CAPITALAND CHINA TRUST INTEGRATED SUSTAINABILITY REPORT 2023
At CapitaLand China Trust, we remain focused on creating sustainable value for our stakeholders. We bring diverse ideas and leverage our real estate investment management expertise across our diversified portfolio - retail, business parks and logistics parks - supported by our strong team on the ground. The convergence and interconnection of distinct shapes on the cover page captures this essence. It also showcases our dynamic ONE CapitaLand Ecosystem, as we forge ahead together with a shared purpose of making a positive impact. WHERE IDEAS TAKE SHAPE Overview 2 About Us 4 About This Report 6 Sustainability Highlights 8 CEO Message 9 Board Statement 10 Sustainability Approach 18 Strategy and Key Objectives 21 Stakeholder Engagement Environmental 22 Environmental and Manufactured Capital Social 36 Human Capital 48 Social and Relationship Capital Governance 54 Organisational Capital 63 Financial Capital Appendix 65 TCFD Recommendations 76 Key ESG Data Summary 79 GRI Content Index 85 SASB Disclosure Index CONTENTS Note: In this ISR, minor variances may occur between the figures and totals presented in the tables and charts due to rounding.
2 CAPITALAND CHINA TRUST 1 Based on valuation on a 100% basis as at 31 December 2023. The valuation based on effective interest is RMB23,631 million as at 31 December 2023. 2 Includes CapitaMall Shuangjing, which was divested in January 2024 but excludes CapitaMall Qibao, as the mall has ceased operations since the end of March 2023. 25,222 PORTFOLIO VALUE1 (RMB MILLION) 12 TIER 1 AND LEADING CITIES GEOGRAPHIC PRESENCE ~1.9 GROSS FLOOR AREA (MILLION SQ M) 4 LOGISTICS PARKS 10 RETAIL MALLS2 5 BUSINESS PARKS CapitaMall Xizhimen
CapitaLand China Trust (CLCT) is Singapore’s largest China-focused real estate investment trust (REIT). Listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 8 December 2006, the objective of CLCT is to invest on a long-term basis, in a diversified portfolio of income-producing real estate and real estate-related assets in China, Hong Kong SAR and Macau that are used primarily for retail, office and industrial purposes (including business parks, logistics facilities, data centres and integrated developments). CLCT is managed by CapitaLand China Trust Management Limited (CLCTML), a wholly owned subsidiary of Singapore-listed CapitaLand Investment Limited (CLI), a leading global real estate investment manager with a strong Asia foothold. VISION Sustainable and resilient REIT with a professionally managed portfolio of quality real estate across China MISSION Deliver sustainable income growth to our Unitholders and value-add to the community and stakeholders by enhancing organic growth through proactive asset management; creating new value through innovative asset enhancement strategies; and capitalising on yieldaccretive acquisition growth For more information, please visit our corporate website at www.clct.com.sg. Our growth strategy is focused on three key pillars: Creating, Unlocking, and Extracting value. We meticulously cultivate our portfolio with a disciplined reconstitution strategy, ensuring a robust and forward-looking asset mix. Proactive asset management elevates the intrinsic value of our portfolio, drawing prominent tenants to our quality spaces. This strategic positioning enables us to deliver sustainable returns to our Unitholders. Our strategy is reinforced by a prudent capital and risk management framework, underpinned by a commitment to sustainability. Strategic advantages and growth potential are further realised by leveraging on CapitaLand Group’s extensive pipeline of high-quality assets as well as operational excellence through the wide-ranging real estate platform, strong local network, and professional property management capabilities. Together, these elements pave the way for our sustainable growth and market leadership. ABOUT US OUR GROWTH STRATEGY SUSTAINABILITY REPORT 2023 3
ABOUT THIS REPORT CLCT is Singapore’s largest China-focused REIT. This is CLCT’s third Integrated Sustainability Report (ISR), and it aims to provide a comprehensive overview of the organisation’s Environmental, Social and Governance (ESG) performance. Published in mid-April 2024, this Report is available on https://investor.clct.com.sg/isr. html. INTERNATIONAL STANDARDS AND GUIDELINES This ISR has been prepared in accordance with the Global Reporting Initiative (GRI) Standards 2021, an internationally recognised sustainability reporting standard that covers a wide range of disclosures. The report is also in compliance with the sustainability reporting requirements set out in the Listing Manual Rule 711A and 711B of the Singapore Exchange Securities Trading Limited (SGX-ST). Our business model is built upon the fundamental concepts as guided by the Integrated Reporting Framework by the Value Reporting Foundation, and it incorporates elements of the framework to communicate value creation. It is also aligned with the Sustainable Developments Goals of United Nations (UN SDGs). Additionally, this Report references the Sustainability Accounting Standards Board (SASB) Standards sustainability disclosure topics and metrics for real estate sector-specific standards, and outlines CLCT’s risk management framework with reference to the Guidelines on Environmental Risk Management for Asset Managers issued by the