Introduction

Managing Sustainability

Sustainability Commitment

CapitaLand’s sustainability strategy is aligned with its credo of ‘Building People. Building Communities.’. CapitaLand is committed to improving the economic and social well-being of its stakeholders through the execution of development projects and management of its operations. In a rapidly changing business landscape, it actively embraces innovation to ensure commercial viability without compromising the environment for future generations.

CapitaLand upholds high standards of corporate governance and transparency to safeguard shareholders’ interests. It has in place an adequate and effective Enterprise Risk Management framework to enhance its business resilience and agility. CapitaLand’s proactive approach towards environmental, health and safety (EHS) management, which incorporates universal design into its developments, ensures that its properties are future-proof and sustainable. Policies and guidelines are put in place to ensure the efficient use of energy, water and other resources.

CapitaLand’s integrated human capital strategy aims to recruit, develop and motivate employees to drive growth for the Group. Community development is an important component of CapitaLand’s commitment to sustainability. It focuses on providing support to enhance the lives of underprivileged children through corporate philanthropy and employee volunteerism.

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

CapitaLand is a signatory to the 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 Sustainability Yearbook, Dow Jones Sustainability World Index and Asia Pacific Index, Global Real Estate Sustainability Benchmark (Regional Sector Leader for Asia, Diversified), FTSE4Good Index Series, FTSE4Good ASEAN 5, MSCI Global Sustainability Indexes, STOXX^® Global ESG Leaders Indices, Channel NewsAsia Sustainability Ranking and SGX Sustainability Indices.

In 2016, CapitaLand Group and its properties clinched over 100 awards and accolades. Some of the awards and accolades are listed in page 58-62 of the CapitaLand Annual Report 2016.

Board Statement

CapitaLand is committed to sustainability and incorporates the key principles of environment, social and governance in setting out its business strategies and operations.

The CapitaLand Board sets the Group’s risk appetite, which determines the nature and extent of material risks that the Group is willing to take to achieve its strategic and business objectives. The risk appetite incorporates ESG factors such as Fraud, Corruption and Bribery, Environment, Health and Safety.

The Board also approves the executive compensation framework based on the principle of linking pay to performance. The Group’s business plans are translated to both quantitative and qualitative performance targets including sustainable corporate practices and are cascaded throughout the organisation.

Top Management Commitment and Staff Involvement

CapitaLand’s sustainability management comes under the purview of its Sustainability Council, comprising members of CapitaLand’s top management. It is supported by a Sustainability Steering Committee which oversees two work teams to ensure the Group’s continued progress and improvement in the areas of environment, social and governance (ESG). The Sustainability Steering Committee and work teams comprise representatives from all business units. The CapitaLand Board of Directors is updated regularly through the Risk Committee and Audit Committee on matters relating to sustainability risks and business malpractice incidents. The Chairman of the Sustainability Steering Committee also updates the Board on the sustainability management performance of the group and key material issues identified by stakeholders and the planned follow up measures.

Materiality*

CapitaLand has a regular review, assessment and feedback process in relation to ESG topics. Key to this is an annual Group-wide Risk and Control Self-Assessment exercise which entails the identification, assessment and documentation of material risks and corresponding internal controls. Such material risks include fraud and corruption, environmental, health and safety, and human capital risks which are ESG-relevant. Other existing channels for feedback to ensure relevance of issues include:

Environment	Regular dialogue/feedback sessions with government agencies (e.g. Building and Construction Authority, National Environment Agency) Active participation in Singapore Green Building Council
Social	Regular dialogue with government agencies and unions Active participation in Singapore Workplace Safety and Health Council Regular employee engagement survey
Governance	Engagement with Securities Investors Association (Singapore) (SIAS) for its annual Corporate Governance Conference Engagement where appropriate with Singapore Exchange

Through regular stakeholder engagement, CapitaLand identifies and reviews material issues that are most relevant and significant to the Group and its stakeholders. For CapitaLand, priorities are ranked based on the likelihood and potential impact of issues affecting business continuity and development. For external stakeholders, priority is given to issues important to society and applicable to CapitaLand. CapitaLand therefore prioritises its sustainability efforts and reporting on issues that are most material to its business and stakeholders. This report covers CapitaLand’s international portfolio in over 20 countries unless otherwise indicated. For more information on stakeholder engagement, please refer to the Social and Relationship Capital, Human Capital and Environmental Capital chapters.

Prioritization of ESG Material Issues

Environment	Social/Labour Practices	Governance
Critical
Energy efficiency Climate change and emissions reduction Water management	Occupational Health & Safety Employment Stakeholder engagement Supply chain management	Compliance Business ethics Product and services
Moderate and emerging
Building materials Construction and Operational Waste Biodiversity	Diversity Human rights

Creating Value from Capital

The Guiding Principles of the International Integrated Reporting (IIRC) Framework were referenced to in this report, and the capitals were categorised into six areas – Financial, Organisational, Manufactured, Environmental, Human, and Social and Relationship.

UN Sustainable Development Goals (SDGs)

The UN SDGs call on companies everywhere to advance sustainable development through the investments they make, the solutions they develop, and the business practices they adopt. In doing so, the goals encourage companies to reduce their negative impacts while enhancing their positive contribution to the sustainable development agenda.

Some of CapitaLand’s key efforts and programmes in relation to the key SDGs are highlighted below.

