STRATEGIC ADOPTION OF THE RECOMMENDATIONS OF TCFD
As a major developer and manager of property assets, CDL is committed to a low-carbon strategy and operations through the practices outlined in our Climate Change Policy.
Recognising that climate-related issues have impending impacts on CDL’s business performance, we have joined three other pioneering Singapore companies to pledge our support for the Recommendations of the TCFD launched in June 2017. The Recommendations promote more effective climate-related financial disclosures to inform longer term investment decisions. We have aligned our climate-related disclosures in four key areas as recommended by the TCFD, on pages 23–27 in our Integrated Sustainability Report 2021.
Our strategic adoption of the TCFD’s Recommendations is an extension of the International Integrated Reporting Council’s integrated reporting approach which CDL has adopted since 2015, to connect our ESG performance with business and financial impacts. It also complements our proactive and transparent ESG disclosure initiatives as seen in our dedicated sustainability microsite and quarterly sustainability reporting which were introduced in 2017.
Climate-related risks and opportunities are governed, assessed and managed across the organisation through a holistic sustainability governance structure that covers all levels within CDL.
At the highest governance level, the Board Sustainability Committee (BSC) has an oversight on all sustainability matters including climate-related issues, which are material to CDL’s business and stakeholders. Assuming an advisory role on CDL’s sustainability strategy, the BSC meets with the Sustainability team at least twice a year to review the company’s Environmental, Social and Governance (ESG) performance, pre-empt potential risks and opportunities, and set strategic direction for implementation. In evaluating Sustainability action plans and new initiatives by the Management, the BSC takes into consideration the company’s growth trajectory, regulatory development, emerging trends, as well as risks and opportunities presented by climate change which can impact the long-term viability of our business.
On a regular basis, the BSC, as well as CDL’s Senior Management, are kept informed of the Company’s ESG performance and programme outcomes including that of carbon reduction and energy efficiency initiatives, through internal updates and the quarterly sustainability report introduced in 2017.
With effect from February 2018, the BSC has started playing a bigger role in advancing CDL’s ESG integration as the Sustainability department, led by CDL’s Chief Sustainability Officer (CSO), reports directly to the Committee and administratively to the Group CEO. The CSO’s primary role is to strategically integrate sustainability into the core of CDL’s business in ways that create enhanced value for the Company and its stakeholders.
Supporting the CSO and the Sustainability Department, is a company-wide multi- disciplinary Sustainability Committee comprising representatives from both the management and working levels. Since its formation in 2008, the Sustainability Committee has been responsible of initiating, driving and monitoring various aspects of CDL’s sustainability practices. Its Environment sub-committee further focuses on identifying material climate- related and other environmental issues, and managing associated impact of our business operations and activities.
The Environment sub-committee meets with CDL’s Senior Management at least once a year for the Environmental Management System (EMS) Management Review chaired by the Group CEO. Started since 2003, the annual meeting sets out to evaluate CDL’s environmental performance and programmes in accordance to ISO 14001 standards, and strategise on action plans to improve the Company’s environmental efforts, including in climate mitigation and energy management.
Climate-related Risk Management
Recognising that climate-related risks are non-diversifiable and affect nearly all business functions of an organisation, climate change has been identified as a strategic business risk under CDL’s Enterprise Risk Management (ERM) framework. The ERM framework comes under the purview of Audit & Risk Committee (ARC), whose responsibility is to provide oversight and review on matters relating to the risk management policies and systems of the CDL Group. For more information on CDL’s ERM framework, please refer to the Risk Management Report found in CDL’s Annual Report 2018.
In our most recent stakeholder-driven materiality assessment conducted in Q3 2017, climate change remains as one of the top 13 critical and highly material issues prioritised by our internal and external stakeholders. The materiality assessment echoes our internal assessment that climate-related issues will likely affect our business, strategy, and financial planning over the short, medium and long term. Climate-related risks identified include carbon pricing and rising stakeholders’ expectations for green properties and sustainable supply chain. On the other hand, declining cost of renewable energy and green financing have been identified as opportunities that CDL can leverage on to create tangible value for our business and stakeholders. A comprehensive account of CDL’s climate-related risks and opportunities can be found here.
Climate Change Scenario Analysis
CDL completed the first phase of our climate change scenario analysis on the 2°C and 4°C scenarios in Q4 of 2018 when the Intergovernmental Panel on Climate Change (IPCC) special report was released. The scope of the study covered CDL’s three key markets – property development, investment properties and hotel operations in Singapore, China and United Kingdom. The TCFD’s classification of climate-related risks and opportunities was adopted to outline the transition and physical risks assessed in this study – including policy and market risks, acute and chronic physical events.
The analysis provided CDL with the potential financial impacts from climate-related risks with 2030 as the timeframe. The projected impact in the 2°C scenario from transition risk was found to be greater because of the more stringent regulatory response expected to reduce carbon emissions. Under the 4°C scenario, the physical impacts of climate change such as floods, snowstorms and heat waves are projected to worsen over a longer term and impacts are expected to exacerbate more significantly after 2030.
Under the 2°C scenario, the study surfaced the need for CDL to prepare a greater budget for climate change, in view of the transition impact from significantly higher carbon tax affecting operational costs and the increasingly rigorous requirements for construction of new buildings.
In the trail of the IPCC special report on the impact of global warming to 1.5°C above pre-industrial levels, CDL is planning for the second phase of our analysis, to include a 1.5°C scenario and expand the region covered in the study to CDL’s operations in the United States. This new study is expected to help CDL stay ahead of the emerging climate-related regulations, mitigate and adapt to physical climate events, as well as systematically identify and unlock potential opportunities.
Internal Carbon Pricing
In 2017, the Singapore Government announced in its budget that a carbon tax will be implemented from 2019. The following year, the Government revealed that the tax will initially be $5 per tonne of GHG emissions from 2019 to 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030. The carbon tax will be imposed on large direct emitters such as power plants. In anticipation that the cost may be passed to downstream users, CDL studied the potential financial impact and initiated an internal carbon pricing setting exercise in the same year. It is our aim to progressively implement an internal price for carbon emissions to hedge against climate-related risks and financial exposure on our global operations.