CAPITALAND ASCOTT TRUST SUSTAINABILITY REPORT 2023
ABOUT CAPITALAND ASCOTT TRUST CapitaLand Ascott Trust (CLAS) is the largest lodging trust in Asia Pacific with an asset value of S$8.7 billion as at 31 December 2023. Having listed on the Singapore Exchange Securities Trading Limited (SGX-ST) since March 2006, CLAS’ objective is to invest primarily in income-producing real estate and real estaterelated assets which are used or predominantly used as serviced residences, rental housing properties, student accommodation and other hospitality assets in any country in the world. CLAS is a constituent of the FTSE EPRA Nareit Global Real Estate Index Series (Global Developed Index). CLAS’ international portfolio comprises 106 properties with over 19,000 units in 45 cities across 16 countries in Asia Pacific, Europe and the United States of America as at 31 December 2023. CLAS’ properties are mostly operated under the Ascott, Somerset, Quest and Citadines brands. They are mainly located in key gateway cities such as Barcelona, Berlin, Brussels, Hanoi, Ho Chi Minh City, Jakarta, Kuala Lumpur, London, Manila, Melbourne, Munich, New York, Paris, Perth, Seoul, Singapore, Sydney and Tokyo. CLAS continued to receive recognition in 2023 for its commitment to upholding high standards of corporate governance, investor engagement and sustainability. CLAS retained its top spot in the REITs and Business Trusts category of the Singapore Governance and Transparency Index 2023 for the third year running. CLAS was also named “Global Sector Leader (Listed – Hotel)” in the 2023 GRESB Real Estate Assessment for the third consecutive year, in recognition of its outstanding leadership in sustainability. CLAS is a constituent of the iEdgeUOB APAC Yield Focus Green REIT Index and the iEdge-OCBC Singapore Low Carbon Select 50 Capped Index. CLAS is a stapled group comprising CapitaLand Ascott Real Estate Investment Trust (CapitaLand Ascott REIT) and CapitaLand Ascott Business Trust (CapitaLand Ascott BT). CLAS is managed by CapitaLand Ascott Trust Management Limited (as manager of CapitaLand Ascott REIT) and CapitaLand Ascott Business Trust Management Pte. Ltd. (as trustee-manager of CapitaLand Ascott BT). The manager and trustee-manager (collectively, the Managers) are wholly-owned subsidiaries of Singapore-listed CapitaLand Investment Limited, a leading global real asset manager with a strong Asia foothold. OUR MISSION To deliver stable and sustainable returns to Stapled Securityholders OUR VISION To be the premier hospitality trust with quality assets in key global cities 1 CAPITALAND ASCOTT TRUST
CONTENTS Standard at Columbia, USA Overview 3 About This Report 7 CLI 2030 Sustainability Master Plan Leadership 9 Accolades and Highlights 11 CEO Message 13 Board Statement and Sustainability Management ESG Priorities & Performance 15 Materiality 16 Environmental 43 Social 63 Governance 71 Economic 73 Appendices SUSTAINABILITY REPORT 2023 2
ABOUT THIS REPORT INTERNATIONAL STANDARDS AND GUIDELINES This report is prepared in accordance with the Global Reporting Initiative (GRI) Standards 2021, and complies with 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 are relevant to CLAS. This report incorporates elements of the Integrated Reporting (IR) Framework of the International Financial Reporting Standards (IFRS) Foundation such as the six IR capitals – Environmental, Manufactured, Human, Social and Relationship, Organisational and Financial, and also references eight United Nations Sustainable Development Goals (UN SDGs). CLAS also adopts a progressive approach towards climate-related disclosures in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and Sustainability Accounting Standards Board (SASB) real estate sector-specific standards in this report. REPORTING SCOPE AND PERIOD This report covers CLAS’ portfolio for the financial period from 1 January 2023 to 31 December 2023 (FY 2023), unless otherwise indicated. Taking guidance from the operational control approach as defined by the Greenhouse Gas (GHG) Protocol Corporate Standard, this report primarily covers CLAS’ environmental performance relating to the properties managed by CLAS’ Sponsor, The Ascott Limited (Ascott), the lodging unit of CLI. CLAS’ properties are predominantly managed by Ascott. As at 31 December 2023, CLAS’ portfolio comprised 51 Ascott-managed operational properties: • This excluded four properties which were divested in September 2023. The environmental data for these properties prior to their divestments has been included in our reporting, where available. • This included three properties which were acquired in November 2023. The environmental data for The Cavendish London and Ascott Kuningan Jakarta has been included in our reporting, while Temple Bar Hotel has been excluded as the property was undergoing transition from the previous third-party operator. Properties which were in operation for less than 12 months and/or undergoing asset enhancement have been excluded from the computation of intensity data. In FY 2023, there were five Ascott-managed properties undergoing asset enhancement1. The environmental performance of the remaining CLAS properties which are managed by third parties is being tracked and monitored. Scope 3 GHG emissions data for these properties has been disclosed in this report. CLAS is managed by the Managers which are whollyowned CLI subsidiaries. For the purpose of this report, CLAS’ employees refer to the employees of the Managers and CLAS’ Ascott-managed properties, unless otherwise stated. This report is to be read in conjunction with CLAS’ Annual Report 2023, which can be accessed via CLAS’ website. In line with CLAS’ commitment to environmental sustainability, no copies of this report have been printed. INDEPENDENT ASSURANCE To enhance data credibility and instill confidence in readers, CLAS has engaged KPMG LLP to provide independent assurance over a selection of our key ESG disclosures in this report in accordance with International Standard on Assurance Engagement 3000 (ISAE 3000). The assurance covers selected indicators from