Financial Statements/ESG Information - 2024 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

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2024 Environmental, Social and Governance Report

01 About This Report

CHYY Development Group LIMITED (the "Company") together with its subsidiaries (collectively referred to as the "Group" or "we") is pleased to present its ninth Environmental, Social and Governance (ESG) Report (the "ESG Report") for the year ended 31 December 2024. This ESG Report outlines the Group's management approaches, strategies, objectives, and performance in relation to ESG. The information disclosed in this ESG Report has been collected and compiled through various channels, including the Group's internal policy documents and data, feedback on the implementation of ESG practices, and stakeholders' surveys regarding the Group's sustainability initiatives. This ESG Report is prepared in both Chinese and English and has been uploaded to the website of The Stock Exchange of Hong Kong Limited (the "HKEx") (www.hkexnews.hk) and the Company's website (www.chyy.com.hk). In case of any discrepancies between the Chinese and English versions, the Chinese version shall prevail.

Scope Covered

In defining the scope of this ESG Report, we carefully selected the entities to be included in the disclosures, taking into account the materiality of each entity's revenue as a proportion of the Group's total revenue for 2024. This ESG Report covers entities whose combined revenue accounted for over 90% of the Group's total revenue in 2024. Additionally, employee-related data disclosed in this report is based on the Group's total workforce as of 2024.

Compilation Basis

The content of this report is prepared in compliance with the Environmental, Social and Governance Reporting Guide (the "ESG Reporting Guide") set out in Appendix C2 to the GEM Listing Rules of The Stock Exchange of Hong Kong Limited, while also taking into account the key concerns of the Company's stakeholders and the unique characteristics of its business operations.

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2024 Environmental, Social and Governance Report

Reporting Principles

This report has been prepared in accordance with the following fundamental principles:

Materiality Principle: The Company has identified key sustainability and ESG issues through a materiality assessment process that incorporated feedback from stakeholders regarding their concerns, interests, and expectations for sustainable development. The final materiality matrix results guided our focus on significant ESG topics, which are addressed in this report through disclosure of relevant policies, initiatives and performance.

Quantitative Principle: In compliance with the ESG Reporting Guide issued by The Stock Exchange of Hong Kong Limited, we have disclosed environmental and social data with measurable key performance indicators. The standards, methodologies, and assumptions used in the report have been clearly stated to ensure transparency.

Balance Principle: This report presents the Group's environmental, social and governance performance in an unbiased manner. We have avoided selective disclosures, omissions, or presentation formats that might unduly influence readers' decisions or judgments.

Consistency Principle: Unless otherwise stated, the statistical disclosure methodologies employed in this report are consistent with those used in the 2023 reporting period, ensuring comparability of data.

Approval and Release

This report has been approved by the Board of Directors of the Company and will be released in April 2025.

Feedback

The Company is committed to listening to our stakeholders' voices. Should you have any comments or inquiries regarding this ESG Report, please feel free to contact us through the following channels:

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2024 Environmental, Social and Governance Report

02 Chairman's Statement

To our esteemed shareholders and stakeholders,

As China advances toward its "Dual Carbon" strategic goals, CHYY Development Group Limited, a global leader in comprehensive shallow geothermal energy heating solutions, remains committed to promoting efficient and clean heating through ground-source heat pumps in northern winters and developing emerging green industries integrating heating and cooling. We actively pursue the deep integration of Environmental, Social and Governance (ESG) principles into our operations.

After over 20 years of R&D innovation and practical application, we have successfully developed: The "Ground-Source Heat Pump Environmental System" for urban areas, The "Ground Source Heat Pump System" for rural households, and The "Ground Source Distributed Environment System", which can be customized as needed. These systems have been standardized into complete product sets, including circulation systems, modular assemblies, and both self-manufactured and outsourced components. Building on this foundation, we are transitioning from a traditional project-based model to a regional partnership model, supporting local partners in establishing production and maintenance bases, providing proprietary products and technologies, guiding manufacturing processes, and ensuring reliable regional heating operations. This shift enables large-scale application and leapfrog development.

