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CLCT Integrated Sustainability Report 2021

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Integrated Sustainability Report 2021

  • About this Report

    CapitaLand China Trust (CLCT) is Singapore's largest China-focused real estate investment trust (REIT). This is CLCT's maiden Integrated Sustainability Report (ISR), and it aims to provide a comprehensive overview of the organisation's Environmental, Social and Governance (ESG) performance.

    INTERNATIONAL STANDARDS AND GUIDELINES

    This report is prepared in accordance with the Global Reporting Initiative (GRI) Standards “Core” option, and the Singapore Exchange Securities Trading Limited's (SGX-ST) Listing Manual Rules 711A and 711B. The GRI Standards have been selected as it is an internationally recognised sustainability reporting framework that covers a wide range of disclosures that is relevant to CLCT. This Report incorporated elements of the Integrated Reporting (IR) Framework of the International Integrated Reporting Council and references the Sustainable Development Goals (SDGs) of the United Nations (UN). CLCT has embarked on reviewing and executing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in this Report.

    REPORTING SCOPE AND PERIOD

    CLCT is managed by CapitaLand China Trust Management Limited (the Manager), a wholly-owned subsidiary of Singapore-listed CapitaLand Investment Limited (CLI), one of Asia's largest diversified real estate groups. The Manager and property management teams that are responsible for the REIT as well as the property and portfolio operations of CLCT, are identified as employees of the REIT. The independent members of the Board (which is part of the Manager) are not employees of the REIT.

    This Report covers 22 properties within CLCT's portfolio for the financial period from 1 January 2021 to 31 December 2021 (FY 2021) - 13 retail properties (including two divested in FY 2021), five business parks and four logistics parks properties, unless otherwise stated.

    Taking guidance from the operational control as defined by the Greenhouse Gas (GHG) Protocol Corporate Standard, the environmental performance of 15 properties which are under operational control have been covered in this Report. These properties are CapitaMall Xizhimen, Rock Square, CapitaMall Wangjing, CapitaMall Grand Canyon, CapitaMall Xuefu, CapitaMall Xinnan, CapitaMall Nuohemule, CapitaMall Yuhuating, CapitaMall Aidemengdun, CapitaMall Qibao, Ascendas Xinsu Portfolio, Ascendas Innovation Towers, Ascendas Innovation Hub, Singapore-Hangzhou Science & Technology Park Phase I and Singapore- Hangzhou Science & Technology Park Phase II. As the Manager and property management teams do not have operational control of CapitaMall Shuangjing, Shanghai Fengxian Logistics Park, Kunshan Bacheng Logistics Park, Wuhan Yangluo Logistics Park and Chengdu Shuangliu Logistics Park, these properties will be excluded from the calculation of CLCT's environmental performance. CLCT's FY 2021 environmental performance also excludes both CapitaMall Minzhongleyuan and CapitaMall Saihan as these properties were divested in FY 2021 and not operational during the year.

    This Report is to be read in conjunction with CLCT's Annual Report 2021.

    The Sponsor, CLI, has obtained external assurance over its performance data and the Manager's performance data is included as part of the Sponsor's external assurance engagement. For any enquiries, please contact:

    MS NICOLE CHEN
    Head, Investor Relations
    Tel : 6713 2888
    Email : ask-us@clct.com.sg
    Website : www.clct.com.sg

  • Sustainability Highlights

    1. Subject to changes upon annual internal and external audits conducted by CapitaLand.

  • Board Statement

    At CapitaLand China Trust, sustainability is at the core of everything we do. We are committed to growing in a responsible manner, delivering long term economic value, and contributing to the environmental and social well-being of our communities. The material environmental, social and governance (ESG) factors have been identified and encapsulated in the CapitaLand 2030 Sustainability Master Plan, which was launched in 2020, and will be reviewed by the Board of the Manager of CLCT together with management every two years.

    The CapitaLand 2030 Sustainability Master Plan steers our efforts on a common course to maximise impact through building a resilient and resource efficient real estate portfolio, enabling thriving and future-adaptive communities, and accelerating sustainability innovation and collaboration. Ambitious ESG targets have been set which include carbon emissions reduction targets validated by the Science Based Targets initiative (SBTi).

    The Board of the Manager of CLCT is responsible for overseeing the Company's sustainability efforts, and takes ESG factors into consideration in determining its strategic direction and priorities. The Board also approves the executive compensation framework based on the principle of linking pay to performance. The Manager's business plans are translated to both quantitative and qualitative performance targets, including sustainable corporate practices and are cascaded throughout the organisation.

    We are pleased to present CLCT's first stand-alone Integrated Sustainability Report (ISR) for FY 2021. This Report is an affirmation of our commitment to sustainability and reinforces the view that sustainability is intrinsically linked to how we deliver value to our stakeholders. With this standalone report, we seek to highlight in greater detail our sustainability approach, measures implemented during the year, performance of our material topics, and our ESG targets.

    RECOGNISING THE IMPORTANCE OF SUSTAINABILITY

    Our sustainability efforts are guided by CapitaLand, one of the leading real estate companies driven by sustainability. Together with the CapitaLand Sustainability Council, we identified and managed the Environmental, Social and Governance (ESG) related issues and considered the key risks and opportunities when formulating the sustainability strategies for CLCT. This includes assessing climate-related risks and opportunities as part of overall environmental risk management to improve business resilience. This approach has been disclosed in this Report in accordance with the TCFD recommendations.

    We are also proud to announce the formation of CLCT's Sustainability Management Committee, spearheaded by the CEO and supported by the senior management heads, which aims to further integrate sustainability into all aspects of our business strategy.

  • Board Message

    SOCIAL RESPONSIBILITY

    Since the onset of COVID-19, we have stepped up engagement with all stakeholders, ensuring strict compliance with advisories, laws and regulations to safeguard the health and safety of all. This includes increasing the frequency of disinfection and sanitation measures across all CLCT's properties and distributing masks to our tenants and customers. Recognising the impacts of COVID-19 on jobs and livelihoods, Ascendas Xinsu Portfolio collaborated with professional recruitment platforms to conduct annual offline recruitment drives in the park focusing on the modern service industries, including but not limited to information technology, software development, environmental protection and energy conservation. The event was recognised and supported by the Secretary of the Party Working Committee of the Dushu Lake Science and Education Innovation Zone, which is one of the key education hubs in Suzhou.

    OUR SUSTAINABILITY MILESTONES AND ACCOLADES

    In September 2021, CLCT obtained its maiden sustainability-linked loan of S$150 million and is the leading REIT in Singapore to pioneer a sustainabilitylinked loan for a China portfolio.

    We are honoured to be conferred a GRESB 3 Star Rating and a score of 77 for our first participation in the GRESB Real Estate Assessment 2021, a global ESG performance benchmark for real estate. In addition, we obtained an “A” for GRESB Public Disclosure Assessment 2021 with a score of 94, ranking 1st amongst seven Singapore Retail Constituents.

    These accolades acknowledged our diligent efforts to continuously improve our sustainability performance. We would also like to thank all our stakeholders for their support as we strive to reach greater heights in CLCT's sustainability journey.

  • Sustainability Commitment

    In 2020, CapitaLand unveiled its 2030 Sustainability Master Plan (SMP) to elevate its commitment towards global sustainability in the built environment. The Master Plan focuses on three key pillars to drive CapitaLand's sustainability efforts in the ESG pillars, enabling CapitaLand to create a larger positive impact for the environment and society:

    • Build portfolio resilience and resource efficiency,
    • BEnable thriving and future-adaptive communities, as well as
    • BAccelerate sustainability innovation and collaboration

    As a CLI-sponsored REIT, CLCT aligns its sustainability objectives and strategies with CapitaLand. It is committed to improving the economic and social well-being of its stakeholders through management of human capital, asset, portfolio operations and project development. CLCT will steer towards the pathways set by CapitaLand and keep adapting its strategies as technologies evolve and new scientific data become available. The Manager works closely with the Asset & Property Managers in carrying out these strategies and relevant activities across its portfolio where possible.