the GRI Standards, and is focused on figures, statements and claims related to sustainability during the reporting period of 1 January 2023 to 31 December 2023, as well as comparisons made with the period of 1 January 2019 to 31 December 2019. The assurance also covers CLAS’ progress against the sustainability performance targets of its sustainability-linked bonds. The accuracy and reliability of the report’s statements and figures are also validated. The assurance also covers the report’s overall compliance to the Singapore Exchange’s principles and rules on sustainability reporting. For the Independent Limited Assurance Report, please refer to Appendix G of this report. FEEDBACK If you have questions or feedback, please send them to ask-us@capitalandascotttrust.com. 1 In addition to the computation of intensity data, consumption data for The Robertson House by The Crest Collection was also excluded from our reporting as the property was undergoing asset enhancement for most of FY 2023. 3 CAPITALAND ASCOTT TRUST
The Robertson House by The Crest Collection, Singapore SUSTAINABILITY REPORT 2023 4
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ALIGNED WITH CAPITALAND INVESTMENT’S NET ZERO AMBITION CAPITALAND INVESTMENT 2030 SUSTAINABILITY MASTER PLAN The Managers are part of CapitaLand Investment Limited (CLI) and our sustainability strategy is aligned to that of CLI. CLAS is aligned with the CapitaLand Investment 2030 Sustainability Master Plan unveiled in 2020 to elevate our commitment to global sustainability in the built environment. The Sustainability Master Plan drives CLI’s sustainability efforts in the ESG pillars, enabling CLI to create a larger positive impact for the environment and society. ASCOTT CARES CLAS also aligns its sustainability goals with its Sponsor, The Ascott Limited (Ascott). Ascott is a wholly-owned business unit of CLI and a leading vertically-integrated lodging operator. Headquartered in Singapore, Ascott’s presence extends across more than 220 cities in over 40 countries in Asia Pacific, Central Asia, Europe, the Middle East, Africa and the USA. Ascott’s sustainability programme, Ascott CARES, is a Global Sustainable Tourism Council (GSTC)-recognised framework consisting of five fundamental pillars: Community, Alliance, Respect, Environment and Supply Chain. As at 31 December 2023, CLI held an approximate 28% stake in CLAS and 51 CLAS properties were managed by Ascott. Scan here for more information on Ascott CARES SUSTAINABILITY REPORT 2023 6
CLI 2030 SUSTAINABILITY MASTER PLAN (SMP) Build Portfolio Resilience & Resource Efficiency Enable Thriving & Future-Adaptive Communities Steward Responsible Business Conduct and Governance Low Carbon Transition • Achieve Net Zero emissions by 2050 for Scope 1 and 2 greenhouse gas (GHG) emissions • Reduce: Absolute Scope 1 & 2 GHG emissions by Carbon emissions intensity by Energy consumption intensity by 46%1 72%1 15%1 Water Conservation and Resilience • Achieve 45% of 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%1 Waste Management and Circular Economy Achieve 25% recycling rate in our day-to-day operations Note that the Enable and 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 and equitable employment practices and principles under applicable laws and market practice and (ii) the business and operational needs of the company and the organisation, as applicable. 1 Using 2019 as the base year. 2 Staff engagement with at least 85% participation. Reduce waste intensity in our day-to-day operations by 20%1 Social Impact • Contribute to communities’ social well-being through outreach initiatives by staff and CapitaLand Group’s philanthropic arm, CapitaLand Hope Foundation (CHF) Human Capital Development Health and Wellness Customer and Supplier Partnerships Female representation in senior management Staff engagement score2 Staff to attend one ESG training • Foster a safety culture with zero fatality, permanent disability and major injury • Incorporate social integration design features in properties • Implement wellness related initiatives and certifications for physical assets • Green lease clauses for new and renewal contracts; work with tenants to improve their sustainability performance • Achieve high level of customer satisfaction • Contractors and vendors to abide by CapitaLand’s Supply Chain Code of Conduct • Zero tolerance to child labour/ forced labour Corporate Governance Transparent Reporting ESG Risk Management • Ensure sustainability targets are integrated into CLI Performance Share Plan & Balanced Scorecard framework to determine executive remuneration and KPIs • At least 85% staff to attend one compliance related training • Identify, assess and manage sustainability risks and opportunities • Ensure sustainability risks and opportunities are managed in line with overall risk appetite and strategy • ESG reporting aligned and externally assured to international standards ≥40% ≥80% ≥85% 7 CAPITALAND ASCOTT TRUST
Build Portfolio Resilience & Resource Efficiency Enable Thriving & Future-Adaptive Communities Steward Responsible Business Conduct and Governance Integrate sustainability in the entire real estate life cycle. In particular, factoring Environment Health & Safety impact assessments and internal carbon price in investment process. Source climate-technology solutions through the global CapitaLand Sustainability X Challenge for piloting and adoption throughout the portfolio. Use data analytics and digitalisation to track and analyse trends in environment parameters and use the insights for portfolio optimisation. Strengthen innovation and collaboration by tapping on S$50 million CapitaLand Innovation Fund, by sourcing globally and within CLI for new ideas and technologies to meet our bold sustainability ambitions. Work with partners to create shared values that benefit the wider real estate community through partnerships and mentorships. Raise capital through sustainable finance instruments or initiatives that demonstrate our sustainability leadership. Interest rate savings can be channelled back into our