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 to overcome the challenges in 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, MSCI Global Sustainability Indexes, Euronext VigeoEiris Indices World 120, STOXX® Global ESG Leaders Indices and SGX Sustainability Indices.

Some of the awards and accolades obtained by CapitaLand Group and its properties are listed in page 68-70 of the CapitaLand Annual Report 2017.

Board Statement

CapitaLand is committed to sustainability and incorporates the key principles of environment, social and governance (ESG) 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 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 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 Board is also updated on the sustainability management performance of the Group, 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

CapitaLand identifies and reviews material issues that are most relevant and significant to the Group and its stakeholders. These are prioritised based on the likelihood and potential impact of issues affecting business continuity and development. For external stakeholders, priority is given to issues important to the society and applicable to CapitaLand. 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 Council (IIRC) Framework were referenced 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 (CHF), 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 embrace 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 to 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

CapitaLand understands the impact that climate change can have on its portfolio. It has been reporting on climate- related risks in its Sustainability Report. The Taskforce on Climate-related Financial Disclosure (TCFD) was created by the Financial Stability Board (FSB), an international body set up by the G20 to monitor risks to the financial system. It recommended a framework to give investors, lenders and underwriters greater clarity on how future-proof a company is in a world that is getting worryingly warmer, and is an attempt to move climate-related issues into the mainstream of financial filings. Some of CapitaLand’s efforts to integrate TCFD recommendations in its reporting are listed below.

Governing Climate-Related Risks and Strategy	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 Environment (including climate change). 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 ESG.
Strategy and Risk Management	Physical Risks 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. 2017 was the second hottest year on record according to NASA data, and was the hottest year without the short-term warming influence of an El Niño event. The ways in which CapitaLand portfolio could be impacted by such physical risks are diverse, complex and uncertain. Transitional Risks The challenge for each nation is to strengthen its resilience against climate change risks, manage its greenhouse gas (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. In Singapore, the government announced plans to increase water prices by 30% over two years starting from June 2017. It also announced that all facilities producing 25,000 tonnes or more of GHG in a year will have to pay a carbon tax from 2020. The carbon tax will be S$5 per tonne of GHG from 2019 to 2023. The government will review the carbon tax rate by 2023, with plans to increase it to between S$10 and S$15 per tonne of emissions by 2030. Such measures will also impact inefficient end users with increased operational costs. The China government has enacted two new environmental protection laws on 1 January 2018. The first will formalise the tax collected from industrial polluters under a uniform set of national rules at a levy of between 1.2 yuan and 12 yuan for every 0.95 kg of nitrogen oxide or sulphur dioxide they release. Previously, such companies were charged an emissions discharge fee. Another law will help combat water pollution more effectively in the country. Response Climate-related risks and opportunities are identified and mitigated through CapitaLand’s Enterprise Risk Management (ERM) framework, and its externally certified ISO14001 Environmental Management System (EMS). CapitaLand has been reducing energy and water consumption and encouraging the use of renewable sources in its operational properties. It aims to future-proof its developments by addressing the risks of climate change right from the design stage through the implementation of its CapitaLand Sustainable Building Guidelines (SBG). SBG aims to address issues of adaptation and mitigation, as the local context of each project will be studied in detail, and appropriate measures will be taken in consideration of climate change. SBG also sets guidelines for buildings to be less energy reliant, e.g. setting green rating targets above legal requirements, and also encourage the use of renewable energy whenever possible. CapitaLand is looking into conducting climate-related scenario analysis consistent with the recommendations, wherever possible, using commonly agreed sector/subsector scenarios and time horizons. This will help to better anticipate and manage climate risks, as well as identify climate-related opportunities. 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 EMS in 15 countries. It recognises the importance of innovation in managing its environmental footprint and differentiating the company from its peers. It encourages the use of innovative green features in its developments.
Metrics and Targets	Operational CapitaLand has tracked and reduced its operational carbon emissions since 2008, and disclosed related metrics in its annual Sustainability Report. It has a long-term carbon emissions target to reduce its carbon emissions intensity by 30% by 2030 from its 2008 baseline. It is also reviewing its target to set a science-based carbon reduction target and an internal carbon price. Green Building Investment CapitaLand aims to future-proof its developments by addressing the risks of climate change right from the design stage. Green rating target for all new developments Green certification of its existing properties by 2030 For more details, please refer to Environmental Capital Chapter.

Demographic Shifts

As people lead longer lives, countries will increasingly encounter challenges of ageing populations in their urban spaces. The pace of the world population ageing is accelerating. By 2030, many middle-income countries would have aged considerably. By 2050, those aged 60 years or over are projected to account for 35% of the population of Europe, 28% of Northern America, 26% of Latin America and the Caribbean, 24% of Asia, 23% of Oceania, and 9% of Africa³. In this regard, CapitaLand has taken the lead in implementing social integration designs into its Sustainable Building 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 Capital Chapter.

Industry Transformation

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

CapitaLand recognises the importance of innovation in managing its environmental footprint, improving the resilience of the properties 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 two of its projects. For more information, please refer to Environmental Capital Chapter.

In anticipation of the technological change and its impact on the skillsets of its staff, CapitaLand has in place a series of programmes to upskill its staff to ensure they remain relevant and contribute to the company. This includes the “Be Future Ready Learning Event” and CapitaLand Family Day Digital Festival. For more information, please refer to Human Capital Chapter.

CapitaLand organised a series of activities to engage its retail tenants in Singapore with its 2017 programme focusing on millennials and phygital retailing. For more details, please refer to Social and Relationship Capital Chapter.