    CapitaLand has identified five pathways to achieve its sustainability objectives and will adapt its strategies as technologies evolve and new scientific data become available:

    PUSH BOUNDARIES OF CHANGE

    To push the boundaries of change, CapitaLand will transit to a low-carbon business that is aligned with climate science. In November 2020, it had its carbon emissions reduction targets approved by the Science Based Targets initiative (SBTi) for a ‘well-below 2°C' scenario. The targets are in line with the goals of the Paris Agreement to keep global temperature rise well below 2°C in this century. CapitaLand is also developing a new metric, Return on Sustainability, in addition to the regular financial return to measure the CapitaLand's ESG impact.

    CapitaLand has also launched the inaugural CapitaLand Sustainability X Challenge (CSXC), the first sustainability focused innovation challenge by a Singapore headquartered real estate company that globally sources for emerging sustainability technologies and solutions in the built environment. The CSXC covers seven challenge statements and reflect the key themes and goals in CapitaLand's 2030 Sustainability Master Plan.

    CapitaLand aims to be a leader in sustainable finance and secure S$6 billion of sustainable financing by 2030. Proceeds and interest rate savings from CapitaLand's efforts in sustainable finance can also be used to drive more sustainability initiatives and innovations within the company.

    MEASURED AGAINST GLOBAL BENCHMARKS

    CapitaLand was one of the first companies in Singapore to voluntarily publish an annual Global Sustainability Report and externally assure the entire report. Benchmarking against an international standard and framework that is externally validated helps the organisation to overcome the challenges in sustainability reporting that may arise from its portfolio of diverse asset types and geographical presence globally.

    CapitaLand is also a signatory to the United Nations (UN) Global Compact and its Global Sustainability Report serves as its Communication on Progress, which will be made available at www. unglobalcompact.org when published.

    For its efforts, CapitaLand is listed in the Global 100 Most Sustainable Corporations Index, Dow Jones Sustainability World Index and Asia-Pacific Index, Global Real Estate Sustainability Benchmark (Global Sector Leader, Diversified- Listed), FTSE4Good Index Series, MSCI Global Sustainability Indexes and The Sustainability Yearbook. CapitaLand Global Sustainability Report 2021 will be published by 31 May 2022.

  • Board, Top Management Support And Employee Involvement

    STRATEGIC SUSTAINABILITY MANAGEMENT STRUCTURE

    CapitaLand's sustainability management comes under the purview of the CapitaLand Sustainability Council. The Sustainability Council comprises selected CLI Board's independent directors and members of the CapitaLand Executive Committee. It is supported by the Group Sustainability Office and various work teams to drive continued progress and improvement in the areas of ESG. It was chaired by one of CLI Board's independent directors and member of its Executive Resource and Compensation Committee and Risk Committee. The work teams comprise representatives from CapitaLand business units (BU) and corporate functions. Each BU has its own Environmental, Health and Safety (EHS) Committee to drive initiatives in countries where the CapitaLand operates with support from various departments.

    CLCT'S SUSTAINABILITY MANAGEMENT STRUCTURE

    Within the Manager, a Sustainability Management Committee (SMC) was established to allow greater focus on sustainability and climate-related matters for CLCT's assets. The SMC is chaired by CLCT's CEO and comprises senior management team members to oversee CLCT's sustainability objectives and strategies directly. The SMC is also responsible for providing timely and regular updates on the REIT's sustainability matters to CLCT's Board of Directors.

    The SMC is supported by CLCT's Sustainability Working Committee (SWC), which comprises key members from various business functions, to implement sustainability-related activities and initiatives across CLCT's operations per CapitaLand's sustainability framework and policies.

  • Materiality

    As CLCT is a CLI-sponsored REIT, CapitaLand's ESG material issues have been deemed material and applicable to CLCT's business and operations. CapitaLand has a regular review, assessment and feedback process in relation to ESG topics. Key to this is an annual CapitaLand-wide Risk and Control Self- Assessment exercise which entails the identification, assessment and documentation of material risks and corresponding internal controls. These material risks include fraud and corruption, environmental (e.g. climate change), health and safety, and human capital risks which are ESG-relevant.

    Guided by the 2030 Sustainability Master Plan, CapitaLand elevated its commitment to global sustainability in the built environment, identifying and reviewing material issues that are most relevant and significant to CapitaLand and its stakeholders. With the restructuring of CapitaLand into CapitaLand Investment Limited (CLI) and CapitaLand Development Pte. Ltd. (CLD), these ESG material issues are prioritised based on the likelihood and potential impact of issues affecting business continuity of CLI. The Board of the Manager of CLCT is responsible for reviewing these material ESG factors and takes them into consideration when determining CLCT's strategic direction and priorities. The Board also oversees the management and monitoring of the material ESG factors. For external stakeholders, priority is given to issues important to the society and applicable to CLI. For more information on stakeholder engagement, please refer to the Social and Relationship Capital chapter on page 33 to 36 of this ISR.

  • Strategy and Key Objectives

    CLCT'S INVESTMENT STRATEGY

    CLCT is committed to delivering long-term sustainable distributions to Unitholders. Our forward-looking portfolio reconstitution strategy is closely aligned with China's dual circulation strategy, which focuses on growing exports and domestic consumption. As Singapore's largest China-focused REIT with a diversified portfolio of retail, business park and logistics assets across 12 prominent top tier cities, CLCT is well poised to capture China's economic growth.

    Our investment strategy is designed to Create, Unlock and Extract Value across our portfolio. Driven by disciplined portfolio reconstitution, proactive asset management, innovative asset enhancement, and underpinned by prudent capital and risk management, we continue our strong track record of enhancing value for our Unitholders.

    Strategic advantages and growth potential is further realised by leveraging on our Sponsor's extensive pipeline of high-quality assets. Operational excellence is reinforced through CapitaLand's integrated real estate platform, strong local network and professional property management capabilities.

    VALUE CREATION AND ALIGNMENT TO UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (UN SDGS)

    The Guiding Principles of the International Integrated Reporting Council (IIRC) Framework were referenced in this report and the material ESG issues are grouped into six Capitals – Environmental, Manufactured, Human, Social & Relationship, Organisational and Financial. These Capitals are mapped against eight UN SDGs that are most aligned with the CapitaLand Sustainability Master Plan 2030 targets, and where CLCT can achieve the greatest positive impact.

  • Sustainability During COVID-19

    NAVIGATING COVID-19 WITH STAKEHOLDERS

    CLCT rolled out numerous measures to control the outbreak and ensure business continuity across all properties. Mask-wearing, green health QR code scanning for contact tracing and temperature screening were made compulsory for visitors and employees. CLCT's properties undergo thorough cleaning, with additional frequency imposed on key areas such as elevators and toilets. Air conditioning and ventilation systems are disinfected and cleaned weekly.

    If tenants and/or visitors are found to test positive for COVID-19, the individuals will be isolated and the affected areas will be closed for disinfection. Apart from regular cleaning, CapitaMall Nuohemule utilised robots provided by the Hohhot Bureau of Commerce to disinfect and maintain clean air quality.

    CLCT has designated COVID-19 Emergency Testing Points and held vaccination drives for employees across its properties to support governmental measures.

    Other COVID-19 initiatives implemented in the year include:

    • COVID-19 emergency drills that ensure employees are able to limit the spread of COVID-19 and conduct regular inventory checks on personal protective equipment such as masks
    • Distribution of vaccination pamphlets and updating the community of tenants' vaccination status
    • Distribution of masks and care packages to tenants and visitors
    • Daily disinfection of public areas at regular intervals, with increased frequency for high contact areas such as elevator buttons, door handles, elevator cars, toilets, and fire passages
    • Training on COVID-19 control and preventive measures for employees and suppliers

    THOROUGH DISINFECTION AT CAPITAMALL XIZHIMEN

    CapitaMall Xizhimen was closed from 20 January 2021 to 27 January 2021 for a thorough disinfection as a COVID-19 patient visited its premises in early January. To ensure a safe environment within the mall, CLCT enlisted the Xicheng Centre for Disease Control and Prevention to conduct testing on 1,373 personnel and obtained 96 environmental samples, of which all tests returned negative. Upon completion of a comprehensive professional disinfection service, the mall swiftly reopened for business on 27 January 2021.