Monetary Authority Singapore (MAS). Together with our Sponsor, CLI, CLCT will continue to adopt a progressive approach in refining its climate-related disclosures based on the 11 recommendations from the Task Force on Climaterelated Financial Disclosures (TCFD). REPORTING SCOPE AND PERIOD As at 31 December 2023, the portfolio comprised 103 retail properties, five business parks and four logistics parks, primarily located in Tier 1 and leading cities in China. This Report discloses information on the 183,4,5 properties within CLCT’s portfolio, unless otherwise stated, for the financial period from 1 January 2023 to 31 December 2023 (FY 2023). CLCT adopts the Greenhouse Gas (GHG) Protocol Corporate Standard in disclosing performance data for Energy, GHG, Water and Waste across our 18 properties. As such, CLCT only reports the assets that are under the Manager’s operational control. There is no restatement of information this year. 3 CapitaMall Qibao ceased operations in March 2023 and is therefore not included in the Report. 4 CapitaMall Shuangjing is not included in the environmental, social and governance operational data reporting as the Manager does not have operational control over the asset. The mall was divested in January 2024. 5 As CLCT's logistics park assets are not operated by CLI, the energy and water data of these assets are not included in the portfolio's environmental performance. The emissions data of these assets are included under Scope 3. 4 CAPITALAND CHINA TRUST
Retail CapitaMall Xizhimen Rock Square CapitaMall Wangjing CapitaMall Grand Canyon CapitaMall Xuefu CapitaMall Xinnan CapitaMall Nuohemule CapitaMall Yuhuating CapitaMall Aidemengdun CapitaMall Shuangjing4 Business Park Ascendas Xinsu Portfolio Ascendas Innovation Towers Ascendas Innovation Hub Singapore-Hangzhou Science & Technology Park (Phase I) Singapore-Hangzhou Science & Technology Park (Phase II) Logistics Park Shanghai Fengxian Logistics Park Kunshan Bacheng Logistics Park Wuhan Yangluo Logistics Park Chengdu Shuangliu Logistics Park The operations of CLCT’s properties are managed by the REIT Manager and property management teams. The respective teams are identified as employees of CLCT. However, non-executive members of the CLCTML Board are not considered employees of the REIT. On an annual basis, to ensure transparency and accuracy, CLI had engaged an independent external consultant to carry out assurance over the CLI Group’s performance data for FY 2023. CLCT’s performance data is also scoped in as part of the CLI Group’s annual external assurance engagement. CLI's report will continue to be externally assured with reference to the ISAE 3000 International Standard on Assurance Engagements. It covers the Group’s global portfolio and employees, including CLCT and CLI ‘s other listed real estate investment trusts and business trusts. CLI’s Global Sustainability Report (GSR) 2023 will be published by 31 May 2024 on the CLI website. This ISR has also undergone a comprehensive internal review. Published annually, this ISR is recommended to be read alongside CLCT's Annual Report 2023 for a comprehensive understanding of its business and performance. Reflecting our ongoing commitment to environmental sustainability, no physical copies of this ISR have been printed. For any further inquiries, please contact: Ms Nicole Chen Head, Investor Relations Tel: 6713 2888 Email: ask-us@clct.com.sg Website: www.clct.com.sg SUSTAINABILITY REPORT 2023 5
SUSTAINABILITY HIGHLIGHTS 5 STAR rating awarded for GRESB Assessment 2023, an improvement from 2 Star rating in 2022 A maintained for GRESB Public Disclosure 2023 FOUR NEW LEED GOLD CERTIFIED PROPERTIES IN 2023 CapitaMall Xizhimen Ascendas Innovation Towers Ascendas Innovation Hub Singapore-Hangzhou Science & Technology Park Phase I6 NEGLIGIBLE RISK rated 8.9 in Sustainalytics ESG Risk Rating, upgraded from Low Risk BBB awarded for MSCI ESG Ratings, upgraded from B B CDP Climate Change 2023 36% OF PORTFOLIO GREEN CERTIFIED Met annual green building certification target by obtaining green certification for approximately 36%7 of portfolio GFA by end 2023. RECOGNITION AND ACCOLADES GREEN CERTIFICATION SUSTAINABILITYLINKED FINANCING FRAMEWORK Established a SustainabilityLinked Finance Framework that comprises key performance indicators (KPIs) linked to green building certifications, renewable energy and energy consumption intensity targets. 31% OF TOTAL DEBT ARE SUSTAINABILITYLINKED LOANS Secured additional sustainabilitylinked loan of S$100 million in FY 2023. As at 31 December 2023, sustainability-linked loans account for 31% of total debt (FY 2022: 13%). ECONOMIC 6 Attained LEED Gold status for Block 1 to 3 of Singapore-Hangzhou Science & Technology Park Phase I – the remaining blocks are LEED Gold certified since 2014. 7 By portfolio gross floor area excluding carpark space. Cover CLCT properties managed by CLI. 6 CAPITALAND CHINA TRUST
