Hong Kong Exchange Environmental, Social and Governance Reporting Guide

1. Hong Kong Exchange Environmental, Social and Governance Reporting Guide

2. Agenda • What is ESG Reporting? (5 mins) • Why Report on CSR/Sustainability Issues? (5 mins) • Best Practice Principles (10 mins) • ESG Reporting Guide Subject Areas (30 mins) • Frequently Asked Questions (20 mins) • Questions and Answers (20 mins) - 2-

3. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 3-

4. What is ESG Reporting? - 4- Reporting on Environmental, Social and Governance (ESG) Issues Also called CSR reporting, sustainability reporting Not PR, but performance reporting on issues that are relevant and important to your business, to complement your financial Annual Report and Accounts

5. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 5-

6. Why Report on CSR/Sustainability Issues? - 6- Strengthen business practice (part of a process) Encourage innovation Demonstrate accountability & transparency Investor demands Standard practice Enhance your reputation Regulatory pressure

7. Why Report on CSR/Sustainability Issues? Ways that sustainability reporting provided major value Improved reputation Increased employee loyalty Reduced inaccurate information about the organization’s corporate social performance Helped the organization refine its corporate vision or strategy Increased consumer loyalty Led to waste reduction within the organization Improved relationships with regulatory bodies Monitoring long-term risk and improving long-term risk management Led to other forms of cost savings within the organization Helped the organization to take measures to increase long-term profitability Improved access to capital Preferred insurance rates 0% 20% 40% 60% Source: Boston College Center for Corporate Citizenship and Ernst & Young 2013 survey - 7-

8. Who Reads CSR/Sustainability Reports? INTERNALEmployees, owners, interns CIVIL SOCIETYMedia, public institutions, academics, experts, concerned citizens and consumers VALUE CHAINSuppliers, customers, joint venture partners, auditors, consultants INVESTORSProviders of capital, research and ratings agencies, financial media, banking, asset owners/managers Source: GRI Readers and Reporters Survey 2010 - 8-

9. What Makes Your CSR/Sustainability Report Credible? Thorough stakeholder engagement process Link with the overall business strategy Publication of targets and results with an explanation Balance between “good and bad news” Source: GRI Readers’ Choice Awards 2008 ‘Top 4 answers to Which aspects indicate a genuine commitment to sustainability?’ - 9-

10. Who is Reporting on CSR/Sustainability Issues? - 10- 95% of global 250 are reporting 85% of Hang Seng Index companies are reporting in some form 45% of Hang Seng Index companies have a stand alone report

11. A Report is Not a PR Brochure! - 11- “Greenwashing” is a reputational risk Increased stakeholder vigilance – they are learning to understand the language and becoming increasingly experienced report readers Information society – multiple channels for critical stakeholders to get information and expose inconsistent information or commitments

12. Hong Kong Exchange – ESG Reporting Guide - 12- Recommended practice for all listed companies Plan to raise the level of obligation of some recommended disclosures to “comply or explain” by 2015 Issuers are encouraged to adopt a higher level of reporting, e.g. Global Reporting Initiative (GRI) May be part of annual report or stand-alone

13. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 13-

14. Best Practice Principles - 14-

15. Director Involvement • ESG reporting is ultimately a director’s responsibility but the task of compiling the report will likely be delegated • Director involvement is important to: • Get strategic input on which issues are relevant for the business to report on • Help make the internal case for CSR (to directors, and to others) • Ensure CSR is integrated into the business (not seen as an add-on) • Ensure buy-in for any new initiatives that result from the report • Receive approval on public statements about your company - 15-

16. Stakeholder Engagement “Stakeholders are parties that have interests in or are affected by the decisions and activities of an issuer.” • Stakeholder engagement helps identify what ESG issues are relevant for your company • Proactively manage risk • Examples include: shareholders, employees, business partners, suppliers, customers and regulators • Ways to engage include: meetings, focus groups, advisory committees, surveys, interviews - 16-

17. Materiality “Materiality is determining which issues are relevant and important to your business.” • “Material topics [are those] that have a direct or indirect impact on an organisation’sability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large” (GRI) • Take into account views of external and internal stakeholders • Need to define a ‘threshold’ for what to include • Share the process you used to determine which issues are material - 17-