    CARING FOR OUR TENANTS: DISTRIBUTION OF CARE PACKAGES AND FIRST AID KITS

    As part of Ascendas Innovation Towers' and Ascendas Innovation Hub's COVID-19 initiatives, care packages were distributed to tenants in February 2021. The care packages included masks, antiseptic and alcohol gel items. In addition, tenants with the Capitastar app received complimentary first-aid kits.

  • Environmental

    ENVIRONMENTAL AND MANUFACTURED CAPITAL

    Our Approach to Environmental Management

    CLCT is aligned with CapitaLand's commitment to minimise its environmental impact and contribute towards desired positive outcomes for the benefit of stakeholders.

    CLCT strives to implement and integrate environmentally friendly features in its properties and improve overall energy efficiency. The asset enhancement initiatives (AEI) undertaken also consider environmental sustainability. Monitoring environmental impact is an important part of CLCT's business operations, as the efficient use and management of environmental resources such as energy, water and waste contributes to higher efficiency and sustainability of CLCT's portfolio.

    Managing Environmental Footprint

    CapitaLand's Environmental Management System (EMS) is a key tool in managing CLCT's environmental footprint across its portfolio. The EMS is integrated with CapitaLand's Occupational, Health and Safety Management System (OHSMS) to form CapitaLand's Environmental, Health and Safety Management System (EHSMS) that complies with ISO 14001 and ISO 45001 standards. The ISO 14001 and ISO 45001 standards are recognised internationally for the environmental management of businesses and occupational health and safety management of businesses respectively.

    Risk Management of Environmental Aspects and Impact

    The EHSMS provides a systematic process to manage CLCT's environmental impact and continuously improve its environmental performance, by identifying and managing potential risks that may result in a negative impact on the environment. The significance of each environmental aspect and impact is assessed using a risk assessment technique based on factors compromising the likelihood of occurrence, severity of impact and control measure to be implemented.

    CLCT strives to minimise impacts such as resource depletion, carbon emissions and waste generation. This is achieved by setting green building rating and environmental performance targets and implementing various measures to achieve them. The targets are linked to the remuneration for staff including top management.

    Training and Awareness

    To facilitate effective implementation of CapitaLand's EHSMS, training and awareness programmes are conducted for all CLCT's staff. In FY 2021, CLCT achieved a participation rate of 91% from the property management teams in China, who attended EHS-related training sessions. It is mandatory for new employees from the property management teams to be introduced to CapitaLand's EHS policy and EHSMS.

    Internal and External Audits

    As a CLI-sponsored REIT, CLCT taps on the internal audit system by CapitaLand to ensure that the implementation of its EMS is effective and aligned to the ISO 45001 standards. CapitaLand also ensures that external audits are conducted annually by an accredited third-party certification body. An annual audit of the EMS provides assurance to CLCT's stakeholders on CLCT's commitment to best practices.

    Sustainable Building Guidelines

    CLCT adheres to CapitaLand's Sustainable Building Guidelines (SBG) guides for all its refurbishment works. The SBG is an in-house guide developed since 2007 to ensure that environmental considerations are factored in at all stages of a project, from feasibility, design, procurement, construction, operation to redevelopment. The SBG is regularly reviewed to ensure continuous improvement, with four main objectives:

    1. Minimise Carbon Footprint and Energy Consumption
    2. Enhance Water Management
    3. Minimise Waste Generation
    4. Promote Biodiversity

    A key component of the SBG is the mandatory Environment, Health and Safety Impact Assessment (EHS IA). The EHSIA is carried out prior to acquisitions, with significant findings and their cost implications, if any, incorporated in the investment paper submitted to the Board of Directors for approval. The Environmental Impact Assessment (EIA) focuses on identifying any environmental threats or opportunities related to the project site and its surroundings, covering matters such as floods, biodiversity, air quality, noise, connectivity, heritage and resources.

    With the implementation of this process, CLCT identifies risks and opportunities relating to Environment, Health and Safety and adopts mitigation measures at an early stage. CapitaLand is at the nascent stage of developing a new metric, Return on Sustainability (ROS) to quantify the risks and value-creation opportunities for each project.

    Green Certification Targets

    CLCT has commenced working plans to achieve green certifications for its portfolio by 2030. This is in line with CapitaLand's target to green all its existing properties by 2030, with each property achieving a minimum certification level by a green rating system administered by a national government ministry/ agency or the World Green Building Council.

    Green Lease

    CapitaLand also aims to roll out its green lease programme (currently implemented at its Singapore properties) across its properties globally, including CLCT-managed assets, and work with its tenants to improve their sustainability performance.

    Our Environmental Performance1

    Environmental Tracking System (ETS)

    Since 2008, CLCT has been tracking the environmental performance of its properties, including energy and water usage, carbon emissions and waste generation via CapitaLand's online Environmental Tracking System (ETS). Additionally, energy and paper consumption at CapitaLand's corporate offices in Singapore and China are monitored with the ETS. The ETS is also used to survey the various initiatives implemented at CLCT's properties, including efficiency measures, biodiversity and habitat risks, water management and flood risk.

    The property management teams of CLCT assets submit monthly data and upload supporting documentation in the ETS. The consolidated data is analysed against reduction targets. This facilitates a better understanding of consumption patterns and identification of areas for eco-efficiency improvements.

    Energy Consumption and Intensity

    CLCT's total energy consumption comprises direct energy consumption (fuel consumption for maintenance of diesel generator) and indirect energy consumption (purchase of electricity and heating).

    In FY 2021, CLCT's total energy consumption increased by 21.3% Year-on-Year (YoY) to 85.2 GWh, with indirect energy consumption accounting for approximately 87.3% of the figure. This increase is attributed to the addition of five business parks to CLCT's portfolio in 2021.

    CLCT recorded an energy consumption intensity of 5.5 kWh/m2/month in 2021, which translates to 54.2% reduction in energy consumption intensity compared to the 2008 baseline.

    CLCT is in the progress of exploring opportunities to generating electricity from renewable sources at its properties.

    Carbon Emissions and Intensity

    Similarly, due to the acquisition of five business park properties, CLCT's total scope 1 and scope 2 carbon emissions1 in 2021 increased by 22.6% YoY to 40,697.7 tonne CO2e. CLCT recorded a carbon emissions intensity of 2.5 kgCO2e/m2/month in 2021, which translates to a 61.4% reduction in carbon emissions intensity compared to the 2008 baseline.

    1. Subject to changes upon annual internal and external audits conducted by CapitaLand.

    Water Consumption and Intensity

    CLCT is committed to reducing total water consumption and overall water intensity across its portfolio. For CLCT properties, water is withdrawn from local municipal sources, and used in building systems such as irrigation and air-conditioning. Proper water management ensures minimal wastage and promotes responsible use of this precious resource; as part of CapitaLand's Sustainability Master Plan 2030, these initiatives have been rolled out in CLCT's retail malls and business parks:

    • Lowered flush volumes and water-efficient faucets
    • Replaced corroded fixtures
    • Installed automatic irrigation systems
    • Installed video surveillance and remote meters on water supply and air conditioning systems to monitor water consumption in real-time

    Across all properties, the property management teams conduct regular checks across water features and monitor water usage closely such that any fluctuations or anomalies can be identified and acted upon promptly.

    To increase awareness of water-saving initiatives, CLCT conducted quarterly operational meetings with tenants and employees in the year to reinforce the importance of water conservation and share water reduction measures.

    In FY 2021, CLCT's total water consumption in 2021 increased by 68.5% YoY to 0.9 million m3. This is due to the acquisition of the business parks and increase in water usage for cleaning and disinfection purposes amid the COVID-19 pandemic, to ensure the health and safety of staff and visitors to CLCT's properties.

