Esther An, Chief Sustainability Officer at City Developments Limited, outlines how the Singapore real estate firm’s sustainability reporting has evolved to communicate value and impact to stakeholders.
Since the mid-90s, global real estate company City Developments Limited (CDL) has integrated sustainability into its growth strategy to create value for the business and its stakeholders. In fact, CDL was an early adopter of sustainability reporting, using the standards set by the Global Reporting Initiative (GRI) since 2008 and adopting a dynamic approach to materiality assessment since 2014.
“Our company started in 1995 when sustainability was not a priority for most companies,” Esther An, Chief Sustainability Officer at CDL, tells ESG Investor.
The same year, An joined the company, tasked with setting up its public relations and corporate social responsibility department (CSR). At the time, CSR was mainly “philanthropy-based”, she says.
Early in her role, she established an ethos called ‘Conserving as We Construct’, embedding environmental conservation into the properties CDL designs, develops, maintains and manages.
“This helped us to look at ESG during a time when it was not considered financially material.”
While CDL continually evolved its approach, with its reporting processes regarded as critical to progress integrating sustainability into its business model, An saw a broader awakening among stakeholders and the wider population amid the Covid-19 pandemic.
During lockdown, the global economy was disrupted so severely that it triggered a shift in mindset among business leaders to recognise the importance of ESG issues in creating a more resilient future.
“When I attended COP25 (Madrid) in 2019, there was talk of the climate crisis, but there was not a lot of urgency,” she says. “When I attended COP26 (Glasgow) in 2021, the momentum had increased, and I could see that the UN’s Race to Zero was gaining traction.”
The Net Zero Asset Owner Alliance (NZAOA) was formed at COP25, with the Net Zero Insurance Alliance (NZIA), Net Zero Banking Alliance (NZBA) and umbrella group GFANZ all formed during COP26.
According to An, the coming together of the finance sector in support of the global transition to net zero has been responsible for propelling sustainability into the mainstream. After all, “money talks,” she says.
Leadership with impact
An has been responsible for producing CDL’s sustainability reports since 2008, where she has been instrumental in creating the company’s two-pillar ESG disclosure framework. It ensures sustainability is embedded into the company’s business strategy by embracing major sustainability disclosure standards and frameworks, helping to track CDL’s contribution to the 14 UN Sustainability Development Goals (SDGs) it prioritises.
At its core, CDL’s two-pillar framework utilises the standards set by the GRI for capturing impact and those now integrated into the International Sustainability Standards Board (ISSB) for investor value that its business creates. Further, the company’s value creation business model is anchored on its ‘Four I’ pillars: integration, innovation, investment and impact.
The approach is designed to provide a strong foundation for business growth and operational efficiency, while achieving three core deliverables: decarbonisation; digitalisation and innovation; and disclosure and communication.
“Decarbonisation is essential in the buildings sector, which accounts for 40% of greenhouse gas (GHG) emissions globally, and digitalisation is necessary to better manage buildings and assets, while disclosure is important to share our impact with investors,” she says.
“The framework may look simple, but it requires a lot of thinking and action to turn commitments into results.”
External assurance is key to enhance credibility and instil confidence in investors. CDL’s external assurance of its sustainability reporting has evolved regularly over time, now incorporating elements of the GRI standards, Sustainability Accounting Standards Board (SASB) standards, as well as the Taskforce for Climate-related Disclosures (TCFD) and Climate Disclosure Standards Board (CDSB) frameworks.
An says it is necessary to integrate a range of reporting standards to fully meet investors’ information needs.
“Impact is also contributing to the value of the investor because investors won’t just look at the short term,” she says. “If you have negative impact on the environment, it will affect the value of investor or the business as well.”
Each year, CDL also conducts a materiality assessment to determine top ESG issues and priorities for its management, based on feedback from stakeholders. The company outlines these material ESG goals and targets under the CDL Future Value 2030 Sustainability Blueprint, which it established in 2017.
“In 2014, materiality studies were initiated with the involvement of both internal and external stakeholders,” says An. “The reason behind this was that when discussing ESG, there could be as many as 50-60 items to consider, and it could become overwhelming for investors.”
Initially, when the study started in 2014, many stakeholders were not familiar with materiality assessments, therefore, most prioritised compliance and legal requirements as the most significant issues.
However, by 2017, innovation had become the top-ranked issue, demonstrating that industry players and investors were looking towards long-term solutions. In 2019 and 2020, health and safety emerged as the top priority due to the Covid-19 pandemic. In 2021, climate resilience and energy efficiency gained importance, as stakeholders further appreciated the impact of sustainability on property value. In 2022, innovation ranked as the number one issue, given its importance in addressing the energy efficiency, renewable adoption, and climate resilience challenges.
CDL’s robust sustainability reporting has effectively helped the company to set targets, track performance, identify gaps for continual improvement to deliver the best results and practices.
“When we use the term ‘target’, we are referring to a long-term plan that requires continuous adjustment as the world and business environments change. This strategy must be flexible and adaptable because we cannot always move the goalposts,” says An.
“To achieve this flexibility, we conduct a materiality study every year,” she says, drawing parallels with the World Economic Forum’s (WEF) annual global risk survey. “The latter is very aligned with our findings; that five out of the top 10 risks identified by the WEF survey are climate related.”
Overall, the sustainability reporting process supports a continuous loop of feedback and response.
“The sustainability report is a strategic communication tool that helps to strategise and communicate with investors about future plans and how to future proof the business,” says An.
Building for the future
Being Singapore-based, CDL has been acutely aware of the physical impacts of climate change for decades. Many cities are vulnerable to rising sea levels, and it is predicted that some of the world’s largest coastal metropolises could be wiped away by mid-century, according to research produced by Climate Central, a science organisation based in New Jersey, US.
“When considering investment opportunities, it is important to look beyond just the location and the appearance of the building,” says An. “Investment decisions also need to be made with the long-term in mind, as buildings can last a long time.”
According to research by the WEF, around 80% of the buildings we have today will exist in 2050, therefore, it is essential for combating climate change that existing building stock is retrofitted for energy efficiency.
In response, CDL established a ‘Green Building Policy’ which incorporates decarbonisation, innovation, inclusivity, and health and well-being into the design and operation of its buildings.
“It is important to communicate these policies effectively because the ecosystem is vast when you operate in 28 countries across multiple regions, making it even harder to ensure that our position these issues is understood and implemented,” says An.
“For a building that is 50 or even 20 years old, it can be very challenging to achieve energy efficiency because the design may not meet today’s more stringent and robust targets.”