, one of the oldest private bank HAL in Germany and the world chain Resort Group Club Mediterranean club [indiscernible] in France. And we also have a number of portfolio companies listed in the various stock exchanges including Fosun Pharma, [ Hanleesiram and also Buan Hana Mining ], et cetera. And if we go to the next slide, is our sustainable journey. While we are faster growing our business in the past 30 years, our sustainable development journey is also tightly incorporated with our business growth. As you can see through this time line, we joined the UNGC at the group level in 2014 and started publishing our first comprehensive ESG report in 2016. We had a consistent 3 year ESG rating upgrades from BB to AA in the past 4 years. And at the same time, we leveraged our capability in the sustainable development and continuously to encourage our member companies to develop their ESG practice and participate in international benchmarks and agreements. And you see here in the 3 key member companies have joined the UNGC in 2019, including the Fidelidade, the HAL and our Japan asset management platform IDERA. And also the Nanjing Iron and Steel is among the first appellant of the ultra-low emission in the industry in China. At the same time, Fosun Tourism Group is rated AA by the MSCI ESG 2021 as well. So looking forward, as you can see, we have the past and also the forward-looking. We are also committed to the carbon neutrality targets. So in 2021, we have set and announced the ambitious carbon reduction targets. We strived to reach a carbon emission peak by 2028 and achieve carbon neutrality by 2050. And to achieve this target, we will continuously to build a green and low carbon management system and take measures to mitigate, adapt and also resist to the climate change. I'm more than happy to share more details with you later. And then, if we look at the next slide, our 2021 ESG achievement. Last year, I have shared our vision and mission, also our progress in each aspect of the ESNG. I'm very proud to provide an update of what we have achieved in the last year. So as you can see on the environment side, the key milestone, as I mentioned, our commitment to the carbon emission '28 and 2050, and it's ahead of the China National target of 2030 and 2060. It's a group-wide target we have set for all our member companies to follow. And we have required all the subsidiary to consider its separate net zero target and the road map, including the Scope 1, 2 and 3 emissions. And some of our member companies have already set their road maps to net zero, such as Fosun Tourism 2030 carbon emission quantitative goals. Definitely, you can refer more details in their ESG report. And also, we urge and guide our member companies to dispose waste, waste water, air pollutant in accordance with relevant regulations. And we maximized the use of resources to the impact of production on operation activities over the environment and human beings, protect biodiversities and also develop a green secular economy. For example, our landmark results Hainan Atlantis has received the first carbon-neutral certificate for the tourism companies in Hainan products. And in the middle, you can see on the social side, our Fosun Foundation currently carrying out more than 50 projects focusing on the health, property, property elevation, universal education and life quality. And the important part is we aim to leverage our business expertise and network to help the local communities. We have continued to expand our rural doctor program in China and also actively advocate and contributed to the WHO rollback malaria program. And at the same time, we've been supporting the front lines in multiple worst-hit countries and domestic cities against the COVID-19 pandemic in the last year as well. More than 3.2 million medical protection materials were shifted to the front lines. And most importantly, on the right side, we have further streamlined our ESG governance internally. And the ESG report in last year, we had verified by a third party. And we have included the ESG performance in the appraisal of Board and linked to the CEO performance. And also in the risk management framework, we have considered and assessed the ESG risk and the climate risk integrating the sustainability element in our business operation. Definitely, there are more achievements that we have done. I'm not able to include it in one slide. But I'm happy to discuss with you further after this session. And also, there's a road map based on the groundwork we have done in the past years. We're happy to show a clear and improving track record of the key measures on the Slide 5 please, especially on the environmental-related measures. So since 2020, we started referencing the global reporting initiative standards, the GRI standard to increase the transparency of our implementation progress and results by collecting data on greenhouse gas intensity, the energy consumption intensity and also the water usage. As you can see on the slide, in 2021, these measures all have demonstrated a significant improvement. As a multi-industry and diverse business, just standardizing and collecting this data is a huge undertaking. But we are willing to put more effort and committed to reach a high standard. And if we move to the Slide 6, please. And internally, we make all these commitments I have mentioned and in that there has been various progress of our sustainable progress development. And we're also glad to see our asset has been recognized by external parties and mentioned the 3 ESG rating upgraded from BB to AA in the past 4 years. And now we are the only conglomerate with AA rating from MSCI for Greater China. And our Hang Seng Corporate Sustainability rating is A. We're also being included in a few leading China ESG indexes, including MSCI and also the Hang Seng. At the same time, our ESG scores for the FTSE vessels and Dow Jones Sustainability Index has also been improved significantly, and they are all above the industry average. And on top of that, you can see, participate in various associations, especially those with international ESG associations in each sectors are also part of our ESG progress. And Fosun joined the UNGC in 2014. And we are the early mover on this in China. It's formally committing ourselves to the whole world, the sustainable development. And through the journey, we convey our ESG expectations to our member companies. And you can see the 3 more member companies joined the UNGC and also, for example, our reinsurance company Peak Re is a reinsurance company in Hong Kong is the symmetry of the UN PSI, the principle of sustainable insurance and committed to the implementing the PSI through the lifecycle of reinsurance business as part of the UN environmental program. So these will be a quick coverage of our ESG commitment and progress. And I'll pass to Ehsernta for you and for the QA. Thank you.