    In terms of intensity, CLCT recorded a water intensity of 0.057 m3/m2/month in 2021, which translates to 38.5% reduction in water consumption intensity compared to the 2008 baseline.

    Operational Waste

    CLCT aims to play its part by managing waste at its properties responsibly. As waste generated at its operational properties is mostly from its tenants, shoppers and the general public, CLCT engages its stakeholders through various means to reduce and recycle waste. Recycling and disposal bins for each type of waste (construction, food, hazardous and all other waste) are available at its properties.

    In addition, main contractors are responsible for implementing proper procedures to minimise and dispose of construction waste. The waste collected and recycled are tracked by the property management teams of each property.

    In FY 2021, a total of 8,400.3 tonnes of nonhazardous waste was collected within CLCT, of which 12.5% (equivalent to 1,046.9 tonnes) were recyclable waste comprising paper, plastic, metals and other materials. CLCT will continue to implement measures to reduce waste generation and increase recycling rate across its portfolio.

    CLCT actively promotes the use of environmentally friendly practices such as returning used photocopier toner cartridges and using FSC certified paper (i.e., from sustainably managed forests, recycled and controlled sources) in its corporate office. As part of the drive to encourage sustainability practices, CLCT's ISR is not printed and it is made available on its website.

    Biodiversity

    CLCT's properties are all located within urban areas. As CLCT does not have any sites located within protected areas, no material biodiversity risks have been identified.

    As a CLI-sponsored REIT, CLCT leverages on CapitaLand's commitment to preserve the environmental integrity of its sites as well as the wider area wherever possible. This is achieved by addressing any distinctive ecological features, taking into consideration nature reserves, protecting plant and animal species and removing invasive plant species on or near the site. External experts are engaged to provide advice where appropriate.

    CLCT also collaborated with schools to cultivate environmental awareness in youth. Through performances and games, students learned about how their actions would affect the environment and the ways to minimise harmful impacts. Activities such as tree planting, community cleanups and environment-focused exhibitions were also organised for properties' employees, tenants, and visitors.

    In 2021, CLCT collaborated with the Beijing Aquarium to hold a “Save the Ocean” exhibition at CapitaMall Xizhimen. To promote the exhibition, an art competition was organised on 1 June 2021 (Children's Day). The event saw participation from over 30 children, with winners receiving entrance tickets to the exhibition and aquarium. Separately, 30 families were invited for a painting activity within the exhibition to create awareness about protecting the marine environment and its creatures. Jellyfish and fish décor were hung from the second and third floors of the mall to promote appreciation for the different marine creatures.

    CLCT'S PERPETUAL ENVIRONMENTAL TARGETS AND FY 2021 PERFORMANCE

    CLCT'S LONG-TERM ENVIRONMENTAL TARGETS AND FY 2021 PERFORMANCE

    1. Carbon Emissions mostly from purchased electricity consumption under scope 2, and some direct energy consumption under scope 1 as defined by the Greenhouse Gas (GHG) Protocol (operational control approach).
    2. Relative to 2008 baseline.

  • Social

    HUMAN CAPITAL

    Risk Management of OHS Hazards

    CLCT values the occupational health and safety of our employees and stakeholders. Effective OHS management is part of risk management and has the potential to enhance staff productivity, morale and overall well-being. CLCT adopts CapitaLand's Occupational Health and Safety Management System (OHSMS), which is accredited to the international ISO 45001 Standards. A key component of the OHSMS is to identify OHS hazards and assess their risks. CLCT strives to minimise and eliminate potential risks through the implementation of Hazards Identification and Risk Assessment (HIRA). OHS hazards were identified to integrate mitigation measures to the functions of CLCT's operations.

    Top Management Commitment and Staff Involvement

    CapitaLand champions OHS with commitment from the top management and staff participation through an integrated EHS Management System and stakeholder engagement activity. CLCT's CEO is accountable for the OHS performance of CLCT. All staff are encouraged to take ownership of OHS issues and be proactive in reporting all OHS-related incidents, including non-compliances and nonconformities.

    CLCT incorporates OHS KPIs which are linked to the remuneration of CLCT's staff, including top management.

    Internal and External Audits

    As a CLI-sponsored REIT, CLCT taps on the internal audit system by CapitaLand to ensure that the implementation of its OHS Management System is effective and aligned to the ISO 45001 standards. Legal requirements are reviewed on a quarterly basis, and compliance to these requirements are evaluated annually.

    Training and Awareness

    To facilitate the effective implementation of its OHS Management System, training and awareness programmes are organised for CLCT's staff, with topics that include safety and emergency response, fire-fighting and defensive driving.

    Training sessions were also conducted for CLCT's contractors and suppliers, as part of CLCT's efforts to foster a more environmentally conscious and safe culture for its stakeholders. For example, Industrial Park Safety Department conducted a safety training for CLCT's resident contractors and long-term suppliers, covering electrical safety, fire safety, maintenance inspection, and property laws and regulations. A total of 40 contractors and 12 longterm suppliers participated in this safety training in FY 2021.

    Contractors are required to comply with strict safety regulations. It is mandatory to conduct safety briefings prior to any work commencement and all personnel involved must be equipped with proper personal protection equipment including safety boots, helmet and gloves. CLCT strictly enforces these regulations with regular inspections to ensure the health and safety of its stakeholders.

    All employees of Ascendas Xinsu Portfolio undergo health and safety training annually, to ensure employees are equipped with the necessary skills to protect themselves. The theme for 2021 was defensive driving and civil defence safety training. Conducted in April, the defensive driving course was aimed at enhancing the driver's skills through the introduction of techniques to minimise danger that might arise from other vehicles or road users. The civil defence safety training conducted in September was aimed at increasing employees' knowledge on the steps to take during an emergency, such as an earthquake, and also to educate employees on general civil defence knowledge. In total, more than 80% of employees attended the trainings.

    CLCT monitors the OHS performance of staff, including contract and part-time workers, who are involved in the daily operations and management of its properties.

    In 2021, there were two work-related injuries1 involving CLCT's staff, mostly from the operations team, which translates into an injury rate of 1.8 (number of work-related injuries per million hours worked). In FY 2021, there were zero work-related fatalities, high consequence injuries and occupational diseases recorded. Thorough investigations were conducted where possible, and all necessary followup actions have been taken. As part of its OHS Management System, CLCT will continue to monitor its OHS performance, reinforcing safety standards and fine-tuning its SOPs for further improvements.

    1. This is based on work-related incidents tha resulted in more than three days of medical leave or more than 24 hours of hospitalization.

    Supply Chain Management

    CLCT works closely with its contractors and suppliers, who are committed to comply with high quality environmental, health and safety standards. Contractors are only appointed if it meets the Group's stringent selection criteria. The Manager adopts the CapitaLand Procurement Policy, and the CapitaLand Supply Chain Code of Conduct to ensure responsible operations in the areas of anti-corruption, human rights, health and safety, as well as environmental management. A structured procurement process is implemented with contracts awarded after rigorous tender selection involving a balanced evaluation of financial and non-financial criteria including safety requirements.

    All vendors are provided with a copy of CapitaLand's EHS Policy and are required to ensure that their staff are sufficiently trained or briefed on environmental, health and safety measures. Vendors are required to submit a copy of their risk assessment and are required to comply with the local government and other legal requirements. Contractor house rules stipulate requirements that cover the deployment of personal protective equipment, reporting of accidents and the proper disposal of debris and toxic waste.

    CLCT abides to CapitaLand's Supply Chain Code of Conduct and aims to encourage suppliers to operate responsibly in the areas of anti-corruption, human rights, health and environmental management.

    To ensure compliance with CLCT's EHS requirements, all tenants and suppliers are required to endorse the Occupational Health Notice. The Notice highlights potential hazards and shares control measures that can be implemented. Suppliers must also endorse the Safety Management Agreement, which outlines the organisation's emergency response, safety and fire protection requirements.