decarbonisation efforts. CapitaLand Hope Foundation as a vehicle to amplify the social impact of our contribution to the communities by collaborating with ecosystem partners to support key underserved needs of children, youth and seniors through donations, volunteerism and thought leadership. Build a culture of volunteerism among staff and leverage its ecosystem to rally customers and business partners to do good together. Develop capability and build a culture of sustainability throughout the organisation. Empower staff with relevant knowledge and skillsets to make decisions that align with our sustainability goals. Cultivate stakeholder engagement through thought leadership and advocacy, towards ensuring CapitaLand as a sustainable brand that cares for the environment and communities it serves. Ensure robust ESG governance structure, where the CLI and CLAS Boards, through its committees, oversee the sustainability strategy. Senior management own the execution on the ground through cross-team collaboration. Monitor and report to ensure transparency of sustainability progress. Continue to validate performance by external assurance and align the Sustainability Report to international standards and frameworks. Integrate ESG into Balanced Scorecard Framework and sustainability targets embedded in policies, processes, best practices and key performance indicators. CLI 2030 SMP PATHWAYS SUSTAINABILITY REPORT 2023 8
ACCOLADES Scored B CDP Climate Change 2023 Top 10 in Singapore Equileap Gender Equality Ranking 2024 Constituent of • iEdge-UOB APAC Yield Focus Green REIT Index • iEdge-OCBC Singapore Low Carbon Select 50 Capped Index Rated 9.5 – Negligible Risk Sustainalytics ESG Risk Rating Ranked 1st REITs and Business Trusts category Singapore Governance and Transparency Index 2021, 2022 and 2023 Global Sector Leader (Listed – Hotel) GRESB Real Estate Assessment 2021, 2022 and 2023 9 CAPITALAND ASCOTT TRUST
FY 2023 HIGHLIGHTS 1 Refers to the gross floor area of CLAS’ properties by m2 as at 31 December 2023. 2 For FY 2023; excluded new properties which were in operation for less than 12 months, properties undergoing asset enhancement programmes and third-party managed properties. The intensity figure relates to purchased energy and natural gas only, and excludes diesel fuel (non-vehicle) and other fuels (vehicle). 3 Based on the board composition as at 31 December 2023 and as at the date of this report. 49% of global portfolio1 achieved green certification Zero staff work-related fatality and permanent disability 38% women on the Boards3 6.9% reduction in energy consumption intensity2 since 2019 Retained ISO 14001 and ISO 45001 certification in 13 countries for more than a decade >S$550 mil in sustainable financing raised to date Global Sector Leader (Listed – Hotel) 2023 GRESB Real Estate Assessment for the third consecutive year SUSTAINABILITY REPORT 2023 10
CEO MESSAGE CLAS is aligned with and actively contributes to the targets and commitments outlined in the SMP. As stewards of CLAS, we seek to strike a balance between the 3 ‘P’s – people, planet and profit. We ensure that sustainability remains a key focus and priority in everything we do, by integrating it throughout the entire real estate life cycle – from investment, design, procurement, asset enhancement to operations. We work with like-minded operators and partners to improve the environmental management of our properties. As at 31 December 2023, we have achieved green building certifications for 49% of our global portfolio, up from 37% the previous year, tracking well against our target. We continue to green our properties through the adoption of renewable energy and innovative technologies, as well as increasing the efficiency of our mechanical and electrical systems and processes. Recognising that our business has an impact on the communities we operate in, we also actively engage our staff, guests, tenants and other stakeholders. In recognition of our leadership in sustainability, CLAS has been named Global Sector Leader (Listed – Hotel) and ranked first in the Asia Pacific Hotel – Listed category of the 2023 GRESB Real Estate Assessment for the third consecutive year. In 2023, CLAS was also included as a constituent of the iEdge-UOB APAC Yield Focus Green REIT Index. On the governance front, in 2023, CLAS was conferred the top spot in the Singapore Governance and Transparency Index under the REITs and Business Trusts category for the third year running. CLAS is also one of the few listed trusts in Singapore to publish a sustainability report which has a limited external assurance in accordance with ISAE 3000. This gives our investors and stakeholders confidence in the quality of our data and reporting. We consider our ESG goals in our financing efforts. To date, we have secured over S$550 million in sustainable financing, with the latest being a sustainabilitylinked cross currency interest rate swap of JPY11.0 billion (c.S$103 million). As CLAS continues to grow as a Trust, we remain committed in our efforts to embed ESG in our strategy and activities, and to build a sustainable lodging portfolio. We endeavour to strengthen long-term value creation and deliver returns to our Stapled Securityholders, whilst making a positive impact on our stakeholders. Ms Serena Teo Chief Executive Officer 11 CAPITALAND ASCOTT TRUST