18. Materiality Matrix 5 ESG subject areas, aspects and KPIs identified as relevant for disclosure ESG subject areas, aspects and KPIs identified as critical for disclosure Crucial 4 3 Importance to stakeholders Not material for external communication 2 Little importance ESG subject areas, aspects and KPIs identified as relevant for disclosure 1 1 2 3 4 5 Little importance Crucial Significance to business Source: HKEx ESG Reporting Guide - A toolkit http://www.hkex.com.hk/eng/rulesreg/listrules/listsptop/esg/documents/toolkit.xls - 18-

19. What Should be Included in the Report? • State which entities are included • State the reporting period • Report on prioritised issues • Select relevant Key Performance Indicators (KPIs)/disclosure • Explain how KPIs are calculated • Compare year-on-year data • Provide context • Consider: • ESG risk, opportunities and challenges • ESG management, strategies, priorities, objectives – and how they relate to the business • Monitoring system to implement ESG strategies - 19-

20. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 20-

21. What are the Subject Areas of ESG Reporting? A Workplace quality A1 Working conditions A2 Health and safety A3 Development and training A4 Labour standards B Environmental protection B1 Emissions B2 Use of resources B3 The environment and natural resources C Operating practices C1 Supply chain management C2 Product responsibility C3 Anti-corruption D Community involvement D1 Community investment Governance is covered in Appendix 14 of the Main Board Listing Rules - 21-

22. What are the Subject Areas of ESG Reporting? A Workplace quality A1 Working conditions A2 Health and safety A3 Development and training A4 Labour standards B Environmental protection B1 Emissions B2 Use of resources B3 The environment and natural resources C Operating practices C1 Supply chain management C2 Product responsibility C3 Anti-corruption D Community involvement D1 Community investment Subject area Aspect - 22-

23. Workplace Quality: Working Conditions (A1) - 23-

24. Workplace Quality: Working Conditions (A1) - 24-

25. Workplace Quality: Working Conditions (A1) Source: MTR 2012 Sustainability Report - 25-

26. Environmental Protection: Emissions (B1) - 26-

27. Environmental Protection: Emissions (B1) - 27-

28. Environmental Protection: Emissions (B1) iv. Metric tonne carbon dioxide equivalent denoted as “MtCO2e v. Emissions of hydroflourocarbons (HFCs), sulphurhexaflouride (SF6) and perflourocarbons ((PFCs) are considered negligible and not quantified Vi. TEU stands for Twenty-Foot Equivalent Unit “In addition to the adoption of clean technology in our operations, the best way to reduce emissions in the shipping industry is to save fuel and we have been focusing on our bunker saving programs for many years. By taking these initiatives, OOCL has cut carbon dioxide emissions by more than 30% since 2004. In addition to reducing our emission, we are able to help our customers achieve a lower carbon footprint in their supply chains.” Source: Orient Overseas Int. Ltd. Sustainability report 2012 - 28-

29. Environmental Protection: Use of Resources (B2) - 29-

30. Environmental Protection: Use of Resources (B2) - 30-

31. Environmental Protection: Use of Resources (B2) Group Water Consumption Hotel Division Water Intensity “What about HSH in water-stressed regions? Beijing and Shanghai, where our hotels are located, are among China’s most water-stressed cities. In 2011, our hotels in Beijing and Shanghai saw a year-on-year reduction of 10% in their water intensity. Their annual water consumption reduced by 2.6% and 18.2% respectively when compared to 2010.” “We are pleased to make headway in reducing our water use. Across the Group, we used 1.82 million m3 of water, down 2% on 2010. Out water savings initiatives in 2011 notched up 171,270 m3 of water saved (equivalent to just over 850,000 bathtubs). The water intensity of our hotels in 2011 was 1,320 litres per guest night, a 6.5% reduction on the 2006-08 baseline. We therefore met our hotels water intensity reduction target of 6%.” Source: The Hongkong and Shanghai Hotels, Ltd. Sustainability Report 2011 - 31-