    CLCT conducted monthly evaluations, in the form of interviews, for key service providers such as security, cleaning, landscape maintenance, elevator maintenance and fire protection agencies to ensure consistent service quality. Factors such as safety control measures and equipment usage status were monitored and graded against a scoring system agreed in the contract.

    Tenants are required to comply with fire rating requirements, and all decorative items must meet a minimal fire protection grade. CLCT conducts inspections during the installation process and will halt any works until any non-compliance is rectified.

    Human Rights

    As a CLI-sponsored REIT, CLCT adopts CapitaLand's integrated human capital strategy to recruit, develop and motivate staff. Key performance indicators (KPI), both for the business as well as for people development, are in place to ensure that staff's performance goals are aligned with the Group's business objectives. Staff are provided with the appropriate development opportunities to perform well in their jobs.

    CapitaLand has a Social Charter which sets out commitments to support the preservation of human dignity and self-respect of every individual, covering topics on human rights, child labour, forced labour, human trafficking, code of conduct, diversity and inclusion, and healthy work-life balance. As a CLIsponsored REIT, this policy is also applicable for all CLCT's staff. The policy guides CLCT towards ensuring a supportive and respectful environment for individuals across all aspects of CLCT's business and operations.

    Anti-Child Labour and Anti-Forced Labour

    CapitaLand is a signatory of the United Nations Global Compact (UNGC) and is committed to the 10 principles in the areas of human rights, labour, environment and anti-corruption. These 10 Principles of the UNGC are derived from the Universal Declaration of Human Rights, the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.

    In 2021, CLCT had no reported incident relating to discrimination, child labour or forced labour, and no staff was below the age of 16.

    Gender Diversity and Pay Parity

    CLCT's workforce in Singapore and China comprises of 57.6% male employees and 42.4% female employees, with close to 50% of female managerial staff represented at the middle and senior management levels.

    CLCT rewards male and female employees fairly based on merit, ability, and experience for comparable roles across the organisation's hierarchy. CLCT adopts CapitaLand's incentive system that focuses on performance and is gender-agnostic. Staff pay is also benchmarked against the market, based on job roles using gender-neutral pay surveys provided by independent remuneration consultants.

    Diversity and Inclusion

    As an international company, CapitaLand embraces diversity and inclusivity regardless of age, religion, gender, race, nationality and family status. CLCT believes that our staff can make significant contributions based on their talent, expertise and experience. As a CLI-sponsored REIT, CLCT also adopts a localisation strategy for its overseas operations, where reasonable and practicable. This ensures that the teams on the ground have a good grasp of the local socio-political and cultural sensitivities to help deliver on the REIT's business outcomes.

    Job Creation and Employment

    CLCT is committed to talent mobility, where staff are given opportunities to rotate across different job functions, subject to skills/competency requirements and business needs. CLCT also adopts CapitaLand's re-employment policy of extending employment to staff who have reached the mandatory retirement age but are still able and willing to continue contributing to CapitaLand.

    Respect for Freedom of Association

    CapitaLand respects its staff's right to freedom of association and to be members of trade unions. In Singapore, CapitaLand is guided by the Industrial Relations Act that allows the representation of staff by trade unions for collective bargaining, thus providing them with an avenue to seek redress for any industrial disputes. CapitaLand and the unions enjoy a cordial working relationship, promoting positive working conditions and improving productivity for the mutual benefit of CLCT and its employees.

    Positive Work Environment

    CLCT recognises that a positive work environment is essential to attract, motivate and retain talent. It leverages on CapitaLand's overall well-being programme that promotes personal development, health and work-life harmony. Initiatives of the programme includes a range of medical and benefits plans, flexible work arrangements, staff engagement initiatives and subsidised rates for staff staying at CapitaLand's wholly owned lodging business unit's properties. Part-time and temporary staff are also entitled to the same benefits on a pro-rata basis. Its robust performance management system ensures that all staff receive regular performance and career development reviews.

    All CLCT's staff are entitled to parental leave. In FY 2021, 12 eligible female staff went on maternity leave and five1 returned to work in the same period. CLCT also provides paid paternity leave to all male staff, where practicable with no male staff taking paternity leave in 2021. In FY 2021, 11 out of 12 female staff who took maternity leave continued to work in CLCT 12 months after they returned from maternity leave.

    Fair Remuneration

    All CLCT staff have signed employment contracts with the key employment terms and conditions clearly stipulated. This allows our staff to understand both their rights and obligations, as well as those of the REIT, thus minimising potential employment disputes. Key employment terms specified in the employment contract include the job title and description, duration of employment, working hours, salary and allowances, (statutory) contributions/deductions, leave entitlements, probation and notice periods, and key insurance and medical benefits etc.

    To ensure that CLCT remains competitive and continues to attract and retain the best talent, CLCT taps on external independent remuneration consultants engaged by CapitaLand to benchmark the REIT's compensation packages against the relevant talent markets. Salaries are reviewed against the benchmarks and the specific job scope and responsibilities of each staff is taken into consideration. All regular full-time staff will undergo an annual performance review where an open discussion on the staff's performance, areas for improvement, developmental needs and career plans are covered.

    CLCT rewards and motivates staff with a comprehensive and competitive compensation package and benefits programmes implemented by CapitaLand. CapitaLand's overall annual variable bonus pool is determined based on the Group's achievement against a holistic set of quantitative and qualitative targets in the balanced scorecard dimensions of Financials, Execution, Future Growth, Talent Management and Sustainability (including Environment, Social and Governance factors). These are cascaded down throughout the organisation including CLCT. In view of the COVID-19 crisis, additional performance measures were introduced relating to preparing and positioning CapitaLand for recovery, protecting the well-being of employees and the community, and managing stakeholders.

    The amount of bonus awarded to CLCT's staff are further based on their relative contributions and individual performance. Staff at managerial grades are also eligible to receive performance-based longterm share awards. The share awards will vest over three years and are subjected to the achievement of pre-determined profitability and shareholder return targets of CapitaLand.

    The performance and remuneration of key management executives are based on both quantitative and qualitative targets within the balanced scorecard framework, including their efforts in building management bench strength and talent.

    CLCT monitors the movement of its workforce closely. In 2021, staff turnover rate was 22.2% in Singapore and 28.8% in China. More than 44.4% of staff in Singapore and 48.2% in China have been with CLCT for five years or longer. CLCT also interviews exiting staff as part of its continuing efforts to improve CapitaLand's retention policies and initiatives.

    Staff Engagement

    CLCT attaches great importance to employee communication. CLCT actively engages its staff through various avenues, including regular communication sessions held by senior management for effective flow of information and alignment of business goals and objectives across all levels of the workforce. Quarterly staff communication sessions by CapitaLand's CEO allow the Group's senior management team to communicate and interact with staff. These sessions are broadcast live to CapitaLand offices globally.

    Following the successful restructuring of CapitaLand into CapitaLand Investment Limited (CLI) and CapitaLand Development Pte. Ltd. (CLD), CLCT's employees were invited to participate in a Pulse Survey conducted by CapitaLand in November and December 2021 to gather their feedback and to understand the ground sentiments on the restructuring.

    Talent Management

    CLCT seeks innovative, dynamic and talented staff to take the REIT into its next phase of growth, adopting a multi-pronged approach to manpower planning, i.e., developing internal talent and hiring young talent, mid-career professionals and industry veterans. CLCT continuously builds its management bench strength through the identification of high potential talent as part of its regular leadership development and succession planning process.

    In 2021, 105 staff were hired, consisting of 50.5% male and 49.5% female employees. 37.1% of the new hires were below 30 years old, 61.9% were between 30 to 50 years old and 1.0% were above 50 years old. All staff receive regular performance and career development reviews, and CLCT closely monitors its staff's progress to guide them in performance improvement.

    CLCT rides on CapitaLand's initiatives to ensure that all staff understand CapitaLand's core values and principles that shape the way we work and function. To facilitate employees' development, a variety and comprehensive training and development programmes at multiple levels are organised for CLCT's staff; these include joint training programmes with training providers such as NTUC Learning Hub. In FY 2021, 100% of Singapore's and 99% of China's staff attended at least one learning event, and the average training hours completed by each employee was 103.4 hours. Moving forward, CLCT will work towards ensuring more staff achieve the target.

