The rapid growth of environmental, social and governance (ESG) investing and sustainable finance has ramped up investors’ appetite for quality ESG disclosures from companies.
Transparent measurement and disclosure of sustainability performance are now considered fundamental for effective business management. Such attributes are also essential for preserving trust in business as a force for good, reads an announcement made last September by five leading reporting standard agencies.
“Yet, the complexity surrounding sustainability disclosure has made it difficult to develop the comprehensive solution for corporate reporting that is urgently needed,” it adds.
To make better, informed decisions, investors need clear, consistent and comparable ESG data. Since the outbreak of Covid-19, leading asset managers and financial companies such as BlackRock, Morningstar, Allianz, Invesco and MSCI have reported that their ESG indices and portfolios outperformed their non-ESG counterparts.
The fallout from the pandemic has hurt economies and disrupted businesses in general, but companies with long-term ESG-centric business strategies, as well as robust and transparent sustainability reporting, are in a prime position to weather the storms.
Today, it seems sustainability as a buzzword has preceded a common regulatory framework — one necessary to ensure its own sustainability.
Corporates reporting ESG performances are surrounded by a myriad of reporting standards and frameworks, says Esther An, chief sustainability officer at City Developments (CDL). This is in addition to numerous global ESG ratings and rankings, each with a different focus in their criteria.
“It is a real challenge to design a ‘one-size-fits-all’ reporting standard that is applicable to corporations from diverse geographic locations, industries, market caps, business focus, cultures and more,” says An in an interview with The Edge Singapore.
However, An adds that it is highly possible for a company to customise a “harmonised framework” — one that aligns with major stakeholders’ expectations. By blending various sustainability reporting standards as they are developed and brought to the fore, CDL has stayed abreast of global efforts to produce a common standard.
By referencing the Global Reporting Initiative (GRI), CDL began reporting its sustainability practices in 2008, nearly a decade before the Singapore Exchange (SGX) made ESG disclosures mandatory in annual reports starting FY2017.
Under An’s direction, CDL has been using a unique hybrid model that has adopted a host of standards as wide-ranging as the ESG sector.
Following its inaugural report using the GRI framework, CDL co-opted the Carbon Disclosure Project (CDP) in 2010, the International Integrated Reporting Council (IIRC) approach in 2015, the UN Sustainable Development Goals (SDG) in 2016, the Task Force on Climate-related Financial Disclosures (TCFD) in 2017, last year’s Sustainability Accounting Standards Board (SASB) standards and this year’s Climate Disclosure Standards Board (CDSB).
CDL’s Value Creation Model: embracing sustainability since 1995 and building a harmonised reporting framework since 2005
The 2020 edition of CDL’s Integrated Sustainability Report (ISR) won the company the most accolades at the 6th Asia Sustainability Reporting Awards, receiving awards in five out of the 19 categories.
“Our ISR 2021 is not only externally assured against GRI Standards, but also against the SASB Standards and CDSB framework this year. This complements CDL’s unique blended reporting framework that addresses the increasing and more diverse demands for corporate ESG disclosures by investors and stakeholders,” she says.
Indeed, CDL is a pioneer in the space, having started its sustainability journey in 1995, the same year An joined the company.
“A responsible company should do well and do good to serve the greater good of communities and the environment. This was very much the philosophy of our late deputy chairman Mr Kwek Leng Joo, who championed CDL’s pioneering commitment to corporate social responsibility in the 1990s,” she continues.
When An first joined CDL to establish its public relations department, she shared her frank impression of the construction sector with Kwek: It was causing some negative impact on the environment. The latter was very open to her ideas, An remembers, and she worked with him in creating the company’s ethos.
See: CDL-led consortium secures $1.22 bil green loan from five banks
“CDL’s corporate ethos of ‘conserving as we construct’, established in 1995, captured his vision and advocacy for environmental conservation at a time when climate change was not quite a mainstream issue,” she adds.
Over the past two decades, the real estate industry has evolved tremendously and has undergone a major, positive transformation towards green buildings and a low-carbon future.
“After Mr Kwek’s passing in end-2015, CDL’s leadership commitment — by the board and the current management led by Group CEO Sherman Kwek — has remained strong,” she says.
“The consistent efforts to embrace sustainability strategically and operationally are crucial to address changing stakeholder expectations, tackle emerging risks and future-proof its business.”
After the turn of the millennium, CDL established its environment, health and safety (EHS) policy to engage and assess its supply chain of contractors and consultants, while breaking new ground with a residential development focused on the environment.
“In 2002, we launched Savannah CondoPark, the first eco-condominium in Singapore to use solar energy to power its clubhouse, setting a benchmark for green buildings here,” says An.
With the launch of the BCA Green Mark certification in 2005 and three Singapore Green Building Master Plans since 2006, more industry players have stepped up, says An. “CDL has remained highly committed to green buildings and has accumulated the highest number of BCA Green Mark Platinum awards in residential developments in Singapore.”