ZERO LAPSES REPORTED For corporate governance, corruption or employee misconduct. HEALTH & SAFETY 100% of the main contractors appointed this year are ISO 45001 certified. Reported zero incidents resulting in fatality and permanent disability for CLCT employees and contractors. SOCIAL GOVERNANCE RENEWABLE ENERGY Procured offsite renewable energy for the first time with Ascendas Innovation Towers and Ascendas Innovation Hub (3.0% of portfolio’s electricity consumption). Completed the installation of 253 solar panels on the roof of Kunshan Bacheng Logistics Park- to generate renewable energy starting in 2024. ENVIRONMENT 8 Refers to green leases implemented for new and renewed leases. Cover CLCT properties managed by CLI. 9 Following the retirement of Ms Kuan Li Li with effect from 1 January 2024, 3 out of 9 Directors (33% of the Board) are female. ESG TRAINING 100% of CLCT employees in Singapore and 98% of CLCT employees in China participated in ESG-related training. 100% of contractors and suppliers attended in-house safety training, covering topics such as Environmental, Health and Safety and COVID-19 safety measures. 40%9 FEMALE BOARD REPRESENTATION Increased from 25% in 2022. GREEN LEASING Implemented green leasing for all CLCT properties8 managed by CLI. SUSTAINABILITY REPORT 2023 7
8 CAPITALAND CHINA TRUST CEO MESSAGE Dear Stakeholders, In 2023, our commitment to sustainability continues to drive our actions as we strive to create long-term economic value for our stakeholders. Building upon the progress made last year, we are pleased to share the latest updates on our sustainability journey and achievements in alignment with CapitaLand Investment's 2030 Sustainability Master Plan (SMP). SUSTAINABILITY RECOGNITION AND ACCOLADES We are delighted that our dedication to sustainable practices has been recognised with a 5-star rating in the 2023 GRESB Real Estate Assessment. This significant improvement from our previous 2-star rating reflects our unwavering efforts and commitment to sustainability. Additionally, we also maintained an "A" rating for 2023 GRESB Public Disclosure. As we advance on our progress in the environmental, social, and governance aspects, we have raised our MSCI ESG Ratings from 'B' to 'BBB', reflecting our responsible and sustainable business practices. Similarly, our Sustainalytics ESG Risk Rating has been upgraded from 'Low Risk' to 'Negligible Risk', highlighting our robust policies and practices. PROGRESS IN ENERGY EFFICIENCY Our focus on energy efficiency has yielded positive results, with four of our assets – CapitaMall Xizhimen, Ascendas Innovation Towers, Ascendas Innovation Hub, and Singapore-Hangzhou Science & Technology Park Phase I10 attaining LEED Gold certification in 2023. Including CapitaMall Wangjing and Rock Square which attained LEED Gold certification in 2022, 36%11 of our portfolio's GFA is currently green certified. We have made substantial progress in implementing green leasing across all12 our CLI-managed properties, further solidifying our commitment to sustainable practices. To reduce environmental impact, we have successfully purchased offsite renewable energy for the first time at Ascendas Innovation Towers and Ascendas Innovation Hub this year, accounting for 3.0% of our portfolio's electricity consumption in FY 2023. In addition, we have completed the installation of 253 solar panels on the roof of Kunshan Bacheng Logistics Park, with the anticipation of generating onsite renewable energy in 2024. SUSTAINABLE FINANCING JOURNEY Our sustainable financing initiatives have garnered noteworthy success. We are pleased to share that we have secured additional sustainability-linked loan of S$100 million in FY 2023. As at 31 December 2023, sustainability-linked loans account for 31% of total debt (FY 2022: 13%). This improvement reflects our commitment towards responsible growth and our resolute focus on embracing sustainable financing instruments to enhance our financial flexibility. In addition, CLCT established a Sustainability-Linked Finance Framework in October 2023. This framework includes key performance indicators (KPIs) tied to green building certifications, renewable energy, and energy consumption intensity targets. EMBRACING DIVERSITY AND INCLUSION We are equally committed to diversity, equity, and inclusion. Our efforts have led to an increase in female representation on our Board to 40.0%13 in 2023, up from 25.0% last year. We continued to maintain gender diversity within our REIT Manager and property management teams in Singapore and China. We are committed to cultivate a positive working environment for employees across diverse backgrounds to promote employee engagement, motivation and retention. SUSTAINABILITY STEWARDSHIP Sustainability remains at the heart of our strategies here at CLCT. Our ESG targets are integrated into our investment and business decisions as we continue to enhance our sustainability performance and broaden our sustainable financing endeavours. As we build resilience and seize opportunities, we remain steadfast in our commitment to contribute to the environmental and social well-being of the communities we operate in. We extend our gratitude for your continuous support and unwavering partnership as we continue this sustainability journey together. TAN TZE WOOI Chief Executive Officer 10 Attained LEED Gold status for Block 1 to 3 of Singapore-Hangzhou Science & Technology Park Phase I – the remaining blocks are LEED Gold certified since 2014. 11 By portfolio gross floor area excluding carpark space. Cover CLCT properties managed by CLI (by sq m). 12 Refers to green leases implemented for new and renewed leases. Cover CLCT properties managed by CLI. 13 Excluding Ms Kuan Li Li, who has stepped down as the Non-Executive Independent Director on 1 January 2024, the Board gender diversity would be 33%.