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SUSTAINABILITY MANAGEMENT CLAS’ Boards recognise the importance of sustainability as a business imperative, and ensure that sustainability considerations are factored into CLAS’ strategy development. This enables CLAS to remain competitive and resilient in an increasingly challenging business environment. The Boards are kept informed of CLAS’ sustainability management performance, key material issues identified by stakeholders, and the planned followup measures. The Boards are updated quarterly and at ad hoc Board meetings. The Boards discuss 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, as well as stakeholders’ expectations on climate change, social impact and/or other matters. The Boards are also informed of any incidents relating to workplace safety, business malpractice and environmental impact, which may include climate-related damage or disruptions. CLAS’ Sustainability Committee is responsible for overseeing CLAS’ sustainability strategies and goals, and monitoring the progress of the sustainability initiatives. CLAS’ Sustainability Committee comprises the CEO and Heads of Department of CLAS’ Managers, and the Heads of Department of the operations and technical teams of its Sponsor. A Sustainability Working Committee, led by the Head, Investor Relations & Sustainability, provides support to the Sustainability Committee. At CLI, lead Independent Director Mr Anthony Lim chairs the Strategy and Sustainability Committee (SSC), which is a Board Committee of CLI. 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 CEO, CEOs of the business units and key management officers of the corporate office. The sustainability work teams comprise representatives from CLI 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 STATEMENT At CLAS, 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. CLAS’ material environmental, social and governance (ESG) factors are aligned with CLI 2030 Sustainability Master Plan (SMP), which was refreshed in 2023 and endorsed by CLAS’ Boards and Management. The SMP steers our efforts on a common course to maximise impact through building portfolio resilience and resource efficiency, enabling thriving and future-adaptive 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, the SMP targets were revised to elevate the SBTi-approved targets in line with a 1.5OC scenario, incorporate CLI’s Net Zero commitment and enhance its focus on social indicators. CLAS’ Boards are responsible for overseeing CLAS’ sustainability efforts, and take ESG factors into consideration in determining its strategic direction and priorities. The Boards also approve the executive compensation framework based on the principle of linking pay to performance. CLAS’ business plans are guided by both quantitative and qualitative performance targets, and executed through sustainable corporate practices. CLAS’ sustainability efforts have been recognised by global indices such as GRESB. We will continue to identify and adopt meaningful ESG practices and enhance sustainability in our business. BOARD, TOP MANAGEMENT AND STAFF COMMITMENT 13 CAPITALAND ASCOTT TRUST
ALIGNMENT OF ESG KEY PERFORMANCE INDICATORS TO REMUNERATION To further ensure commitment and involvement, CLAS has incorporated ESG key performance targets / indicators into remuneration for its staff, including top management. The performance on these performance targets have financial and non-financial consequences. • Environmental, Health and Safety (EHS)* • Stakeholder Engagement • Investment, Asset Management • Innovation • Enterprise Risk Management • Human Resource, Group Procurement, others CLI Sustainability Management Structure Business units and corporate departments covering Provide strategic oversight of ESG policies and integration CLI Board of Directors CLAS Boards of Directors Serve as sustainability champions (accountable for business unit/REIT's and business trust's performance) Strategy and Sustainability Committee (Board Committee) CLI Leadership Council (Comprising senior management) Business Unit/REIT and Business Trust Various Sustainability Work Teams/Committees comprising Staff Business Unit/REIT and Business Trust Sustainability Committee Drive implementation of initiatives under ESG pillars Provide management oversight of ESG implementation CLAS Sustainability Committee Chaired by: CEO of CLAS' Managers Comprising management of: CLAS’ Managers • Investment & Asset Management • Finance • Investor Relations & Sustainability CLAS’ Sponsor • Sustainability • Engineering & Technical Services Management and implementation of CLAS’ sustainability objectives and strategies CLAS Sustainability Management Structure CLAS Sustainability Working Committee Chaired by: Head, Investor Relations & Sustainability of CLAS’ Managers Comprising representatives from: • Sustainability • Engineering & Technical Services Staff * Includes EHS Internal Audit and Environmental Tracking System. SUSTAINABILITY REPORT 2023 14
1 Taking 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. 2 For more information on CLAS’ Enterprise Risk Management and Group-wide Risk and Control Self-Assessment exercise, please refer to pages 87 to 92 of CLAS’ Annual Report 2023. MATERIALITY CLAS identifies and prioritises the management of material ESG issues that are most relevant and significant to the trust and its stakeholders. CLAS adopts a double materiality approach, considering issues which are material from either the impact perspective or financial perspective1 or both. Potentially material ESG issues arising from activities across CLAS’ value chain (including potential risks and opportunities in the immediate and longer term) are primarily identified via ongoing engagement with its stakeholders and reviews of sources including investor questionnaires, as well as ESG surveys, benchmarks and frameworks such as GRESB. In addition, CLAS has a regular review, assessment and feedback process in relation to ESG topics. Identified material issues are reported in our corporate risk register through the annual Group-wide Risk and Control Self-Assessment (RCSA) exercise2, 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 ESG-relevant. Identified material ESG issues are then prioritised based on the likelihood and potential impact of issues affecting the business continuity of CLAS. For external stakeholders, priority is given to issues important to the community and applicable to CLAS. In FY 2023, the material ESG topics that were identified were approved by the SSC and endorsed by CLAS’ Boards. Environment CRITICAL MODERATE AND EMERGING Social Governance • Climate change and carbon emissions reduction • Energy efficiency • Water management • Waste management • Biodiversity • Occupational health and safety • Human capital • Stakeholder engagementi • Products and servicesii • Supply chain management • Diversity (Boards and staff) • Human rightsiv • Risk managementiii • Business ethics i This includes green leases and tenant engagement on ESG matters. ii This includes products and services promoting customer health and safety, and green certified buildings. iii This includes consideration of compliance, economic performance and cybersecurity. iv This relates to CLAS' zero tolerance stance towards child/forced labour. PRIORITISATION OF MATERIAL ESG ISSUES MATERIALITY 15 CAPITALAND ASCOTT TRUST