CDL is also thinking big by paying close attention to details, driving innovation through common features like windows. Through a partnership with the National University of Singapore’s (NUS) School of Design and Environment, the NUS-CDL Smart Green Home Laboratory developed the Acoustic-Friendly Ventilation Window prototype last year, which reduces noise while allowing ventilation up to four times greater than conventional windows.
“Such innovative experimental studies on smart green building features have helped CDL set benchmarks in raising comfort for building users and at the same time reducing environmental impact,” says An.
Advocacy and partnership
As Singapore gears up to lead sustainability efforts in the region, CDL hopes to facilitate conversations about sustainability reporting.
In June, CDL hosted the first session of a webinar series with a list of partners, namely the UN Economic and Social Commission for Asia and the Pacific’s Sustainable Business Network, Singapore Institute of Directors, Global Compact Network Singapore, SGX and NUS Centre for Governance and Sustainability.
Titled “The Future of Sustainability Reporting”, the inaugural session was attended by close to 400 participants from 25 countries.
See also: CDL extends support to some 400 tenants as Singapore bans dining-in again
The panel featured TCFD expert board member Jon Williams, CDP Hong Kong regional director Pratima Divgi, executive director at the Monetary Authority of Singapore Abigail Ng and leading reporting consultant Rajesh Chhabara.
These panellists shared insights on TCFD as a mandatory climate risk disclosure guideline in more countries, following the Group of Seven’s (G-7) support in forcing banks and companies to disclose their exposure to climate-related risks.
While Singapore has been making gradual progress towards sustainability over the past decades, An notes a rapid step-up in urgency last year, starting with the renaming of the Ministry of Sustainability and the Environment (MSE) last July.
“2020 was truly a year of awakening, catapulting sustainability into a mainstream political and business issue. The renaming of MEWR [Ministry of the Environment and Water Resources] to MSE symbolises that sustainability is a mainstay in Singapore’s national agenda, sending a strong message to stakeholders in the international, public, private and people sectors of its importance,” says An.
This does not mean that Singapore had not been engaged in sustainable practices prior to the renaming, adds An. “We see a coordinated collective national effort on such an intense pace and scale to address global climate and sustainability challenges, as reflected in the Singapore Green Plan 2030.
This complements the increasing convergence of will and commitment to combat climate change at global, national and business levels in the global race to zero.”
She says MSE has been working in a “fast-forward mode” over the past year, engaging global, regional and local stakeholders across diverse industries in pushing the sustainability and climate agenda. “It is evident that we have reached the tipping point for sustainability and climate action in Singapore and most leading economies. The subject of sustainability has gone beyond the Parliament, boardrooms, communities and classrooms.”
With some prodding, companies are also getting into the groove of sustainability efforts. In the years since SGX made sustainability reporting mandatory, listed companies have made “heartening” improvements, notes the bourse and the NUS Centre for Governance and Sustainability in their Sustainability Reporting Review 2021, released in May.
Across the 566 SGX-listed issuers reviewed, the overall score improved to 71.7 points this year from 60.6 points in 2019, when the previous review was published. Notably, 59.9% of issuers scored at least 70 points, double the figure of 28.9% in the 2019 assessment. “There was improvement across the board, likely due to greater familiarity with sustainability reporting,” says An.
With regards to the built industry, the Singapore Green Building Masterplan (part of the Singapore Green Plan 2030) outlines an “80-80-80 by 2030” target. They represent the greening of 80% of Singapore’s buildings by gross floor area, a target 80% of new developments to be Super Low Energy (SLE) buildings and an 80% improvement in energy efficiency from 2005 levels for best-in-class green buildings; all to be achieved by 2030.
“This is an ambitious but necessary objective to substantially reduce Singapore’s carbon footprint,” says An.
In addition, Singapore’s position as a financial powerhouse affords it a unique advantage in greening the region’s finance, through tools such as green bonds.
CDL issued the first green bond by a Singapore company in 2017. Over the last four years, CDL has secured more than a total of $2.5 billion worth of sustainable finance. They are in the form of a green bond, loans, revolving credit facilities and a landmark $250 million SDG Innovation Loan — a sustainability-linked loan — from DBS in 2019.
“CDL’s strong ESG track record has helped the company and our joint venture (JV) partners gain access to fast-growing sustainable finance to accelerate climate action,” says An.
While top-down policy changes may boost Singapore’s green potential, realising these gains is the other half of the battle. “Most of the efforts are centred around institutional investors. Perhaps we can see more education and outreach to retail investors, who are also invested in the ecosystem,” says An.
She sees credible and better reporting as the way to help mobilise capital markets to accelerate climate action. “Many sustainable stock exchanges, including SGX, have been actively promoting sustainability and reporting. SGX is conducting consultations among businesses with a view to enhance standards of sustainability and climate-related disclosures,” says An.
She concludes: “As one of the pioneering companies which adopted the TCFD framework in our sustainability reporting, we are optimistic that climate-related disclosures will become mainstream. This will provide a wealth of data and information for ESG investors to make informed decisions.”
Photo and infographic: City Developments Limited