BOARD STATEMENT At CLCT, 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 Investment 2030 Sustainability Master Plan (SMP), which was refreshed in 2023 as part of the review by the CapitaLand Investment Board of Directors together with Management. The CapitaLand Investment 2030 Sustainability Master Plan steers our efforts on a common course to maximise impact through building portfolio resilience and resource efficiency, enabling thriving and futureadaptive communities, and stewarding responsible business conduct and governance. Ambitious ESG targets have been set which include carbon emissions reduction targets validated by the Science Based Targets initiative (SBTi). In 2023, CapitaLand Investment revised its SMP targets to elevate its SBTi-approved targets in line with a 1.5˚C scenario, incorporate its Net Zero commitment, and enhance its focus on social indicators. The CLCT Board is responsible for overseeing the REIT’s sustainability efforts, and takes ESG factors into consideration in determining its strategic direction and priorities. The CLCT Board also approves the executive compensation framework based on the principle of linking pay to performance. CLCT’s business plans are translated to both quantitative and qualitative performance targets, including sustainable corporate practices and are cascaded throughout the REIT. SUSTAINABILITY REPORT 2023 9
Note: Enable & Steward targets are intended to reflect the organisation-wide goals set by CLI on a group basis, and are intended to be implemented subject to and taking into account (i) fair & equitable employment practices and principles under applicable laws and market practice & (ii) the business and operational needs of the company and the organisation, as applicable. 14 Using 2019 as the base year. • Achieve Net Zero emissions by 2050 for scope 1 and 2 greenhouse gas (GHG) emissions • Reduce: • Achieve 45% of total electricity consumption from renewable sources • Work towards setting new scope 3 carbon emissions reduction target Reduce water consumption intensity in our day-to-day operations by 15%14 Build Portfolio Resilience & Resource Efficiency Low Carbon Transition Water Conservation & Resilience Waste Management & Circular Economy Absolute scope 1 & 2 GHG emissions by 46%14 Energy consumption intensity by 15%14 Carbon emissions intensity by 72%14 Reduce waste intensity in our dayto-day operations by 20%14 Achieve 25% recycling rate in our day-to-day operations SUSTAINABILITY APPROACH CAPITALAND INVESTMENT (CLI) 2030 SUSTAINABILITY MASTER PLAN (SMP) SUSTAINABILITY COMMITMENT 10 CAPITALAND CHINA TRUST
• Contribute to communities’ social well-being through outreach initiatives by staff & CapitaLand Group’s philanthropic arm, CapitaLand Hope Foundation (CHF) • Ensure sustainability targets integrated into CLI Performance Share Plan & Balanced Scorecard framework to determine executive remuneration & KPIs • At least 85% staff to attend 1 compliance related training • ESG reporting aligned & externally assured to international standards • Identify, assess & manage sustainability risks & opportunities • Ensure sustainability risks & opportunities are managed in line with overall risk appetite & strategy • Foster a safety culture with zero fatality, permanent disability, major injury • Incorporate social integration design features in properties • Implement wellness related initiatives & certifications for physical assets • Green leases for new & renewal of leases; work with tenants to improve their sustainability performance • Achieve high level customer satisfaction • Contractors & vendors to abide by CLI’s Supply Chain Code of Conduct • Zero tolerance to child labour/ forced labour Enable Thriving & Future-Adaptive Communities Steward Responsible Business Conduct & Governance Social Impact Corporate Governance Transparent Reporting Governance ESG Risk Management Health & Wellness Customer & Supplier Partnerships Human Capital Development 15 Employee engagement score of at least 80% (with at least 85% participation). Female representation in senior management Staff engagement score15 Staff to attend at least 1 ESG training ≥40% ≥80% ≥85% SUSTAINABILITY REPORT 2023 11
12 CAPITALAND CHINA TRUST RESPONSIBLE BUSINESS CONDUCT Aligned to CLI’s policies and commitments, CLCT advocates for respecting human rights and proactively addresses human rights concerns that may impact the REIT’s operations. These policy commitments are approved by CLI’s and CLCT’s Board and management, and are applied to CLCT’s activities and business relationships. CLCT leverages on CLI’s Social Charter in its commitment to support the preservation of human dignity and self-respect of every individual. This Social Charter addresses issues from a myriad of topics such as human rights, child labour, forced labour, human trafficking, code of conduct, diversity and inclusion, and healthy work-life balance and is applicable to both our workforce and supply chain. Other human rights related commitments such as grievance handling, harassment policies and remediation procedures have been embedded across different levels within the organisation. MAINTAINING DIVERSITY ON THE BOARD The Board embraces diversity and has in place a Board Diversity Policy which provides for the Board to comprise talented and dedicated Directors with a diverse mix of expertise, experience, perspectives, skills and backgrounds, with due consideration to diversity factors, including but not limited to, diversity in age, gender, tenure and business or professional experience. The Board values the benefits that diversity can bring to the Board in its deliberations by avoiding groupthink and fostering constructive debate. Diversity enhances the Board’s decision-making capability and ensures that the Manager has the opportunity to benefit from all available talent and perspectives, which is essential to the effective governance of CLCT’s business and for ensuring long-term sustainable growth. CLCT’s Board diversity targets, plans and timelines for achieving the targets and progress towards achieving the targets are described on pages 120 to 121 of CLCT’s Annual Report 2023. The Nominating and Remuneration Committee (NRC), in carrying out its duties of determining the optimal composition of the Board in its Board renewal process and addressing Board vacancies, considers candidates who bring a diversity of background and opinion and have the appropriate industry or related expertise and experience. In identifying possible candidates and making recommendations of board appointments to the Board, the NRC’s considerations include achieving an appropriate level of diversity in the Board composition having regard to diversity factors such as skills, experience, gender, age and tenure, as well as educational, business and professional backgrounds of its members. In its annual review of the Board’s composition, the NRC expressly considers and includes a commentary to the Board on the subject of diversity, including gender diversity, in the composition of the Board. In this regard, the NRC has reviewed the size and composition of the Board and is of the opinion that the Board and Board Committees are of an appropriate size and comprise Directors who as a group provide the appropriate balance and diversity of skills, knowledge, experience, gender, age and tenure, taking into account CLCT’s Board diversity targets, plans and timelines, the objectives of the Board Diversity Policy and CLCT Group’s business needs and plans, for effective decision-making and constructive debate. In line with the Board Diversity Policy, the current Board as at the date of this Sustainability Report comprises nine members who are corporate and business leaders, and are professionals with varied backgrounds, expertise and experience including in accounting, finance, banking, capital markets, real estate, investment management, governance and the China market. The Board members bring with them the combination of skills, talents, experience and diversity required to serve the needs and achieve the plans of the CLCT Group. For more details on our Board Diversity Policy and performance, please refer to pages 119 to 122 of CLCT’s Annual Report 2023. SUSTAINABILITY MANAGEMENT
