ESG Interviews with Hong Kong Listed Companies - 3
Climate Change and Sustainability - Environmental, Social and Governance (ESG) Best Practices from the Boardroom
Part 3 (of 5) Real Estate Development – New World Development Company Limited (NWD), interview with Adrian Cheng Chi-Kong, Chief Executive Officer, and Chairman, Sustainability Committee.
New World Development has significantly enhanced its customer experience, and nowhere is this more evident than in Tsim Sha Tsui, Kowloon, Hong Kong.
I, for one, now frequently visit K11 Art Mall to shop for Japanese green tea, or to walk to K11 MUSEA to get together with family and friends for hotpot or to watch the latest blockbusters.
I was therefore looking forward to meeting the visionary behind K11, Adrian Cheng, to exchange thoughts on topics ranging from:
- Adoption of the sustainability strategy dubbed New World Sustainability Vision 2030 (SV 2030) with its four sustainability pillars - Green, Wellness, Smart, Caring
- Best practices in sustainable property construction and management
- Commitment to and growth of sustainable finance as a funding source, and
- Cheng’s drive to support sustainable start-ups focusing on UN Sustainable Development Goals (SDGs) through Asia’s first SDG-focused accelerator Impact Kommons.
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 climate change and sustainability requirements expected of them from their diverse stakeholder constituents.
They include, aside from NWD, 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 MTR Corporation Limited (transportation), covering all five industry sectors for which the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) provided industry-specific supplemental guidance.
1. I noticed your sustainability strategy, SV2030, has four pillars. Can you walk us through each of these Green, Wellness, Smart, and Caring pillars?
Green: “Sure, Lapman. We're committed to leading our industry's evolution to genuine sustainability – environmentally, socially and economically, so we developed SV2030 in 2018, which references the UNSDGs. Let’s start with Green, we are making good progress here. Overall, we are looking to reduce by half our environmental impact in energy and carbon emissions intensity (against our baseline in FY2015). In this connection, by FY2021, we have already achieved a reduction of 20% and 33%, respectively. In addition, we aim to significantly reduce our waste-to-landfill and water intensities. We are on track to meet our FY2030 targets.”
“Also, during the last couple of years, we have gone beyond our SV2030 framework and become more ambitious with our decarbonisation roadmap. We have committed to our ‘Business Ambition’ for 1.5°C, in response to the global call to action from the United Nations and other business leaders for climate change mitigation under the Paris Agreement. We have since become the third real estate developer in Asia to receive the Science Based Targets initiative's (SBTi) approval of our near-term 1.5°C aligned science-based targets (SBTs). We have also committed to SBTi Net-Zero Standard, which will include setting long-term company-wide emission reductions in line with reaching science-based net-zero by 2050.”
“In terms of renewable energy, we are targeting the use of 100% renewable energy for all our rental properties in the Greater Bay Area (GBA) by the end of FY2026, and all of Greater China by the end of FY2031. This is to play our part in reducing Scope 2 emissions. One of our initiatives to address Scope 3, which is our industry’s first, is our ‘Creating Shared Value’ (CSV) Lease that we launched towards the end of last year. This is a win-win tenant engagement initiative where we encourage all employees of tenants under our CSV Leases to play an integral part in sustainability initiatives as part of their business operations, incentivised with K Dollars from us. The aim is the scaling up of sustainable operations through employee participation of our tenants.”
Wellness: “Wellness covers both the health and well-being of our employees, customers and communities. We ensure the occupational health and safety of our employees and for our supply chain, we look to improve the well-being of our stakeholders. It’s critical that we create quality and health environments, like with our’ WELL’ Platinum-certified K11 ATELIER at King’s Road, and offer programmes to encourage stakeholders to embrace healthy and active living.”
Smart: “Innovation is our #1 material topic to accelerate the realisation of SV2030 and futureproof our business. In 2019, we launched Impact Kommons, Asia’s first UN SDGs-focused business accelerator, which has since contributed 36 successful integrations between our New World Group ecosystem and various high-impact startups. I will elaborate on these later.”