ENVIRONMENTAL COMMITMENTS AND PROGRESS Areas of Focus 2030 Targets Performance in 2023i,ii IR Capitals and UN SDGs supported Low-carbon Transition Reduce absolute Scope 1 and 2 GHG emissions by 46% from 2019 baselineiii to achieve sciencebased target • 15.5% reduction in absolute Scope 1 and 2 GHG emissions Environmental Capital Manufactured Capital Reduce carbon emissions intensity by 72% from 2019 baselineiii • 0.4% reduction in carbon emissions intensityIV Reduce energy consumption intensity by 15% from 2019 baselineiii • 6.9% reduction in energy consumption intensityIV 45% of total electricity consumption from renewable sources • 6,490 MWh (10%) of electricity consumption from renewable sources 50% of portfolio to achieve a minimum green rating by 2025, and 100% of portfolio by 2030v • 49% as at Dec 2023 • 51% as at May 2024 Water Conservation and Resilience Reduce water consumption intensity by 15% from 2019 baselineiii • 4.8% reduction in water consumption intensity Waste Management and Circular Economy Achieve 25% recycling rate in day-to-day operations • 3,476 tonnes of waste generated in 2023 • 11% recycling rate Annual Targets Sustainable Operation Excellence ISO 14001 certification for EMS • CLAS retained ISO 14001 certification in 13 countries Manage risks of environmental impact • CLAS leverages CLI’s EMS, which is externally audited annually, providing assurance to top management and external investors on CLI’s and CLAS’ compliance and alignment to best practices i Computation of footprint data is based on available information of the Ascott-managed properties and excludes third-party managed properties. ii Computation of intensity data excludes new properties which were in operation for less than 12 months, properties undergoing asset enhancement programmes and third-party managed properties. iii Using 2019 as a baseline as the CLI 2023 SMP was introduced in 2020. iv Intensity figures relate to purchased energy and natural gas only, and exclude diesel fuel (non-vehicle) and other fuels (vehicle). v By gross floor area in m2. SUSTAINABILITY REPORT 2023 16
ENVIRONMENTAL CLAS’ APPROACH – ALIGNMENT TO CLI’S COMMITMENTS, SYSTEMS AND POLICIES As a CLI-sponsored Trust, CLAS is aligned with CLI’s commitment towards building a resilient and resourceefficient portfolio with minimal environmental impact to create long-term economic value for our stakeholders. CLAS works towards the long-term and annual targets set out in the CLI 2030 SMP, to transit to a low-carbon business. To systematically monitor and manage CLAS’ environmental impact and continuously improve our environmental performance across our geographically diversified portfolio, CLAS leverages CLI’s comprehensive Environmental, Health and Safety Management System (EHSMS), which has been formed by integrating CLI’s Environmental Management System (EMS) with its Occupational, Health and Safety Management System (OHSMS). CLI’s EHSMS encompasses all business functions including property development, property management as well as corporate management and operations. It provides a systematic approach to manage CLAS’ environmental impact, and for CLAS to continuously improve its environmental performance by identifying and managing significant environmental aspects of its business operations that may potentially have a negative impact on the environment. CLAS evaluates the significance of each environmental aspect, and the impact is assessed based on factors such as the likelihood of occurrence, severity of the impact and control measures implemented. CLI’s Environmental, Health and Safety (EHS) Committee and the EHS Committees of the respective business units are responsible for implementing the EHSMS. For more details on CLAS’ sustainability management structure, please refer to pages 13 and 14 of this report. The EHSMS is audited by a third-party accredited certification body to the ISO 14001 and ISO 45001 standards, which are recognised internationally for the environmental management of businesses, and occupational health and safety management of businesses respectively. CLAS has retained the ISO certifications for the EHSMS in 13 countries for more than a decade. As part of the ISO 14001 certified EMS, new or updated legal requirements are reviewed quarterly and compliance is evaluated annually. An internal audit system ensures the conformance and effective implementation of its EMS to ISO 14001 international standards. Internal audits are conducted at least once a year, covering at least 50% of the sites in each country. External audits are conducted annually by a third-party accredited certification body. In FY 2023, there were no incidents of material non-compliance with environmental laws and regulations. Also adopted by CLAS is the CLI Environmental, Health and Safety Policy (CLI EHS Policy), which is made available to all staff, tenants, suppliers, service providers and partners. As an international corporate social citizen, CLAS is committed to protecting the environment and upholding the occupational health and safety of everyone in the workplace, and will: • Carry out exemplary EHS practices to minimise pollution and health and safety risks; • Seek continual improvement on its EHS performance; • Comply with pertinent legislations and other requirements; and • Implement the CapitaLand Sustainable Building Guidelines and Occupational Health and Safety programmes. All employees at CLAS’ Ascott-managed properties attend training and awareness programmes to facilitate the effective implementation of the