SUSTAINABILITY REPORT 2023 13 BOARD, TOP MANAGEMENT AND EMPLOYEE COMMITMENT Role of CLI Board, Management and Employees The Sponsor's (CLI) Board recognises the importance of sustainability as a business imperative and ensures that sustainability considerations are factored into CLI’s strategy development. This enables CLI to remain competitive and resilient in an increasingly challenging business environment. The CLI Board is kept informed on a regular basis through the Strategy and Sustainability Committee (SSC) on the Group’s sustainability management performance, key material issues identified by stakeholders, and the planned follow-up measures. Additionally, the CLI Board is typically updated by the Risk Committee and Audit Committee at least once a year and at ad hoc Board meetings. The CLI Board discusses matters relating to sustainability risks and relevant performance metrics, which include carbon emissions and our progress on achieving the reduction targets, green certification, human capital development, stakeholders’ expectations on climate change, social impact and/or other matters. The CLI Board is also informed of any incidents relating to workplace safety, business malpractice and environmental impact, which may include climaterelated damage or disruptions. Lead Independent Director of CLI, Mr Anthony Lim chairs the SSC which is a CLI Board Committee. The SSC is responsible for overseeing CLI’s sustainability strategies and goals, including providing guidance to management and monitoring progress against achieving the goals of sustainability initiatives. The SSC typically meets twice a year, with additional meetings convened as necessary. The CLI Leadership Council makes strategic resource allocation decisions and meets on a regular basis. The CLI Leadership Council comprises the Group Chief Executive Officer (CEO), CEOs of the business units and key management officers of the corporate office. The sustainability work teams comprise representatives from CLI’s business units and corporate functions. Each business unit has its own Environmental, Health and Safety (EHS) Committee to drive initiatives in countries where it operates with support from various departments. BOARD DIVERSITY AS AT 31 DECEMBER 2023 BOARD INDEPENDENCE (As at 31 December 2023) BOARD GENDER DIVERSITY (As at 31 December 2023) Male 6 Female 4 Independent Directors 7 Non-Independent Directors 3 AGE SPREAD (As at 31 December 2023) TENURE MIX (As at 31 December 2023) Less than 3 years 6 3 to 6 years 1 More than 6 years 3 50 years old and below 2 51-60 years old 3 61 years old and above 5
14 CAPITALAND CHINA TRUST SUSTAINABILITY MANAGEMENT Role of CLCT Board, Management and Employees At CLCT, a Sustainability Management Committee (SMC) was established to ensure greater focus on sustainability and climate-related matters of CLCT’s assets. The SMC is chaired by the CEO of the REIT Manager of CLCT and comprises senior management team members to oversee CLCT’s sustainability objectives and strategies directly. The SMC is responsible for providing timely and regular updates on the REIT’s sustainability matters to CLCT’s Board of Directors and its Chairman. Regular updates to the CLCT Board of Directors include value and mission statements, goals, strategies overviews, policies and progress related to sustainable development. The SMC is supported by CLCT’s Sustainability Working Committee (SWC), which comprises key members from various business functions, to implement sustainabilityrelated activities and initiatives across CLCT’s operations as per CLI’s sustainability framework and policies. CLCT’s sustainability governance is inter-linked with the Sponsor’s sustainability management. The overall governance comes under the purview of the CLI Senior Leadership Council. CLCT is represented at the CLI Senior Leadership Council by the CEO of the REIT Manager of CLCT who provides guidance on sustainability strategies and goals for CLCT. This report's content, including the material ESG topics, are reviewed and approved by the CLCT’s Board of Directors. During board meetings, sustainability policies and strategies are discussed and reviewed as well. STRATEGIC SUSTAINABILITY MANAGEMENT STRUCTURE CLCT Board of Directors CLCT'S SUSTAINABILITY MANAGEMENT STRUCTURE CLI'S SUSTAINABILITY MANAGEMENT STRUCTURE CLI Board of Directors STAFF Strategy and Sustainability Committee (Board Committee) CLI Leadership Council (Comprising Senior Management) Various Sustainability Work Teams/ Committees comprising Business units and corporate departments covering CLCT Sustainability Management Committee Headed by Chief Executive Officer Team Members Chief Financial Officer Head, Investment & Portfolio Management Head, Investor Relations CLCT Sustainability Working Committee Headed by Head, Investment & Portfolio Management and Head, Investor Relations Environment, Health and Safety Stakeholder Engagement Investment, Asset Management Innovation Enterprise Risk Management Human resource, Group Procurement, others Finance Investment & Portfolio Management Environmental Health and Safety Property Management Investor Relations
SUSTAINABILITY REPORT 2023 15 ESG INTEGRATION ACROSS CLCT’S BUSINESS FUNCTIONS CEO and Executive Director • Responsible for decisions relating to ESG targets. Finance • Responsible for securing green financing and engaging with stakeholders such as bankers. Investment & Portfolio Management • Seeks investment opportunities with climate change impact as one of the assessment criteria. • Proposes solutions for procurement of renewable energy, greening of assets, and related capital expenditure. • Engages various internal stakeholders on ESG matters. Environmental, Health and Safety Team • Responsible for monitoring environmental performance of assets against annual and long-term targets. Property Management • Collaborates closely with Investment and Portfolio Management team to evaluate solutions for green energy procurement, greening of assets, and related capital expenditure. • Engages with tenants, service providers, and relevant government agencies for ESG matters. Investor Relations • Engages investment community and ESG rating agencies on CLCT's sustainability targets and performance. • Responsible for ESG reporting matters. RECOGNITION BY GLOBAL BENCHMARKS CLI has been a signatory to the United Nations (UN) Global Compact since 2015 and our Communication on Progress for FY 2023 will be published at www. unglobalcompact.org. In February 2023, CLI also became a signatory of the UN-supported Principles for Responsible Investment (UN PRI), as part of our commitment to invest responsibly. For these efforts, CLI continues to be listed on the Dow Jones Sustainability World Index and Asia-Pacific Index, GRESB (Global Sector Leader – Listed (Diversified) with the highest 5 Star rating), FTSE4Good Index Series, MSCI