Caring: “Caring focuses on creating shared value for our communities and culture through advancing sustainable development and sustainability-related training and volunteering. For example, amidst the severe fifth wave of the pandemic, the Group has provided appropriate support to fight against the pandemic together with different sectors and the public. In addition to donating anti-epidemic supplies to the underprivileged, we also loaned the government 3.5 hectares of land in Fanling, at no charge, for the construction of a mobile cabin hospital and made Pentahotel Hong Kong, Kowloon available as an isolation facility. Besides, we also launched ‘Share for Good’, the City’s first large-scale crowd-donation platform to facilitate safe and efficient delivery of supplies to all those in need.”
2. As one of Hong Kong’s leading property developers, can you share best practices in sustainable property development and management?
“Integrating sustainability and creating shared value for all stakeholders is of utmost importance to us. We are taking steps to standardise sustainable practices during the different stages of property development, with the aim to deliver impact and customer experience based on the four pillars.”
“At the design and building out stage, we have set out sustainable building certification commitments for new and existing buildings, and manage climate risks and other social and environmental impacts along the supply chain.”
“As an early supporter of TCFD, we completed a physical risk assessment on 14 major properties in the GBA, and further developed and implemented ‘Climate Resilience Guidelines’ integrating various climate mitigation and adaptation measures across various stages of development, including design, major refurbishments and construction activities. It’s pertinent for us to manage climate risks and mitigate the impact of climate change to ensure a sustainable future not only for our own business but also for society overall.”
“In terms of innovation at the construction project site, we are replacing traditional diesel generators with the ‘Enertainer’, a connected battery system. The Enertainer can avoid direct air pollutants, improve energy efficiency, and significantly reduce carbon emissions, noise levels and fire hazards during construction. For example, at one of the project sites, the Enertainer achieved about 80% reduction of net carbon footprint and up to 85% energy savings.”
“We strive to reduce our adverse environmental and social impacts during the operation stage of our managed properties. We have conducted a feasibility study on obtaining green certifications on building operations of existing buildings, and are in the process of standardising retrofitting and retro-commissioning works in our existing properties while exploring other initiatives to improve energy efficiency for the built environment.”
“We work with stakeholders closely to drive sustainability efforts. Apart from launching CSV Lease, an initiative that brings together the Group, its tenants and their employees to promote sustainability, we also engage other stakeholders to further put sustainability into action. In collaboration with social enterprise V Cycle, a participant of our UN SDGs-focused start-up accelerator Impact Kommons, we piloted a plastic recycling initiative with K11 MUSEA tenants to repurpose plastic recyclables into stylish K11 upcycled umbrellas as our first circular product. This pilot project not only demonstrated our effort in promoting circularity, providing our tenants with a much-desired solution for diverting waste from landfills, but it also created fair wage employment opportunities for underprivileged elderly waste pickers. Participating tenants saw this as value-adding to their brands and have continued to partner with us on their sustainability journey.”
“New World Group is committed to building sustainable communities. Victoria Dockside and K11 ATELIER King’s Road are two exemplary projects demonstrating this commitment to sustainability. Going beyond incorporating sustainable features and attaining green and healthy building certifications, K11 projects aim to create art and cultural destinations that enrich everyone’s life through the power of creativity, culture and innovation, creating shared value for the wider public.”