EHSMS. New hires are introduced to the EHSMS and CLI EHS Policy, and briefed on their respective roles. More detailed training on the implementation of EHSMS is conducted for the heads of departments in administration, operations, and project management, including the heads of operating properties, design managers and project managers. SUSTAINABLE DEVELOPMENTS AND ASSETS CLAS refers to CapitaLand’s Sustainable Building Guidelines (SBG), an in-house guide developed since 2007, to ensure environmental factors are considered throughout all stages of a project. The SBG is regularly reviewed to ensure continuous improvement, with a focus on four key objectives – minimising carbon footprint and energy consumption, water management, reducing the generation of waste, and promoting biodiversity in the real estate life cycle. The SBG sets guidelines for buildings to be more energy efficient, for instance – setting green rating targets, specifying minimum equipment efficiency, and requiring the use of onsite renewable energy whenever possible. By adopting the SBG, CLAS future-proofs development properties by addressing climate change related risks right from the design stage. A key component of the SBG is the mandatory Environment Health Safety Impact Assessment (EHSIA) which is conducted during the feasibility study stage of any potential acquisition or investment in operational assets and development projects as part of the due diligence process. The assessment serves as a guide in considering EHS risks and opportunities upfront, so that mitigation measures can be identified at an early stage. 17 CAPITALAND ASCOTT TRUST
At CLAS’ existing operational properties, environmentally-friendly practices, infrastructure and equipment upgrades are also being carried out, where Disclaimer The purpose of this section is to provide climate-related disclosures which contain information related to climate risks and opportunities, consistent with the TCFD recommendations. The information and opinions contained in this section are provided as of the date they are made and subject to change. This report contains forward-looking statements and statements of opinion. All statements, other than statements of historical fact, including without limitation, statements regarding the plans, strategies and objectives of management in relation to climate and CLAS’ future performance, are forward-looking statements. Forward-looking statements are predictive in character and involve subjective judgement, assumptions and analysis, and can be subject to potentially significant risks, uncertainties and other factors, many of which are outside the control of, and are unknown to, CLAS. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements. CLAS does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. Users of this report are cautioned not to place undue reliance on such statements, particularly in light of the long-term horizon which this report discusses and the inherent uncertainty in possible policy, market and technological developments in the future. CLAS will continue to publish relevant climate-related disclosures in its future sustainability reports and users of this report are advised to check its website for and refer to the latest published report. While CLAS has prepared the statements in good faith, there are also limitations with respect to climate scenario analysis derived from a third-party platform. The degree of potential risk identified in this platform does not consider mitigation or adaptation strategies that may be in place or are being implemented at the portfolio company or specific asset. It also does not consider planned mitigation or adaptation strategies at the country level. The climate scenario analysis in this report was reviewed with and augmented by another third-party consultant. Scenario analysis is not an indication of probable outcomes and relies on assumptions that may or may not prove to be correct or eventuate. Scenario analysis is a process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Additionally, scenarios are not warranted or guaranteed to be free from technical inaccuracies or omissions. Instead, scenario analysis provides a way for organisations to consider how the future might look if certain trends continue or certain conditions are met. In the case of climate change, for example, scenarios allow an organisation to explore and develop an understanding of how various combinations of climate-related risks, both transition and physical risks, may affect its businesses, strategies, and financial performance over time1. While every effort was made to provide accurate and complete information, CLAS does not represent or warrant that the information in this report is free from errors or omissions, or is complete. This report is not intended to be and should not be relied upon as advice to investors or potential investors. In particular, no representation or warranty is given as to the accuracy, likelihood of achievement or reasonableness of any forward-looking statements contained in this Statement or the assumptions on which they are based. Climate scenarios may change and third-party platform outputs may change and improve over time. Such material is, by its nature, subject to significant uncertainties and contingencies outside of CLAS’ control. Actual results, circumstances and developments may differ materially from those expressed or implied in this report. CLAS’ TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) Since 2017, CLI aligned its climate-related disclosures with the TCFD recommendations in the four key areas of governance, strategy, risk management and metrics and targets. CLI further declared its support for TCFD and its recommendations in 2019. Aligned with CLI’s commitment and in compliance with regulations, CLAS has progressively developed its climate-related disclosures since 2021, and is striving to continuously enhance its reporting against the TCFD recommendations. This chapter contains CLAS’ 2023 progress update. feasible, to meet green certification standards. Every property is studied in detail, and appropriate climate change adaptation measures are considered to address risks. 1 For an overview of a scenario analysis, please see page 25 of TCFD’s Recommendations of the Task Force on Climate-related Financial Disclosures. SUSTAINABILITY REPORT 2023 18