    To encourage employee development, all CLCT's employees receive regular performance and career development reviews. To make it convenient for employees to obtain learning resources, CapitaLand also launched its own online learning platform. With the launch of CapitaLand i-learning portal, CLCT's employees can access different types of courses and can freely arrange their time to learn and improve their business capabilities.

    Various internal and external speakers have been invited to give virtual talks on topics pertaining to digital fluency, corporate culture and fund management, which are made available for all CLCT's employees.

    Staff Well-being

    CLCT aims to provide a safe work environment that contributes to the well-being of its staff. CapitaLand implemented a Total Well-Being Programme that included an annual health screening in Singapore and China. Within CLCT, 22.2% of the employees in Singapore and 68.8% of the employees in China participated in this health screening in FY 2021. CLCT encouraged its employees to participate in various activities, such as hiking, badminton and dragon boating to promote healthy lifestyles. Additionally, health and wellness talks were conducted regularly, covering topics such as cancer awareness, chiropractic care, good sleep management, stress relief and burnout prevention.

    CLCT'S PERPETUAL SOCIAL TARGETS AND FY 2021 PERFORMANCE

    CLCT'S LONG-TERM SOCIAL TARGETS AND FY 2021 PERFORMANCE

    SOCIAL AND RELATIONSHIP CAPITAL

    Stakeholder Engagement

    CLCT proactively engages its stakeholders to better address their needs, build social and relationship capital, and create shared values for the long term. Its stakeholders comprise employees, investors, tenants, shoppers, contractors, vendors, governments and NGOs. Through the various engagement channels, CLCT seeks to understand its stakeholders' views, to effectively communicate with them and respond to their concerns.

    Through the various engagement channels, CLCT seeks to understand stakeholders' views and communicate with them to respond to their concerns. Issues that are of interest to its various stakeholders are outlined in the following sections.

    Employees

    CLCT actively engages its staff through various avenues, including regular staff communication sessions and pulse survey carried out by CapitaLand. For more details on the employee pulse survey and staff programmes, please refer to the staff engagement section in the Human Capital chapter.

    Investors, Analysts and Media

    Strong corporate transparency and two-way communication will enhance stakeholder confidence. CLCT's investor relations (IR) policy, which is available on its website at www.clct.com.sg, provides the framework to execute its communications activities effectively.

    Its key objectives are firstly, to ensure stakeholders are equipped with accurate and timely information to make sound judgements about the REIT; and secondly, to cultivate trust and confidence through regular and clear communication with its stakeholders. CLCT strives to disclose information that pertains not only to its financials and operations but also to its environmental, social and governance (ESG) matters, which has increasingly become a deciding factor for many investment mandates. This engagement is managed via multiple touchpoints, including one-on-one meetings, website, investor roadshows and participation in industry conferences and forums.

    All material information is announced in a timely manner on SGXNet and on CLCT's corporate website, including financial results, business updates, annual reports as well as presentation decks used at conferences and roadshows. Investors may also sign up for email alerts to receive timely updates on CLCT's latest announcements and press releases. A dedicated “Ask Us” email address (ask-us@clct.com. sg) is also available to address queries from investors and the general public. CLCT organised various events, and participates in conferences throughout the year, providing opportunities for the investment community and the media to interact with the senior management team and learn more about the REIT's operations.

    For more information on CLCT's investor and media relations efforts, please refer to Investor & Media Relations section, page 77 to 79 in the CLCT Annual Report 2021.

    Customers (Tenants and Shoppers)

    Tenant and Shopper Engagement

    In line with CapitaLand's sustainability strategy, tenant and shopper engagement remains a key focus at CLCT. CLCT actively organises community-building initiatives to enhance tenant stickiness. Numerous events were conducted in FY 2021 to foster greater interaction and build a thriving community.

    Tenant Satisfaction Survey

    CLCT strives to create meaningful relationships with its customers. To maintain the relevance of its malls, the REIT conducted a tenant satisfaction survey at 10 of its retail malls in FY 2021, with an overall participation rate of 100.0%. CLCT garnered feedback on a range of matters from cleanliness, security, mall ambience to the adequacy of car park lots. On an average, 97.1% of the respondents expressed satisfaction with CLCT's services, an improvement from 94.0% attained in the previous year. The survey is useful in providing specific and actionable feedback, which allows us to better address our tenants' needs and concerns. The feedback obtained is reviewed and relevant follow up actions are taken to improve the experience and service levels to its tenants and shoppers.

    Supply Chain

    CLCT works with contractors and suppliers that are committed to high quality EHS standards. For building operations, CLCT adopts CapitaLand's contractor management guidelines which require all contractors to comply with local government and other legal requirements. Preference is given to ISO 14001 and ISO 45001 certified companies. In line with CapitaLand's global commitment to human rights, it is mandatory for main contractors appointed by CLCT to ensure that there is no child labour and/or forced labour engaged.

    CLCT is guided by CapitaLand Supply Chain Code of Conduct that aims to influence its supply chain to operate responsibly in the areas of anti-corruption, human rights, health and safety, as well as environmental management. For more information, please refer to the Supply Chain Management segment in the Human Capital chapter.

    Community Government Agencies and Regulators

    CLCT is committed to adhere to regulatory compliance. Procedures adopted at CLI are in place to ensure that CLCT's activities and operations correspondingly comply with existing regulatory requirements. This is done through regular monitoring and evaluation and audit of the CapitaLand EHSMS. For more details, please refer to the Environmental Capital chapter.

    Community/ NGOs

    CLCT organises activities that are aligned with its focus on community investment, raising awareness and stakeholder engagement in the areas of philanthropy, environment, health and safety. In China, members of the public and tenants can sign up for these events at CLCT's retail malls and business parks. The social capital generated in these focus areas support CLCT's business growth.

  • Governance

    ORGANISATIONAL CAPITAL

    The Board of Directors (Board) has adopted the Board Code of Business Conduct and Ethics that establishes the requirements for every Director in CLCT to adhere and comply with the highest standards of ethical conduct. This sets the appropriate tone from the top in respect of the desired organisational culture and ensures proper accountability within CLCT. In line with this, the Board has a standing policy requiring each Director to not allow himself/herself to get into a situation where there is a conflict between his/her duty to the CLCT and his/her own interests.

    Fraud, Bribery and Corruption (FBC) Risk
    Management Framework

    As a CLI-sponsored REIT, CLCT adopts a zerotolerance stance against any FBC in the conduct of its business activities and expects all its employees to be committed to the highest standards of integrity in their work and business dealings.

    The FBC Risk Management framework has been set in place to manage FBC risks in an integrated, systematic and consistent manner.

    Risk-Aware Culture

    Together with various CapitaLand's policies and procedures, the FBC Risk Management Policy is published on the intranet and accessible by all CLCT's staff. The policies aim to help detect and prevent FBC by:

    • offering a fair compensation package to staff, based on practices of pay-for-performance and promotion based on merit; and providing various healthcare subsidies and financial assistance schemes to alleviate the common financial pressures faced by its staff.
    • documenting policies and work procedures which incorporate internal controls to ensure that adequate checks and balances are in place. Periodic audits are also conducted to evaluate the efficacy of these internal controls.
    • building and maintaining the right organisational culture through its core values, educating its staff on business conduct and ethical values.

    In addition, these various policies and guidelines call upon CLCT's staff to observe ethical principles in the conduct of business activities which include:

    • Abiding by CapitaLand's Ethics and Code of Business Conduct Policies which deal with matters such as confidentiality, conduct and work discipline, corporate gifts and concessionary offers. Clear policies and guidelines on how to handle workplace harassment, grievances are also in place. Donations are not to be made to any political causes through CapitaLand and/or its philanthropic arm, CapitaLand Hope Foundation.
    • Acting professionally and with integrity;
    • Practising fair competition;
    • Honouring contractual commitments made;
    • Not making inaccurate or misleading statements;
    • Making decisions or representations only when duly authorised;
    • Ensuring appropriateness of frequency and venue when conducting business activities;
    • Maintaining security and confidentiality of data and information; and
    • Not manipulating business relationships for personal gains or interests.