|•||Signature Project - VICTORIA DOCKSIDE|
“Echoing the UN SDGs, Victoria Dockside provides the community with a sustainable and walkable neighbourhood enhanced by urban greenery, supporting a greater understanding of urban biodiversity. It also offers immersive, holistic experiences where life, work, and play are intertwined. The dedication to sustainability is evident in the Victoria Dockside's green building certifications and awards, achieving up to 33% freshwater savings and 44% flushing water savings as compared to the industry baseline. This is through water recycling and water-efficient fixtures as well as adopting unconventional technology to 100% reuse sea wall and the partial basement floor slab in order to reduce construction waste and disturbance to the environment, etc. The building also features the ‘Nature Discovery Park’, Hong Kong’s first urban biodiversity museum and sustainability-themed education park, which aims to raise awareness of Hong Kong's ecological importance and rich urban biodiversity, and to promote a sustainable lifestyle”’
|•||Signature Project – K11 ATELIER King’s Road|
“K11 ATELIER King's Road is the first project in Island East to introduce the ‘Vertical Creative City’ concept, seeking to transform the design, purpose and culture of workplaces. As the tallest green office building in the neighbourhood, it integrates smart technologies, green design, and art and craftsmanship fused with architecture to support a lifestyle of comfort and sustainability. Offering over 70 green and healthy features with reference to the UN SDGs, it has achieved the highest rating of Platinum in ‘BEAM Plus’, ‘LEED’ and WELL Building Standard. The building is designed to achieve 34% energy saving against ‘ASHRAE’ Standard, featuring 220 sq. m. of hybrid solar photovoltaic and thermal system, one of the largest installations in Asia and the first commercial project in Hong Kong, co-generating electricity and hot water equivalent to about 70,000 kWh per year.’
3. As an ESG academic with sustainability finance expertise, I am delighted to see your commitment to sustainable finance. Can you share some of the highlights?
“NWD was one of the first movers in sustainable finance here in Hong Kong. As of the first half of FY2022, we raised over HKD25 billion through sustainable finance. It all started in 2018 when we issued our first Green Bond (USD310 million) and established a ‘Green Finance Framework’ to create investment opportunities and deploy capital to enhance the environmental performance of our buildings and the health of our tenants.”
“As a pioneer in sustainable finance, we achieved a number of firsts, and here are two highlights:
|•||In 2021, we issued the world’s first USD Sustainability-Linked Bond by a real estate developer, which has a ‘Sustainability Performance Target’ that is aligned to the interim target of our latest ‘Renewable Energy Roadmap’, which commits to 100% renewable energy for GBA rental properties by FY-end 2026.|
|•||In 2022, we became the first corporate in the world to issue a USD-denominated Social and Green dual-tranche bond in the public bond markets. With this transaction, we also became the first non-financial corporate in Asia to issue a USD-denominated Social bond in the public bond markets, as well as the first corporate in Greater China to issue a USD-denominated Green perpetual in the public bond markets. The bonds were oversubscribed by nearly 5 times at peak, with strong participation from over 100 quality investors on each tranche. The Social component of the bond is very innovative for the region and we look forward to accelerating our efforts in creating shared value for society through its proceeds.”|
“We will continue to work with our banking partners to actively leverage sustainable financing opportunities, and nurture, innovate and develop sustainable finance practices in the region.”
4. As a Board Member of the FinTech Association, I am interested to hear about your passion and support for start-ups that focus on achieving UN SDGs through Impact Kommons?
“Yes, another first is Impact Kommons, Asia’s first UN SDGs-focused business accelerator, which in essence offers a platform for start-ups to collaborate with New World group businesses, sustainability experts, and global partners to scale solutions that fulfil the United Nations Sustainable Development Goals. This platform not only allows us to find, scale and integrate high-impact solutions, but also nurture and develop the next-gen founders and talent, aligning with our corporate vision of creating shared value.”
“Across three cohorts of Impact Kommons, we have worked with 30 high-impact start-ups to deliver 36 integrations across our New World ecosystem. The solutions have included robotics, waste management, upcycling, climate tech, healthcare, artificial intelligence, green packaging and more. We look forward to welcoming more like-minded partners to this programme in upcoming cohorts to co-create a more sustainable future.”
Adrian, it was my pleasure to exchange thoughts with you today and I look forward to seeing leading listed companies like New World Development be pioneers and role models in the sustainability journey 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, investor relations and strategic communications.
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