32. Operating Practices: Supply Chain Management (C1) - 32-

33. Operating Practices: Supply Chain Management (C1) “We are one of the few banks with a procurement policy and Code of Conduct for suppliers. The Group formulated its Sustainable Procurement Policy and a Supply Chain Code of Conduct in 2011 and has already begun implementation.” “To facilitate the implementation of the Code for suppliers, in the first quarter of 2011 we formulated a communication strategy, where we trained procurement staff to communicate our standard and requirements to our suppliers. Any non-compliance with the Code may lead to contract termination if a remedial action plan to come into compliance is not put into place by the supplier.” “In 2011, Self-Assessment Questionnaire was sent to 42 companies supplying a specified level of goods and services to the Group in the financial year of 2011. The assessed suppliers were in compliance with the Code of Conduct.” Source: Bank of China Hong Kong CSR Report 2011 - 33-

34. Community Involvement: Community Investment (D1) - 34-

35. Community Involvement: Community Investment (D1) Source: HSBC Sustainability Report 2012 - 35-

36. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 36-

37. FAQ’s: General • Is it really necessary? • You will need to do something • It makes business sense: Benefits to the business process and demands from investors and other stakeholders • Strong likelihood is that you will need to “comply or explain” by 2015 • Do you want to be the last one to report, and lag behind your competitors? • How do I know which subsidiaries to include? • Considera) Where your income comes from and b) Where your major impacts are • If any subsidiaries are not able to comply, state this and declare when you plan to report by - 37-

38. FAQ’s: General • When should we publish our report? • At the same time as your annual report, or even as part of your annual report • As soon as possible after the reporting period ends, and ideally within 3-4 months, so that the information does not become obsolete • Use the same reporting cycle as your annual report if possible • How much will producing a report cost? • Depends on what type of report you choose to do (10 vs 40 pages; only HKEx or full GRI) • Whether you choose to do the report in-house or engage an external contractor • Expect to at least use 50% of an full time equivalent for a 2-3 month period. A single point of contact will also be needed if you outsource to a contractor - 38-

39. FAQ’s: Resources and Personnel • What other resources do I need? • Communicating your report – website, print • Data collection system • Carbon audit • Who needs to be involved? • Senior management at critical stages (materiality and the sign-off of the final report) • Representatives of the various departments who will provide data and information • Corporate communications, legal department, investor relations should also be involved - 39-

40. FAQ’s: Resources and Personnel / Materiality and Data • How do I engage senior management? • A briefing from an external party to explain the drivers and rationale for doing this • Share how ESG issues can be critical to business success (risk and opportunity) • Senior management champion to give credibility • How do I assess materiality? • Rank the significance of each issues to both internal and external stakeholders, and then plot this on a materiality matrix • Internal ranking can be decided by way of an internal workshop or discussion. External ranking can be assessed via interviews, survey or another technique - 40-

41. FAQ’s: Materiality and Data • How do I manage the data collection process? • Explain to all individuals providing data the rationale for reporting, their role, what will be asked of them and the timeline for completion • Produce a spreadsheet for data collection • What if we don’t have the right data? • You can explain this and when you will access this data in the future (estimations) • No one expects your company to be perfect the first time you report • Does the report need to be assured? • Not necessarily - it’s up to you. It provides a better level of credibility if you choose to do this, and may help highlight areas of improvement for the next reporting cycle - 41-

42. Next Steps • What level of disclosure will you aim for? • How will you determine materiality? • What sort of report will you produce? • GRI / HKEx / Other • Short / long / printed / online • What capacity do you have to deliver this? • Will you need external support? - 42-

43. Agenda • What is ESG Reporting? • Why Report on CSR/Sustainability Issues? • Best Practice Principles • ESG Reporting Guide Subject Areas • Frequently Asked Questions • Questions and Answers - 43-

44. Any questions?

45. Get in Touch Richard Welford I Chairman, CSR Asia rwelford@csr-asia.com I +852 35798079 Mara Chiorean I Director – Hong Kong mara.chiorean@csr-asia.com I +852 35798079 Jemima Jewell I Partnerships Director jemima.jewell@csr-asia.com I +852 35798079 - 45-