    CapitaLand's zero-tolerance policy on FBC extends to its business dealings with third parties (including contractors, subcontractors, consultants, agents, representatives and others performing work or services for or on behalf of CapitaLand).

    A whistle-blowing policy and other procedures are in place to provide the CapitaLand's staff and external parties who have dealings with the Group, with a well-defined, accessible and trusted channel to report suspected FBC, dishonest practices or other improprieties in the workplace. Procedures are put in place to provide such employees and parties with well defined, accessible and trusted channels to report suspected fraud, corruption, dishonest practices or other improprieties in the workplace, and for the independent investigation of any reported incidents and appropriate follow up action. The whistle-blower is given the option to make such reports anonymously, and the Manager ensures that the identity of the whistle-blower is kept confidential regardless. The objective of this policy is to encourage the reporting of such matters so that employees or external parties making any reports in good faith will be able to do so with the confidence that they will be treated fairly and, to the extent possible, be protected from reprisal.

    Substantiated cases are reported quarterly to the CapitaLand Audit Committee and shared with the risk champions regularly. Actions taken can include the termination of staff's contract, and/or reporting to the appropriate external authorities. In FY 2021, there were no substantiated cases of FBC, and cases involving anti-competition or money laundering behaviour within CLCT. More details on CLCT's practices can be found on page 36 to 69 of the Corporate Governance Report in CLCT's Annual Report 2021.

    Training

    Training and development are crucial to ensure all employees understand the CapitaLand's core values and principles that share the way the Group works and functions. There are dedicated training courses in Singapore and China such as “CapitaDNA: Strengthening Core Values”, where specific examples and applications of the Company's core values in the workplace are shared.

    CLCT PERPETUAL GOVERNANCE TARGETS AND FY 2021 PERFORMANCE

    Enterprise Risk Management (ERM)

    Risk management is an integral part of CLCT's business - both operationally and strategically. Adopting CapitaLand's Enterprise Risk Management (ERM) Framework enables CLCT to identify, manage, monitor and report material risks in an integrated, systematic and consistent manner. The Board is responsible for the governance of risks across CLCT, assisted by the Audit Committee, who provides dedicated oversight of risk management at the Board's level. The Board approves CLCT's risk appetite, which determines the nature and extent of material risks that the Manager is willing to take to achieve CLCT's strategic and business objectives.

    For more information regarding Risk Management, please refer to the CLCT Annual Report 2021 page 70 to 76.

    FINANCIAL CAPITAL

    In 2021, CLCT delivered a Net Property Income (NPI) of S$250.4 million for FY 2021, up 85.2% year-onyear and its highest annual NPI since listing. This was mainly due to new contributions from its recently acquired logistics portfolio1 and business park portfolio2, 100% contribution from Rock Square3, first full-year contribution from CapitaMall Nuohemule4 and lower rental relief provided, partially offset by the effects of divestment in 2021. Distributable income for the same period increased by 70.0% yearon-year to S$135.5 million. On an enlarged unit base, FY 2021 distribution per unit (DPU) rose 37.5% yearon-year to 8.73 cents.

    For more information on CLCT's financial performance, please refer to page 91 to 95 of CLCT Annual Report 2021.



    • The financial results in 2H 2021 and FY 2021 include contributions from Kunshan Bacheng Logistics Park, Wuhan Yangluo Logistics Park, Chengdu Shuangliu Logistics Park and Shanghai Fengxian Logistics Park from 10 November 2021.
    • The financial results in 2H 2021 and FY 2021 include contributions from Ascendas Xinsu Portfolio, Ascendas Innovation Towers and Ascendas Innovation Hub from 30 December 2020, 4 January 2021, 10 February 2021, and 26 February 2021 respectively. While the acquisitions of the Singapore-Hangzhou Science & Technology Park Phase I and Phase II were completed on 18 June 2021, the risk and reward have been transferred from 15 February 2021.
    • CLCT completed the acquisition of the remaining 49% interest in Rock Square on 30 December 2020.
    • CapitaMall Nuohemule opened with 100% occupancy in December 2020.
    • In accordance with the Property Funds Appendix, the aggregate leverage is calculated based on the proportionate share of total borrowings over deposited properties.
    • Ratio of the consolidated FY 2021 interest expense reflected over weighted average borrowings on balance sheet.
  • Appendix

    TCFD RECOMMENDATIONS

    CLCT's climate-related disclosures in line with the Taskforce for Climate-related Financial Disclosure (TCFD)

    CLI had started to align its climate related disclosures with TCFD recommendations in the four key areas of governance, strategy, risk management and metric and targets since 2017 and further declared its support for TCFD and its recommendations in 2019.

    CLI and its REITs, including CLCT, will be enhancing their TCFD reporting and will continue enhancing their implementation of TCFD recommendations.

    Governance

    The Board of the Manager of CLCT (the Board) considers sustainability issues as part of its strategic formulation, determines the material ESG factors and oversees the management and monitoring of the material ESG factors.

    The Board sets the REIT's risk appetite, which determines the nature and extent of material risks that CLCT is willing to take to achieve their strategic and business objective. As part of the material risk issues being highlighted, climate change has been identified as critical. The Board regularly reviews climate change risks as part of the CLI Enterprise Risk Management (ERM) Framework.

    The Board is actively involved in discussions on environment-related initiatives, which include climate-related initiatives. Taking the lead from CLI, the Board is updated on relevant performance metrics, e.g. carbon emissions performance and progress on the reduction targets and green certification. They are also kept aware of any environmental incidents, which may include climate-related damages or disruptions.

    At the REIT level, CLCT works closely with CapitaLand China's EHS Committee. This EHS committee drives initiatives related to climate-related risks and opportunities, as well as the broader environmental issues. CLCT is looking to set up a specialised sustainability committee, led/chaired by its CEO. In alignment with CLI, the CLCT CEO is responsible for CLCT's climate change-related targets. A key objective of CLCT's senior management is to transit to a low-carbon business that is aligned with climate science and build a resilient and resource efficient portfolio. Members of CLCT's senior management and relevant stakeholders will undergo annual training to further build capacity with respect to climate-related risk and opportunity management. The frequency and content of these capacity building trainings will be regularly reviewed to incorporate emerging issues relating to environmental risk management

    In line with the Group governance, in 2021, CLI Group-wide sustainability management comes under the purview of CapitaLand Sustainability Council (SC) which comprises two Independent Board members and four executive committee members that report to the CLI Board. CapitaLand's Management Council consisting of the Group Chief Executive Officer (CEO), all Presidents and/or CEOs of business units and key management officers of the Corporate Office provide strategic management of ESG implementation across the Group. It is supported by the Group Sustainability Office and various work teams to drive continued progress and improvement in the areas of ESG. It was chaired by one of CapitaLand Investment Board's independent directors and member of its Executive Resource and Compensation Committee and Risk Committee. The work teams comprise representatives from CLI business units and corporate functions. This governance is cascaded from the Group level to CLCT level through the operations of CLCT's EHS Committee.

    Strategy

    As a CLI-sponsored REIT, CLI's identified ESG issues have been deemed to be material and applicable to CLCT's business and operations. The selection of these issues will be guided by CLI's regular review, assessment and feedback process in relation to ESG topics moving forward.

    Climate change and emissions reduction is one of the key ESG material issues identified as relevant and critical for CLI and CLCT. Climate change risk has been identified as a key risk as part of its ERM Framework and includes both physical and transitional risks. Physical risks include consideration of rising sea levels, violent storms, long intense heat waves, flash floods and freshwater depletion. Transitional risks include potentially more stringent regulations and increased expectations from customers and stakeholders.