ENVIRONMENTAL GOVERNANCE Board Oversight of Climate- and Carbon-related Risks and Transition Plans CLAS’ Boards consider sustainability issues as part of their strategic formulation, determine the material ESG factors and oversee the endorse and monitoring of the material ESG factors. The Boards approve the Trust’s risk appetite, which determines the nature and extent of material risks that CLAS is willing to take to achieve their strategic and business objectives. The Boards oversee CLAS’ Enterprise Risk Management (ERM) Framework, and regularly review CLAS’ risk profile, material risks and mitigation strategies. Climate change has been identified as one of the critical material risk issues for CLAS. The Boards are actively involved in discussions on climate-related initiatives. Taking the lead from CLI, the Boards are updated on relevant climate-related topics including CLI’s 2030 Sustainability Master Plan (SMP), green capital expenditure plans to sustain the green ratings of CLAS’ properties, performance metrics such as carbon emissions performance, progress on the reduction targets, as well as stakeholders’ expectations on climate change. Any natural disasters, which may include climate-related damages, disruptions to operations or health and safety risks to our employees are also reported to the Boards. EHS factors are considered as part of CLAS’ investment evaluation process and strategy, and where relevant, are presented to the Boards. For more details on CLAS’ sustainability management structure, please refer to pages 13 and 14 of this report. Climate-Specific Skills and Capacity Building CLAS’ Boards are continuously upskilling with respect to sustainability and climate-related issues. All Board members have undergone the SGX recognised sustainability training, and all new and existing Board members are briefed on sustainability management and the CLI 2030 SMP as well as climate-related matters, including choice of climate scenarios and the decarbonisation journey. Briefings are also conducted to members of the senior management, including topics such as the use of Renewable Energy Certifications (RECs) and carbon offsets in CLAS’ decarbonisation journey. Senior management also reviewed the latest climate scenario analysis, decarbonisation roadmap and workplan for CLAS. Gathering Stakeholder Feedback on Decarbonisation CLAS has regular engagement with its stakeholders with respect to sustainability issues, and feedback on our decarbonisation plan is mainly received through the following channels: • Participating in sustainability surveys and engaging ESG indices and data platforms; • Regular analyst and investor meetings (such as CLI’s 2023 sustainability non-deal roadshow); • Participation in industry panel discussions and conferences; • Annual reports and sustainability reports; • Annual general meetings, financial results and business updates announcements; • Media releases and interviews; • Company website; and • Email enquiries/direct contact to CLAS. STRATEGY Identifying and Addressing Climate-related Risks As a CLI-sponsored Trust, CLAS’ identified ESG issues are aligned and adapted from CLI’s list. The selected ESG issues have been deemed to be material and applicable to CLAS’ business and operations. The selection of these issues is guided by CLI and CLAS’ regular review, assessment and feedback process in relation to ESG topics. Since 2016, and in the CLI ESG factors materiality review performed in 2022, climate change and emissions reduction have been identified as key ESG material issues which are relevant and critical for CLAS and CLI. Climate change has been identified as a key risk as part of the ERM Framework and includes both physical and transition risks. Physical risks are a result of climate change and can be acute or chronic in climate patterns, such as rising sea levels, violent storms, long intense heat waves, flash floods and freshwater depletion. Transition risks result from a transition to a lower-carbon economy, which could entail potentially more stringent regulations and increased expectations from customers and stakeholders. In line with CLI’s SBG, CLAS identifies and addresses climate-related risks and opportunities across the real estate lifecycle, from the earliest stage of the investment process to design, procurement, construction, operations and redevelopment or divestment. CLAS generally considers the short-term timeframe to be within 2-3 years, medium-term timeframe as until 2030, and long-term timeframe to be beyond 2030. 19 CAPITALAND ASCOTT TRUST
Scenario Analysis on Future Climate-related Risks and Opportunities In 2022, CLAS commenced a climate scenario analysis to understand how climate-related risks and opportunities could impact its portfolio. The analysis considers the latest global scientific developments, and 1.5°C to 3°C scenarios for current to long-term time frames. Together with CLI, CLAS will then review its strategies, mitigation and adaptation plans, and identify opportunities, in alignment with the CLI 2030 SMP. The SMP was designed to build resilience throughout CLI’s operations and futureproof its real estate portfolio, to guard against climate change risks, avoid premature obsolescence and leverage on available opportunities. The climate scenario analysis for CLI’s global portfolio (including CLAS) considered the parameters listed below: Physical risk scenarios NGFSi | 1.5°C | Orderly, 2100 NGFS | 2°C | Orderly, 2100 NGFS | 3°C | Hot House World (NDCii), 2100 Outcome of analysis Most severe physical risk impacts and costs at 3°C and in the longer term Transition risk scenarios CRREMiii | 1.5°C, 2050 NGFS | 2°C | Orderly, 2100iv NGFS | 3°C | SSP2v | Hot House World, 2100 Outcome of analysis Most severe transition risk impacts and costs at 1.5°C and in the shorter term Geographical coverage All assets within CLAS’ operating regions as at 31 December 2022: - Australia - Belgium - China - France - Germany - Indonesia - Japan - Malaysia - Philippines - Singapore - South Korea - Spain - United Kingdom - United States - Vietnam i The Network of Central Banks and Supervisors for Greening the Financial System (NGFS). ii Nationally Determined Contributions (NDC). iii Carbon Risk Real Estate Monitor (CRREM). iv The CRREM 2°C, 2050 transition risk scenario was chosen at the beginning of this climate scenario analysis. However, the platform updated its models and this option was removed during the analysis. The NGFS 2°C, 2100 Orderly scenario was then identified to replace the removed CRREM 2°C, 2050 scenario. v Shared Socioeconomic Pathways (SSP). 1.5°C 2°C 3°C SUSTAINABILITY REPORT 2023 20