Thank you very much, Ning, for sharing on these updates. So the first question for you is on the environmental targets you have. So could you share with us some more details on Fosun's carbon peaking and neutrality commitments, especially including how you plan to go about achieving these goals as a group?

Thank you, Ehsernta. I think the climate change and also the carbon neutrality is a very important task for everyone and every corporate. So as a global company, meeting and addressing this challenge of climate change is a duty for Fosun. So we set these group climate change and energy policy, which is our commitment to make the climate change risk and mitigated the climate change impact at all business levels and also encourage our stakeholders to join us in delivering this commitment in energy and climate change. Because of the complexity of the climate-related risk, we have leveraged our existing corporate risk management system to assess and address the climate-related risks across businesses. And meanwhile, we integrated the content measures into our corporate strategy. So in 2021, we announced the goal for the carbon neutrality. Also we have made significant progress on the environmental-related issues. And a lot of people will ask Nanjing Iron and Steel, it takes more than 90% of the total group carbon emission, has paid close attention to the energy saving transformation and adopted the measures such as reducing the irons to ratios, increasing the hot charging rates, optimizing the material structure and also reducing the fuel ratios and also the solid fuel consumptions to improve the energy efficiency and reduce the carbon emissions. So Nanjing Iron and Steel has hit a record low comprehensive energy consumption of 545 KGC per ton of steel, as you can see in our ESG report, it's a significant improvement on that. And at the same time, the initiatives, including the product lifecycle management, the PV power generations, green logistics and research on innovative technology are the key areas that Nanjing Iron and Steel is focusing on for future improvement. And same for our key member companies like the Fosun Tourism with the first carbon-neutrality certificate and also their MSCI ESG rating has been improved to AA as well. And Fosun Pharma has outperformed their target set for 2021 and the 100% of the green coverage for Hainan Mining. So I think I can say we're making a significant progress on this ultimate target. That is coming to our goal on the carbon emission 2050 is a long time. So on Slide 8, please. So to achieve this long-term goal, there's 4 areas we have established to support us towards that goal. Firstly, the climate-change governance. So we have established the ESG Committee under the Board under the ESG Working Group at the execution level for fully implemented the company's ESG strategy, including the carbon emission strategy. And also, I mentioned the appraisal for the ESG management performance has been included in the group CEO and the business group leader's KPI. And we integrate these carbon neutrality into the EHS audit and management system require all member company to actively carry out the carbon-related work from end-to-end. And secondly, the climate change management policies, we regularly review these climate strategy and goals and plans by study and forecasting the risks and opportunities, promoting the low carbon transformation and investing in the carbon-neutral products and services. And third is the climate-related financial disclosure. And we try to keep in touch with all our stakeholders. So in the near future, we will publish the group TCFD report with reference to the TCFD recommendations to disclose the transparent and reliable, also the consistent climate-related information to all our stakeholders. And the same time, the group performance and our measures also play very important roles. We actively monitor and record of the GHG emissions for each member companies for continuous improvement. And you can see in 2021, our GHG emission decreased by 1% year-over-year, the GHG emission intensity decreased by 21% year-over-year. And we have included the Scope 3 GHG emissions data in our reporting this year. So at the same time, the pilot companies will or have set their own 2050 carbon goals. Together with our companies, we aim to become gradually the carbon reduction pioneering in each industry sectors. So what you can expect in the following years, I would say, is the first there will be the TCFD report to enhance our climate-related disclosure. And we're working on the data to gathering and tracking the Scope 3 GHG emissions with all member companies and also enhanced the carbon neutrality implementation management in the group and also at the member companies. So we will keep all our stakeholders updated on our progress so everyone can stay tuned.