In northern China, winter building heating accounts for approximately 10% of the nation's total energy consumption. Our high-efficiency, clean geothermal heat pump systems can achieve the same heating coverage as coal-based systems at comparable costs, while using only 50% of the energy consumption of fossil fuel-based heating to meet 100% of heating demand. This not only improves quality of life but also serves as a key enabler for the "Energy Production & Consumption Revolution" and the "Rural Lifestyle Revolution". We remain dedicated to driving sustainable development through technological innovation and responsible business practices, contributing to a greener and more energy-efficient future.

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2024 Environmental, Social and Governance Report

We are delighted to observe the growing attention from government authorities and society at large toward high-efficiency, clean geothermal heating. Notable developments include: Beijing's newly issued policy (Jing Cai Shui [2025] No. 66), which implements a reduced water resource tax rate of RMB0.8 per thousand cubic meters for heat pump users adopting HYY's 100% re-injection single-well circulation heat exchange technology; The high-level expert seminar on the "Single-Well Circulation Geothermal Heat Pump Clean Heating Project" held in Dalian Xiaoyao Bay International Business District and Hutchison Whampoa's (Yunan Bay) development, which garnered significant attention from industry stakeholders and was covered by CGTN International and other media outlets; The Company obtained the Wastewi$e Certificate of the Hong Kong Green Organization Certification in 2024, and won the Best Energy Conservation and Carbon Reduction Action Award in the annual selection of the Hong Kong International Financial Forum and the Hong Kong International ESG List.

CHYY Development Group Limited will continue to lead with unwavering determination, steering the heating industry from the "Era of Combustion" into the "Era of Combustion-Free" solutions. By advancing high-efficiency, clean geothermal heat pump systems, we aim to replace fossil fuels and develop an integrated green heating-cooling industry, injecting sustainable momentum into the modernization of harmonious coexistence between humanity and nature !

Xu Shengheng, Liao Yuan

Co-Chairmen of the Borad

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2024 Environmental, Social and Governance Report

03 ESG Governance

Statement of Board of Directors

As a responsible corporation, our Group is fully committed to addressing sustainability challenges and leveraging our influence to advance sustainable development agendas encompassing environmental and social issues. Regarding our Environmental, Social and Governance (ESG) performance, we firmly believe that establishing a robust governance framework is paramount. To ensure effective management, we have implemented a comprehensive management system across all business operations to identify, manage, and respond to sustainability-related risks and opportunities.

The Board of Directors assumes full responsibility for the Group 's ESG strategy and reporting. They oversee the formulation of ESG policies and targets and conduct annual reviews of ESG performance. To strengthen day-to-day management and implementation, we have established an ESG Working Team, which engages with stakeholders to identify material ESG issues for the Group. The team analyzes and evaluates feedback to assist in developing relevant policies and measures while monitoring their execution. Each department is responsible for integrating these policies and targets into daily operations to ensure alignment with our ESG commitments. Through this structured approach, we strive to uphold accountability, transparency, and continuous improvement in our sustainability journey.

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ESG Governance Framework

Board of Directors

• To oversee the Group's environmental, social and governance management policies and strategies.
• Regularly review the Group's environmental, social and governance performance and progress to assess and manage risks and opportunities.

ESG Working Team

• To assist in the formulation and review of the Group's sustainable development goals, priorities and targets.
• To assist in the formulation of policies and measures to promote goals and targets.
• Monitor, review and evaluate the implementation of ESG related policies and practices.
• Evaluate the progress and performance of the company's ESG work and the effectiveness of its improvement plans.
• Report to the Board on ESG performance.

Management

• To implement the environmental, social and governance measures established by the Company in the departments under its management and in its day-to-day operations.
• To promote environmental, social and governance awareness in the departments under their management.

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04 Stakeholders' Participation

The Company firmly believes that the fundamental premise of an Environmental, Social and Governance (ESG) report lies in disclosing information that is both relevant and material to our stakeholders. As such, we actively seek engagement opportunities with both internal and external stakeholders to foster ongoing collaborative dialogue. Through diversified communication channels, we maintain multi- directional, consistent, and transparent exchanges to identify and understand their key ESG concerns. The Company remains committed to ensuring effective communication and nurturing strong relationships with each stakeholder group. We will continue to refine our stakeholder engagement approach to better address evolving expectations and sustain mutual trust in our ESG journey.

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