Climate Change and Sustainability - Environmental, Social and Governance (ESG) Best Practices from the Boardroom

Part 4 (of 5) Transportation – MTR Corporation Limited (MTR), interview with Gill Meller FCG HKFCG(PE) Institute Immediate Past President and Ex-officio; Legal and Governance Director, and Jessica Chan, Head of Sustainability.

It was in 1967 that the story of the MTR began with a feasibility study carried out as a result of Hong Kong’s increasingly unsustainable traffic congestion situation. The fragrant harbour city was enjoying rapid export-led economic growth and became known as one of the Four Asian Tigers, which further spurred the growth of its relatively young population, half under the age of twenty-five, from three million at the start to four million by the end of the decade.

The MTR was ‘born’ twelve years later with the opening of the first MTR line in 1979 and has kept growing since, together with many generations of Hongkongers on their individual journeys, providing safe and sustainable transportation for all.  MTR’s purpose is to keep cities moving, but how does MTR keep cities moving sustainably?

I am delighted to have the opportunity to exchange thoughts on this subject with Gill Meller, MTR’s Legal and Governance Director, and Jessica Chan, MTR’s Head of Sustainability.

Gill’s range of responsibilities includes environmental and social responsibility, governance and risk management, insurance, legal, procurement and supply chain functions, while she is responsible for overseeing a new assurance function to help strengthen the second line of defence across key risk areas at the MTR.

Today’s interview is part of a series of in-depth and in-person ESG discussions with leading Hong Kong listed companies with the objective 1) to identify best practices in Hong Kong and internationally, and 2) to inform the design of an upcoming HKCGI ESG survey to assess the current state of ESG expertise, processes, technologies and data capabilities of listed companies in Hong Kong, and the real-life challenges and opportunities they face in dealing with the sustainability expectations of their diverse stakeholder constituents.

They include, aside from MTR, Bank of China (Hong Kong) Limited (financial sector), CK Hutchison Holdings Limited (a diversified conglomerate, whose businesses include ports, retail, infrastructure, and telecom), CLP Power Hong Kong Limited (energy), and New World Development Company Limited (real estate development), covering all five industry sectors for which the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) provides industry-specific supplemental guidance.

1. What does MTR’s purpose of keeping cities moving sustainably mean in practice and how are you working to achieve it?

“The MTR is one of the most sustainable modes of transportation in Hong Kong. Did you know, for example, that one MTR train at full capacity can carry up to 2,500 passengers, which is the equivalent of 25 buses, 150 minibuses, or 1,500 passenger cars?” Gill said. “Keeping cities moving refers to two types of mobility:

“We have set ourselves three social and environmental objectives to achieve our purpose of “Keeping Cities Moving” in a sustainable way.

2. What get measured, get managed. What are the Key Performance Indicators (KPIs) to measure progress against the three social and environmental objectives?

“We have set ourselves 35 KPIs across the three social and environmental objectives, with some of the key ones being as follows:

3. How does MTR fulfil its unique role in the railway and property ecosystem in fostering desired behaviours within its supplier base?

“We work with a wide range of suppliers and business partners, where full compliance with our Supplier Code of Practice, which covers ethical standards, human and labour rights, environmental protection and supply chain management is a prerequisite,” Gill said, who oversees MTR’s central procurement and supply chain function.

“Considering that the quality of the services we provide and the infrastructure we build can be impacted by the reliability and quality of the products and services our suppliers deliver to us, we have developed a set of supplier assessment procedures to maintain a sustainable supply chain network. Our suppliers are categorised into three separate groups, namely transport operations, property management, and railway extension projects. For example, for all our new train purchases, we conduct lifecycle assessments on their performance, taking into consideration their future energy use and maintenance over an average lifespan of 40 years in addition to upfront capital costs.”

“Supply chains risks are identified and regularly assessed through our Enterprise Risk Management (“ERM”) System. The potential risks identified include delays to production and delivery of goods owing to extreme weather events associated with climate change as well as potential increases in insurance premiums for our infrastructure and property assets. Sustainability risks which may impact our critical suppliers are also identified through assessments which account for their business nature, geographic locations and past performance.”

“In 2022, we aim for 50+ of our key suppliers to attend training sessions on ESG best practices and will launch an incentive scheme to measure and reward environmental and safety performance for major contracts of our new railway projects.”

4. What are your thoughts on the adoption of electric vehicles (“EV”) in Hong Kong as part of the future of transportation?

“Hong Kong targets to become carbon neutral by 2050 and has formulated a roadmap on the popularization of electric vehicles to foster the adoption of electric vehicles for Hong Kong to improve its air quality and become a smart city,” Jessica said. “The roadmap will form part of Hong Kong’s broader climate action initiatives, such as the Clean Air Plan for Hong Kong 2035, and Hong Kong’s Climate Action Plan 2050.”

“The comprehensive roadmap covers six areas, i.e.:

“It goes without saying that a full-fledged charging network is key to supporting the adoption of EVs. To help the government, MTR targets to install 200+ additional EV charging stations across office buildings, malls and station carparks by 2025,” Gill shared.

5. Where sustainability meets technology, we get GreenTech. Where sustainability meets finance, we get sustainable finance. What is the role of sustainable finance at the MTR?

“As a pioneer in green finance, we have raised HKD 30 billion through sustainable finance arrangements since 2016, the year we set up our Green Bond Framework, the proceeds of which can be used for projects related to:

As a further development of our Green Bond Framework (2016) and Green Finance Framework (2018), we put in place a Sustainable Finance Framework in 2020 to cover a wider range of financing transactions, the proceeds of which are used to develop sustainable urban infrastructure in support of the United Nations Sustainable Development Goals,” Gill shared.

“In 2021 for example, we arranged HKD 4.8 billion of green finance to fund projects to conserve energy, protect the environment, and enhance and expand low-carbon railway services, including the replacement of rail power lines, battery locomotives acquisition, regenerative station energy saving inverter systems and biodiversity preservation for the Lok Ma Chau Wetland.

Gill, Jessica, it was a delight to exchange thoughts with you today and I look forward to seeing leading listed companies like MTR be pioneers and role models in their sustainability journeys to help balance people, planet and profit.

By Prof. Lapman Lee, Professor of Practice (ESG, FinTech, Governance), Hong Kong Polytechnic University

Managing Director, Triniton Advisors, specialised in climate change and sustainability Boardroom strategic advice and training, governance and risk management, investor relations and strategic communications.