Global Sustainability Indexes and The Sustainability Yearbook. CLI’s Global Sustainability Report 2023 will continue to be externally assured with reference to the International Standard on Assurance Engagements (ISAE) 3000, and will cover CLI’s global portfolio and employees, including CLCT and CLI’s other listed real estate investment trusts (REITs) and business trusts. In the 2023 GRESB Real Estate Assessment, CLCT achieved the highest 5 Star rating, placing the REIT in the top 20% of the global benchmark. MATERIALITY CLCT is guided by CLI’s materiality assessment process, which identifies and prioritises the management of material ESG issues that are most relevant and significant to CLCT and its stakeholders, taking into consideration their relevance or impact to the business, strategy, financial planning, business model and key stakeholders. A double materiality approach is adopted, considering issues which are material from either the impact or financial perspectives16, or both. Potentially material ESG issues arising from activities across CLI and CLCT’s value chain (including potential risks and opportunities in the immediate and longer term) are primarily identified via ongoing engagement with CLI’s business units and external stakeholders, and reviews of sources including investor questionnaires, as well as ESG surveys, sustainability benchmarks and frameworks such as Dow Jones Sustainability Indices, GRESB and SASB. In addition, CLI and CLCT have a regular review, assessment and feedback process in relation to ESG topics. Identified material issues are reported in its corporate risk register through the annual Group-wide Risk and Control Self-Assessment (RCSA) exercise, which identifies, assesses and documents material risks and the corresponding internal controls to manage those risks. These material risks include fraud and corruption, environmental (e.g. climate change), health and safety, and human capital risks which are ESG16 To identify ESG issues which are potentially financially material, CLI takes reference from the SASB Standards for Real Estate and Real Estate Services, which identify sustainability factors that are material to short, medium, and long-term enterprise value for the industry.
16 CAPITALAND CHINA TRUST SUSTAINABILITY MANAGEMENT relevant. Identified material ESG issues are then prioritised based on the likelihood and potential impact of issues affecting the business continuity of CLI and CLCT. For external stakeholders, priority is given to issues important to the community and applicable to CLI and CLCT. In FY 2023, the material ESG topics that were identified were approved by the CLI SSC. CREATING VALUE AND ALIGNMENT TO UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (UN SDGS) CLCT’s material ESG issues and the value created, aligned to CLI 2030 SMP focus areas and commitments, are mapped to the six integrated reporting Capitals of the Value Reporting Foundation’s IR Framework – Environmental, Manufactured, Human, Social and Relationship, Organisational and Financial. This is further mapped against eight UN SDGs that are most aligned with CLI 2030 SMP focus areas, and where CLI and CLCT can achieve the greatest positive impact. For more details of the value creation strategy, please refer to pages 18 to 20. INVESTMENT STRATEGY As Singapore’s largest China-focused REIT with a diversified portfolio of retail, business park and logistics park assets across 12 tier one and leading cities, CLCT is well-positioned to capture China’s long term economic growth. We are committed to delivering long-term sustainable distributions to Unitholders. Our forward-looking portfolio reconstitution strategy is closely aligned with China’s long-term economic direction, which focuses on domestic consumption and innovation-driven 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 sustainable 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 CLI’s integrated real estate platform, strong local network, and professional property management capabilities. PRIORITISATION OF MATERIAL ESG ISSUES Critical Critical Critical • Climate change and carbon emissions reduction • Energy efficiency • Water management • Waste management • Biodiversity • Occupational health and safety • Human capital • Stakeholder engagementii • Products and servicesiii • Supply chain management • Diversity (Board and Staff) • Human rightsiv • Risk managementi • Business ethics Moderate and Emerging Moderate and Emerging Environment Social Governance i This includes consideration of compliance, economic performance and Cybersecurity. ii This includes green leases and tenant engagement on ESG matters. iii This includes products and services promoting customer health and safety, and green certified buildings. iv This relates to CLI’s zero tolerance stance towards child/forced labour.
Singapore-Hangzhou Science & Technology Park Phase I SUSTAINABILITY REPORT 2023 17
18 CAPITALAND CHINA TRUST STRATEGY AND KEY OBJECTIVES Create Value Unlock Value Extract Value VALUE CREATION STRATEGY
SUSTAINABILITY REPORT 2023 19 Unlock Value Extract Value Create Value We continuously review the performance of our assets and identify the optimal stage in their lifecycle to unlock value. By divesting non-core, mature assets, we will be able to enhance returns to our Unitholders. This allows us to reallocate capital to more promising opportunities that offer higher potential for growth and value creation. We remain committed to evaluating our portfolio rigorously and taking decisive actions to unlock and deliver long-term value for our Unitholders. VALUE UNLOCKED IN FY 2023: » Announced divestment of CapitaMall Shuangjing on 6 December 2023 at an agreed price of RMB842.0 million (approximately S$157.8 million17) and an exit yield of 2.8%18 PROACTIVE ASSET MANAGEMENT Our priority is to achieve organic growth through customer-centric initiatives. This includes optimising tenant mix, implementing proactive leasing strategies, deepening tenant engagement, and leveraging CapitaLand’s omni-channel platforms and loyalty programs. Our goal is to enhance tenant experiences and operational efficiency while managing costs effectively. INNOVATIVE ASSET ENHANCEMENT At opportune moments, we will embark on asset enhancement initiatives to reposition the properties and drive competitiveness to maximise asset value and better cater to the preferences of today’s customers. VALUE EXTRACTED IN FY 2023 WITH FURTHER UPSIDE EXPECTED IN FY 2024: » AEI at CapitaMall Yuhuating (Completed in March 2023): +112% rental reversion » AEI at Rock Square (Completed in July 2023): >13% return on investment » AEI at CapitaMall Grand Canyon (Completed in December 2023): +50% rental income Our objective is to achieve growth through strategic and well-timed acquisitions that align with our long-term goals. We focus on investing in assets with quality growth potential and synergistic value. To strengthen the resilience of our portfolio, we invest in a diversified portfolio of income-producing real estate across various asset classes. We proactively source potential acquisitions from our sponsor's pipeline as well as third-party vendors with the aim of creating a future-ready portfolio that can deliver stable and sustainable distributions to our Unitholders. 17 Based on an assumed exchange rate of S$1 to RMB5.3348 unless otherwise stated. 18 This is based on annualising the net property income of the Property from 1 January 2023 to 30 September 2023 and divided by the agreed price of RMB842.0 million (around S$157.8 million).