Risk Type Primary Risk Driver Potential Impacts CLAS’ Risk Level in 3 Scenarios Mitigation Measures 1.5°C (NGFS, 2100) 2°C (NGFS, 2100) 3°C (NGFS, 2100) Physical Risk Extreme cold Cold days and extreme cold could become more common and/or severe - Increase in heating demand leading to higher utility costs and potentially higher Scope 1 emissions, if fuel oil or natural gas boilers are used • Ongoing maintenance to ensure that air heating systems and generators are in good working order and appropriate for both the local and changing climate conditions. • Future retrofits and designs to consider welfare of staff, guests and tenants in such environments. Extreme heat Hot days and extreme heat could become more common and/or severe - Increase in cooling demand leading to higher electricity costs • Ongoing maintenance to ensure that air cooling systems and generators are in good working order and appropriate for both the local and changing climate conditions. • Implement health and safety initiatives to protect people from extreme heat risk, including work restrictions during peak temperature hours, as required. Fluvial flooding Damage to assets located in high flood risk zones - Increase in assets exposed to growing severity of river floods - Increase in operating costs (e.g. repair costs, business interruption) • Develop flood control features / measures including flood gates and drainage infrastructure where appropriate. Platform level to be checked against flood maps for new design or redevelopment. • Ensure flood emergency response plans are implemented. Coastal flooding Properties in coastal areas may be exposed to steady and continuous sea level rise - Increase in assets exposed to coastal flooding - Increase in capital expenditures to construct flood control infrastructure • Monitor national-level initiatives to mitigate coastal flooding risk. • Develop flood control features / measures where appropriate. • Ensure flood emergency response plans are implemented. (Note: The risk delta from 1.5°C to 3°C scenarios for the moderate risk level is close to 56%) ENVIRONMENTAL Risk level by third-party platform None Negligible Moderate Significant Severe The first heatmap below on physical risks reflects the quantitative approach based on an assessment performed by a third-party platform. The second heatmap on transition risks reflects the quantitative approach based on an assessment performed by a thirdparty platform, which is further augmented by qualitative research undertaken by an external consultant. The quantitative analysis performed was based on the property values of CLAS’ properties and their respective exposure to climate-related risk change. It is important to note that the risk level is based on the change of the risk in future scenarios – it is assumed that there is currently a certain level of risk exposure for each of the climate-related risks and the risk level reflects the magnitude of change. The five colour-coded risk levels are based on different thresholds of financial exposure, and are relative to the baseline exposure. Presented below are the specific exposures for CLAS’ portfolio. 21 CAPITALAND ASCOTT TRUST
Risk Type Primary Risk Driver Potential Impacts CLAS’ Risk Level in 3 Scenarios Mitigation Measures 1.5°C (NGFS, 2100) 2°C (NGFS, 2100) 3°C (NGFS, 2100) Physical Risk Tropical cyclones Properties may face more frequent and severe tropical cyclones - Higher chance of damage to specific asset locations that are tropical cyclone-prone - Increase in operating costs (e.g. business interruption) • Check and ensure structures are sufficient to withstand increased windspeed. • Improvements to roofs and site drainage systems including reinforcement / improvement where appropriate. • Increased operational management, including regular inspections of back-up generation facilities. • Ensure business continuity plans and emergency response plans for severe storms are implemented, including plans for power supply cuts or system failures. Wildfires Risk of wildfires could increase in extremely dry conditions, such as drought, and during high winds - Increase in assets exposed to wildfires - Increase in operating costs (e.g. business interruption) • Design and monitor landscaping to prevent vegetation encroachment to structures. • Inclusion of fire breaks (e.g., service roads) between outside vegetation and structures. • Distribution of escape plans to staff / occupants. • Ensure business continuity plans and emergency response plans for wildfires are implemented (distribution of escape plans to staff and occupants). Risk Type Primary Risk Driver Potential Impacts CLAS’ Risk Level in 3 Scenarios Mitigation Measures 1.5°C (CRREM, 2050) 2°C (NGFS, 2100) 3°C (NGFS, 2100) Transition Risk Carbon price shifts Carbon emissions priced through taxation or emissions trading schemes - Increase in operational costs associated with carbon pricing • CLI implemented an internal carbon price which serves as a guide for long-term decisions and policy-making. • CLAS has a decarbonisation plan / strategy in place to ensure the adoption of strategies to minimise emissions and reduce exposure to carbon price shifts. SUSTAINABILITY REPORT 2023 22
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