So thanks for sharing with us the details on your environmental targets. Another issue that we're interested would be on social. So as a company with diversified ecosystems across like health care, tourism, financials, et cetera, how does Fosun do you think address the social issues with your capabilities?

Thank you. Absolutely. I think what do we say is greater power with greater responsibilities. But as a big company like Fosun, we aim to do it all on these and not just on the environment-related issues. So over the past few years, we can see this transition from CSR, which works on more on the public welfare to ESG now require the company not only just contribute to the welfare, but also improve the environment and social performance. So a number of the investors expressed to us that they appreciate that Fosun as a parent company play a very vital role in the sustainable development through our subsidiaries operation and development. And also internally, a safe, healthy and equal work environment is a baseline. We also endeavor to create a happy learning and sharing and supportive work culture. And on top of that, we also committed to improve the societal ecosystem. So Fosun always be a good corporate citizen by taking more social responsibilities and insisting to better serve our society where we operate and also our people and our nations. So we joined hands with our member companies to promote and support the humanitarians release such as fight against the pandemic and flood and also the areas we have strong advantage. For example, the rural doctor program in China and the assistance in fighting against the malaria in Africa. So to facilitate that, our Fosun Foundation played a very important role. It was founded back in 2012. And the coverage that I mentioned in the last part is the poverty alleviation, health care, community and care for children, young entrepreneurs, education, culture and arts. So in multiple countries and regions which around the world and to spread the value of Fosun and payback to the society in practice. So currently, we are running more than 50 programs. And we aim to leverage the expertise in innovation and health and business development and also our geographic network advantage. I'm happy to share a few examples that we feel very proud is in China we focus on the rural areas, health care, especially in these poverty stricken areas. So we -- starting with assisting 1.4 million rural doctors and we launched this program that will last for 10 years since 2017. And we introduced the Internet, AI, big data, the health care services and also the technology to build a network for the health protection and improved the medical and health care services capacity. We helped to train and retain the qualified rural doctors in the local community and also improved ability and accessibility of medical and health services to reduce the return to poverty rate caused by the owners. So as of the 2021, I think the program has already still expanding, but now has covered the 73 poverty stricken national counties in 16 provinces and benefited 3 million families in need. And also because we have also have our networks globally, so not just in China, we've been actively participating in the international programs that we have advantage to support. So Fosun Pharma, I would say, is the largest anti-malaria product manufacturer in the world. And it has 24 antimalarial pharmaceutical products, has been prequalified for production by the WHO. And also as an official member of the rollback malaria, it's a global cooperative initiative by the WHO. So we have supported more than 200 million doses of Acheson. It has been proven the international board standard of the severe malaria treatment. And it contributes to the recovery of more than 48 million sufferers of severe malaria worldwide. And most of them, they are the African children under the age of 5. So at the same time, we also provided malaria control lectures and programs in school to enhance awareness of the malaria prevention. So these are the examples we have done to support the -- to leverage our expertise to support the local community. And then you can see on the Slide 10, we jointly initiated the global ad program with carrying enterprises organization and individuals for the fight against the pandemic under the social -- so far, we have provided more than 9.9 million medical protection I mentioned and also in most of the worst heat domestic cities and countries like India, Indonesia, Nepal, Cambodia and some other cities in China as well. So these social programs are all progressed hand-in-hand with our business development.