    In line with the Group, the REIT's strategy to identify and address climate-related risks and opportunities spans all areas of its real estate life cycle, from the earliest stage of the investment process, to design, procurement, construction, operations and redevelopment or divestment.

    • All new investments into operational assets and development projects undergo the EHS Impact Assessment during due diligence to identify any environmental (including climate change) risks and opportunities related to the asset/project site and its surroundings. The assessment covers performance metrics such as energy efficiency, as well as transitional and physical risk and opportunity considerations. Significant findings from the assessment would be incorporated in the investment paper submitted to CLCT's Board for approval.
    • Through the implementation of the Group's Sustainable Building Guidelines (SBG), it aims to identify and address the risks and opportunities of climate change right from the design stage. The local context of each project will be studied in detail, and appropriate measures will be taken into consideration with regards to adaptation of climate change. SBG also sets guidelines for buildings to be more energy efficient, e.g. setting green rating targets, specifying minimum equipment efficiency, and requiring the use of onsite renewable energy whenever possible.
    • At the operational asset level, the Group's Environment, Health and Safety Management System (EHSMS), which is audited by a third-party accredited certification body to ISO 14001 standard, serves to monitor transition risks relating to climate regulations via EHS legal registers updates and regular stakeholder engagement. Operational issues pertaining to climate change, energy and water are also identified and managed through the EHSMS to strengthen the climate resilience of its portfolio.
    • The Group's 2030 Sustainability Master Plan further outlines the targets and pathways for transition to a lowcarbon business that is aligned with climate science. Energy use and carbon reduction targets, as well as green certification targets are set for its operational assets. Initiatives are put in place to improve the environmental performance, resilience and durability of its assets through system upgrades, system optimization, effective maintenance and changes to user behaviour. The continued achievement of high green building ratings as well as energy and water efficiency measures put in place to achieve the reduction targets would help to mitigate the impact of changing weather conditions.

    As part of the 2030 Sustainability Master Plan formulation, the REIT generally considers medium term time frames to be until 2030, and long term beyond 2030 in relation to the identification of climate-related risks and opportunities

    CLI piloted various physical risk platforms with sample global assets (including some CLCT assets), to prepare for its group-wide scenario analysis study. CLI and its REITs aim to conduct its climate scenario analysis in 2022 for its global portfolio, including CLCT's assets. This analysis would consider scenarios based on the latest global and scientific developments, and likely cover a spectrum of scenarios from 1.5˚C to 4˚C scenarios for current to long-term time frames, to draw conclusions on the financially material physical and transition risks and validate its current strategy. It will then review its mitigation and adaptation plans, identify opportunities, in alignment with CapitaLand's 2030 Sustainability Master Plan, which is designed to build resilience throughout its operations and future-proof the Group's real estate portfolio to guard against climate change risks and to avoid premature obsolescence and adopt available opportunities.

    Risk Management

    CLCT conducts an annual Trust-wide Risk and Control Self-Assessment (RCSA) exercise that requires business units and corporate functions to identify, assess and document material risk which includes ESG relevant risks, along with their key controls and mitigating measures. Material risks and their associated controls are consolidated and reviewed at the REIT level before they are presented to the REIT's Audit and Risk Committee and the REIT's Board. This exercise is based on CLI's annual Group-wide RCSA exercise, review of the Risk Appetite Statement and Key Risk Indicator on Climate Change and Environmental Risk. Such climate-related risks and opportunities are identified and mitigated through CLI's Enterprise Risk Management (ERM) framework, and its externally certified ISO 14001 Environmental Management System (EMS).

    CLCT's risk management process to address its key risks and uncertainties, including climate change, is discussed further in its Annual Report, Risk Management on page 70.

    Upon completion of the scenario assessment study, targeted in 2022, the CLI Group and the REIT will review and update, if appropriate, the processes associated with risk management in order to account for environmental and climate-related risks.

    Climate-related risks and opportunities are identified and mitigated through CLI’s ERM Framework. The REIT prioritises material ESG issues based on the likelihood and potential impact of the issues affecting business continuity and development. Notably, CLCT is cognizant of the risk posed by existing and emerging regulatory requirements with relation to climate change as it is outlined in CLI’s ERM Framework as a transitional climate change risk. Some of these risks include:

    • Regulatory or compliance risk, prompted by certain regulations in the countries of operation. These include but are not limited to the Environmental Risk Management Guidelines introduced by the Monetary Authority of Singapore (MAS) in 2020 requiring financial institutions and asset managers to place greater emphasis on both physical and transitional environmental risks and the Singapore Stock Exchange mandate from December 2021 that all issuers must provide climate reporting that is aligned to the recommendations of the Task Force on Climate-related Financial Disclosures on a 'comply or explain' basis in their sustainability reports from the financial year (FY) commencing 2022. Climate reporting will be mandatory for the materials and buildings industry from FY 2024.
    • Market risks, including shifts in carbon and electricity prices, or customer expectations, prompted by the conclusions of COP26 in November 2021, where it was recognised that urgent action is needed to combat global warming, and this can only be done through global action from governments and businesses. Other developments, such as China's aim to achieve carbon neutrality before 2060 while increasing the share of nonfossil fuels in primary energy consumption to approximately 25%, are also monitored by CLCT as they affect the day-to-day operations and practices of the REIT.

    Physical risks are observed through the regular monitoring of climate-related physical risks occurring as extreme weather events, for example cases of floods, and changing climate patterns are regularly monitored across the portfolio. In 2020, CLI had conducted a global portfolio baseline study to better understand its portfolio’s physical climate risk in relation to floods. This included insights into whether the properties were located in low lying plains, encountered flooding in previous years, had equipment located in the basement, etc. Globally, most of CLI's properties already have flood control features/measures in place, such as flood barriers, sensors, water level pumps and flood emergency response plans.

    Through CLI's ERM Framework and the implementation of the EHS IA for all new investments, it identifies and prioritise certain physical risks, e.g. floods are highlighted in the due diligence reports and plans to integrate climate change resilience and adaptation considerations into the design, development and management of its properties are identified. To further strengthen climate resilience to flood risk, CLI will regularly engage its business units to ensure flood emergency response plans are implemented across its portfolio.

    Metrics and Targets

    At the Group level, CLI has tracked and reduced the carbon emissions of its managed and owned operational properties, including those of CLCT, via its cloud-based Environmental Tracking System. All related metrics have been regularly disclosed in its annual Global Sustainability Report. Since 2010, CapitaLand has been disclosing scope 1, 2 and 3 GHG emissions of its global portfolio and the data has been externally assured.

    Furthermore, in 2020, the Group had their carbon emissions reduction targets approved by the Science Based Targets initiative (SBTi) for a Well-below 2˚C scenario. This target is in line with the goals of the Paris Agreement to keep global temperature rise well below 2˚C in this century. In 2022, the Group would be evaluating the targets and the progress towards them and explore options for any long-term targets of decarbonisation. Please refer to the CLI Investment Global Sustainability Report 2021 which will be published by May 2022.

    At the REIT level, in FY 2021, Direct Scope 1 carbon emissions amounted to 1,997 tonnes CO2e. Indirect Scope 2 carbon emissions amounted to 38,700 tonnes CO2e for FY 2021. Overall carbon intensity (tCO2e/m2) for Direct Scope 1 and Indirect Scope 2 carbon emissions was reduced by 61.4% from the 2008 baseline. To calculate its carbon emissions, CLCT takes guidance from the operational control approach as defined by the GHG Protocol Corporate Standard, in line with the Group.

    Aligned with the Group, CLCT has set sustainability and climate related performance metrics and targets that are linked to the remuneration policies for members of senior management, such as the Balance Scorecard (BSC) framework for FY 2021 which had included both quantitative and qualitative targets relating to climate change.

    CLI also implemented a shadow internal carbon price in 2021 to quantify climate-related risk and opportunities for its new investments. It is also developing a new metric, Return on Sustainability, in addition to the regular financial return to measure the Group's ESG impact. CLI will continue to explore new metrics to measure climaterelated risks and opportunities.

    GRI CONTEXT INDEX






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