20 CAPITALAND CHINA TRUST VALUE CREATED ENVIRONMENTAL CAPITAL ▶ 43.0%i reduction in carbon emissions intensity. ▶ 36.0%i reduction in energy consumption intensity. ▶ 39.5%i reduction in water consumption intensity. ▶ Achieved 18.6% waste recycling rate in day-to-day operations. ▶ Obtained 4 new LEED Gold certification for CapitaMall Xizhimen, Ascendas Innovation Towers, Ascendas Innovation Hub and Singapore-Hangzhou Science & Technology Park Phase I. ▶ Continued to implement the recommendations and improved on TCFD reporting - for more details, please refer to the TCFD chapter in the Appendix of this report. ▶ Purchased offsite renewable energy at Ascendas Innovation Towers and Ascendas Innovation Hub for the first time (3.0% of portfolio’s electricity consumption). ▶ Completed the installation of 253 solar panels on the roof of Kunshan Bacheng Logistics Park, which will begin operations in 2024. ▶ Retained ISO 14001 certification. MANUFACTURED CAPITAL ▶ Extracting Value - Achieve higher returns through innovative AEIs in: • CapitaMall Yuhuating: AEI spanning ~8,900 sq m with enhanced range of offerings and experiences including Food & Beverages (F&B), Leisure & Entertainment and Education tenants. The improved overall NLA mix is better equipped to cater to today’s catchment needs, which resulted in achieving a rental reversion of approximately +112%. • Rock Square: Recovered 2,310 sq m of supermarket anchor space at Basement 2 and reconfigured the area to enhance overall shopping experience. Introduced trending and popular lifestyle offerings, including Gifts & Toys and specialty F&B. The return on investment (ROI) for this reconfiguration was more than 13%. • CapitaMall Grand Canyon: Transformed an old supermarket area at Basement 1 into 7,740 sq m of refreshed tenant mix that includes a new retail concept supermarket “7Fresh”, as well as 60 popular F&B outlets and trendy retail and amenity stores. Post AEI, rental income for the area grew approximately 50%. ▶ Unlocking Value - Completed divestment of CapitaMall Shuangjing in January 2024, as part of CLCT’s proactive portfolio management strategy to focus on monetising non-core assets and seizing investment opportunities that enhance overall portfolio quality. ▶ Refreshed amenities and facilities to increase stickiness of consumers and tenants to our properties. ▶ Enhanced sustainability efforts and energy efficient initiatives HUMAN CAPITAL ▶ Diversified Singapore and China workforce (20 employees in Singapore and 462 employees in China) • 56.4% male employees and 43.6% female employees • 77.4% aged between 30 and 50 years old ▶ 38% female employees in CLI's senior management positions; 33.3% female employees in CLCT's key management positions ▶ Recorded average of 75.2 training hours per employee • 100% of employees in Singapore attended at least 1 ESG training • 98.3% of employees in China attended at least 1 ESG training ▶ CLI global employee engagement score of 84%, with 93% survey participation ▶ Zero employee work-related fatality and permanent disability ▶ Zero contractor work-related fatality and permanent disability ▶ No reported incidents relating to discrimination, child labour or forced labour in CLCT ▶ Retained ISO 45001 certification SOCIAL & RELATIONSHIP CAPITAL ▶ Organised a series of green events at several malls to raise environmental awareness, such as the 'Happy Plogging' event at Rock Square, where participants combined jogging and litter clean-up across various areas ▶ Held a 8km eco-green run, a weekend family bonding event at Ascendas Xinsu Portfolio that attracted 150 tenants as well as their family members ▶ Organised a series of sporting events and training programs at CLCT’s business parks to promote wellness and environmental sustainability ORGANISATIONAL CAPITAL ▶ As at 31 December 2023, CLCT Board has four female members representing 40%ii of the Board ▶ 98.1% of employees attended Fraud, Bribery & Corruption awareness and Whistle-blowing training ▶ 85.1% of employees attended Cybersecurity training ▶ 100%iii of CLCT's supply chain agreed to abide by CLI’s Supply Chain Code of Conduct FINANCIAL CAPITAL ▶ Secured sustainability-linked loan of S$100 million, forming 31% of the total outstanding loan facilities ▶ Please refer to the following sections in the CLCT Annual Report 2023: • Financial Highlights • Financial Review • Capital Management • Financial Statements i Using 2019 as baseline. ii Following the retirement of Ms Kuan Li Li with effect from 1 January 2024, as at the date of this Sustainability Report, 3 out of 9 Directors (33.3% of the Board) are female. iii This refers to property maintenance and project related contracts for CLCT properties and projects managed by CLI. This includes supply chain complying with their own code of conduct which is equivalent or more stringent than CapitaLand’s Supply Chain Code of Conduct. STRATEGY AND KEY OBJECTIVES