	CapitaLand Hope Foundation, CapitaLand’s philanthropic arm, believes in investing in the fundamental needs of education, healthcare and shelter of underprivileged children to relieve them of hardship and help them to eventually break the poverty cycle2. For more information, please refer to chapter on Social and Relationship Capital.
	Occupational health and safety is of utmost importance to CapitaLand, including all its employees, tenants, contractors, suppliers and the communities who use its properties. CapitaLand aims to provide a work environment that is safe and contributes to the general well-being of its employees. For more information, please refer to chapter on Human Capital.
	CapitaLand is committed to: Reduce water consumption, reuse water and prevent water pollution, especially in countries where the availability of clean water and sanitation are of concern. Reduce energy consumption through energy efficiency and encourage renewable energy sources. Green its operational portfolio by 2030. Actively embraces innovation to ensure commercial viability without compromising the environment for future generations. Future-proof its development by addressing the risks of climate change right from design stage. Preserving the biodiversity of its site as well as the wider area where possible. For more information, please refer to chapter on Environmental Capital.
	CapitaLand believes that regardless of ethnicity, age or gender, employees can make a significant contribution based on their talent, expertise and experience. We adopt consistent, equitable, and fair labour policies and practices in rewarding, developing employees under the direct hire of CapitaLand. CapitaLand is a signatory to UN Global Compact. For more information, please refer to chapter on Human Capital.
	CapitaLand adopts a strong stance against bribery and corruption. All employees are required to make an annual declaration to uphold the core values and not to engage in any corrupt or unethical practices. Requires certain of its agreements with third-party service providers and vendors incorporate anti-bribery and anti-corruption provisions. Require main contractor to ensure no child labour and forced labour at the CapitaLand project sites. CapitaLand is a signatory to UN Global Compact. For more information, please refer to chapters on Organisational Capital, Human Capital, and Social and Relationship Capital.

Risks, Challenges and Opportunities

Climate Change

Climate change risks and opportunities are identified and mitigated through CapitaLand’s Enterprise Risk Management (ERM) framework, and its externally certified ISO14001 Environmental Management System (EMS).

Climate change brings about different effects in different geographies including rising sea levels, violent storms, long intense heat waves, flash floods and fresh water depletion. 2016 also saw the Earth’s warmest year with data showing that 2016’s global temperatures are approximately 1.2 degrees Celsius above pre-industrial levels.

By the close of COP22 (22nd UN Climate Conference) in November 2016, 111 governments had already ratified the Paris Agreement. Together they account for three quarters of global greenhouse gas (GHG) emissions. Singapore committed to reduce its emissions intensity³ by 36% from 2005 levels by 2030, and stabilise greenhouse gas (GHG) emissions with the aim of peaking around 2030. In December 2016, the Task Force on Climate-related Financial Disclosures⁴ published its recommendations for a clear, efficient, and voluntary disclosure framework that improves the ease of both producing and using climate-related financial disclosures.

The challenge for each nation is to strengthen its resilience against climate change risks, manage its GHG emissions and achieve economic growth in a sustainable manner. As countries are rallying for actions to mitigate climate change, more stringent regulations may be expected and companies may be faced with increased expectations from stakeholders. An example was the year end shrouding of northern China in smog. In response, China’s parliament levied environmental protection taxes on industry from 2018.

CapitaLand is positioned to face such challenges as it has in place a target to achieve green certification of its existing properties by 2030. It is ISO 14001 certified for its environmental management system in 15 countries. It recognises the importance of innovation in managing its environmental footprint and differentiating the company from its peers. It encourages innovative green features in its developments. More than S$2.5 million has been invested in innovative features for three of its projects.

For more information, please refer to Environmental Capital chapter.

Demographic Change

As people lead longer lives, many countries will increasingly encounter challenges of ageing populations in their urban spaces. The pace of world population ageing is accelerating. By 2030 many middle-income countries will have aged considerably. By 2050, those aged 60 years or over, are projected to account for 34% of the population of Europe, 28% of Northern America, 26% of Latin America and the Caribbean, 25% of Asia, 23% of Oceania, and 9% of Africa⁵. In this regard, CapitaLand has taken the lead in implementing social integration designs into its Sustainable Buildings Guidelines. For its new Singapore projects, a target has been set to achieve Universal Design Gold as assessed by Singapore’s Building and Construction Authority. For more information, please refer to Social and Relationship Chapter.

Industry Transformation – Convergence of Online and Offline

As the pace of technological advancement within and outside of the real estate sector quickens, consumer spending and the culture of work will change.

In 2016, CapitaLand launched C31 Ventures to invest in new-economy startups relevant to its businesses and created the new brand lyf to tap into the millennial market for serviced residences.

CapitaLand leveraged digital technology to improve its mall customers’ experience. In 2016, it enhanced CapitaStar, a key digital platform to build brand loyalty, with the pilot of the Sparkle artificial intelligence chatbot in Singapore to connect shoppers with the products and services. CapitaStar members can tap on virtual concierge services, including ride hailing and restaurant booking through CapitaLand’s partnerships with new economy partners Grab and Chope respectively.

Ascott has also expanded its collaboration with Tujia China’s largest and fastest growing online apartment sharing platform with the launch of the Somerset Tujia brand. It also forged a new partnership with Fliggy, formerly known as Alitrip making its products and services accessible to hundreds of millions of Chinese travellers.

For the future of the work place, CapitaLand started working with Collective Works in Singapore, UrWork in China and Toong in Vietnam.

CapitaLand commenced the redevelopment of Funan DigitaLife Mall. The new integrated development is set to become an experiential creative centre within Singapore’s civic district, where it is envisioned to serve as a technology-enabled hub to connect retail, cultural, learning and business opportunities. It will feature a multi-level landscape with the creation of a series of gardens, including urban farms and edible gardens. The urban farm aims to showcase sustainable food production with a range of technologies, demonstrating the diversity and cyclical relationships of crop production.