SUSTAINABILITY REPORT 2023 21 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. CLCT identifies its stakeholders as individuals, organisations, and communities that are directly or indirectly impacted by its operations. Its stakeholders include 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. Stakeholders Engagement Channels Topics Addressed In Capitals Employees Regular dialogue sessions with senior management Employee engagement surveys Volunteer programmes Recreation club activities Wellness activities • Work-life balance • Remuneration and benefits • Employee welfare • Human Capital • Social and Relationship Capital Investors, analysts and media Annual general meetings Financial results and business updates announcements Media releases and interviews Annual reports and sustainability reports Company website Regular analyst and investor meetings Responses to sustainability surveys • Operational efficiency, monetary savings, cost avoidance • Earnings, net property income, distribution per unit, business strategy, market outlook • ESG risks and opportunities • Financial Capital • Social and Relationship Capital Customers (Tenants and shoppers) Tenants: Tenant satisfaction survey, green fit-out guide and joint promotions and strategic partnerships Shoppers: mall campaigns, exhibition, social media campaigns CLI’s social media channels • Facilities management • Customer experience • Social and Relationship Capital • Environmental Capital Supply Chain (Main contractors, vendors, and suppliers) CLI’s Supply Chain Code of Conduct Environmental, Health and Safety (EHS) management system Quarterly EHS monitoring Vendor evaluation, events, meetings and training • Design and quality • Occupational health and safety practices • Workers’ welfare and well-being • Environmental compliance • Environmental Capital • Human Capital • Social and Relationship Capital Community (Government/ national agencies/ Community and NGOs) Senior management representation on boards of various industry bodies and sustainability-related public discussions Longstanding partner to various national programmes Participation in external conferences/ forums to consult and share experience with academics, NGOs and business associations Corporate advertisements • Sustainable building developments • Stakeholder programmes to advocate sustainable tenant/ customer behaviours • Advocacy of best practices • Social and Relationship Capital Frequency Annual Quarterly Ongoing For more details on how we engaged our stakeholders in 2023, please refer to pages 48 to 51 of this ISR.
ENVIRONMENTAL COMMITMENT TO MINIMISING ENVIRONMENTAL IMPACT At CLCT, we are committed to building a robust and resource-efficient portfolio with minimal environmental impact, while creating long-term economic value for our stakeholders. We recognise that climate change poses a critical challenge to our planet and society. In addition to understanding the risks and opportunities presented, we acknowledge the tangible impacts stemming from climate change. The identified potential impacts from both physical and transition risks, and our mitigation measures are disclosed on pages 65 to 75 in this report. Supported by our Sponsor, CLI, environmental sustainability is integrated throughout our acquisitions, asset enhancement initiatives, and day-to-day operations. As a fundamental part of CLCT’s business operations, we actively monitor our portfolio’s environmental footprint and take necessary actions to mitigate its impact. The efficient use of environmental resources, such as energy and water, contributes to our operational efficiency and long-term sustainability, as well as enhances resilience to climate change. The following framework outlines the material environmental aspects of CLCT’s operations. ▶ Reduce carbon emissions and transit to low-carbon operations ▶ Build resilience for its portfolio against the physical impact of climate change and prepare for changing regulations toward a low-carbon economy ▶ Reduce energy consumption and transit to renewable energy sources ▶ Reduce water consumption ▶ Minimise waste generation and increase recycling rate ▶ Manage biodiversity to contribute positively to the natural environment ▶ Engage stakeholders to adopt environmentally sustainable behaviours Climate Change and Carbon Reduction Energy Efficiency Water Management Waste Management Biodiversity Material Issues ▶ CapitaLand Investment 2030 Sustainability Master Plan ▶ CapitaLand Science-Based Targets ▶ CapitaLand Investment Environmental, Health and Safety Policy ▶ CapitaLand Investment Sustainable Building Guidelines OBJECTIVES POLICIES 22 CAPITALAND CHINA TRUST
▶ CLCT’s Chief Executive Officer (CEO) is the REIT’s Environmental, Health and Safety Champion ▶ ISO 14001-certified Environmental Management System ensures accountability to all employees ▶ Key performance indicators (KPIs) are linked to remuneration for all employees in REIT Manager; performance is tracked regularly Environmental Management System (EMS) ▶ Ensure legal compliance ▶ Identify environmental aspects and manage impact ▶ Adopt Sustainable Building Guidelines (SBG), including the Environmental, Health and Safety Impact Assessment (EHSIA) ▶ Appoint ISO 14001-certified main contractors and set environment targets/requirements in the procurement of products and services ▶ Ensure environmentally sustainable operations - implement EMS Standard Operating Procedures KPIs and Performance-linked Remuneration ▶ Green existing property portfolio ▶ Set eco-efficiency targets and improve performance through tracking of environmental performance ▶ Encourage end users, including tenants, shoppers, guests and the general community, to adopt environmentally sustainable habits STAKEHOLDER ENGAGEMENT METHOD/ACTION PLAN ACCOUNTABILITY 8km Eco-green run at Ascendas Xinsu Portfolio SUSTAINABILITY REPORT 2023 23
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