Hong Kong Exchange Environmental, Social and Governance Reporting Guide

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 -

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 -

What is ESG Reporting? 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 - 4 -

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 -

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

Why Report on CSR/Sustainability Issues? Ways that sustainability reporting provided major value 0% 20% 40% 60% Improved reputation 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 Increased employee loyalty Reduced inaccurate information about the organization’s corporate social performance Helped the organization refine its corporate vision or strategy Source: Boston College Center for Corporate Citizenship and Ernst & Young 2013 survey - 7 -

Who Reads CSR/Sustainability Reports? INTERNAL Employees, owners, interns CIVIL SOCIETY Media, public institutions, academics, experts, concerned citizens and consumers VALUE CHAIN Suppliers, customers, joint venture partners, auditors, consultants INVESTORS Providers of capital, research and ratings agencies, financial media, banking, asset owners/managers Source: GRI Readers and Reporters Survey 2010 - 8 -

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 -

Who is Reporting on CSR/Sustainability Issues? 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 - 10 -

A Report is Not a PR Brochure! “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 - 11 -

Hong Kong Exchange – ESG Reporting Guide 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 - 12 -

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 -

Best Practice Principles Materiality Stakeholder engagement Director involvement - 14 -

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 -

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 -

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’s ability 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 -

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

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 -

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 -

Environmental protection Community involvement 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 -

Environmental protection Community involvement 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 -

Workplace Quality: Working Conditions (A1) General disclosure Information on: The policies; and Compliance and material non-compliance with relevant rules, standards and regulations on compensation and dismissal, recruitment and promotion, working hours, rest periods, equal opportunity, diversity and other benefits and welfare KPI A1.1 Total workforce employment type, age group and geographical region KPI A1.2 Employee turnover rate by age group and geographical region - 23 -

Workplace Quality: Working Conditions (A1) General disclosure Information on: The policies; and Compliance and material non-compliance with relevant rules, standards and regulations on compensation and dismissal, recruitment and promotion, working hours, rest periods, equal opportunity, diversity and other benefits and welfare KPI A1.1 Total workforce employment type, age group and geographical region KPI A1.2 Employee turnover rate by age group and geographical region - 24 -

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

Environmental Protection: Emissions (B1) General disclosure Information on: (a) the policies; and (b) compliance and material non-compliance with relevant standards, rules and regulations on air and greenhouse gas emissions, discharges into water and land, generation of hazardous and non-hazardous wastes, etc. KPI B1.1 The types of emissions and respective emissions data. KPI B1.2 Greenhouse gas emissions in total (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.3 Total hazardous waste produced (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.4 Total non-hazardous waste produced (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.5 Description of measures to mitigate emissions and results achieved. KPI B1.6 Description of how hazardous and non-hazardous wastes are handled, reduction initiatives and results achieved. - 26 -

Environmental Protection: Emissions (B1) General disclosure Information on: (a) the policies; and (b) compliance and material non-compliance with relevant standards, rules and regulations on air and greenhouse gas emissions, discharges into water and land, generation of hazardous and non-hazardous wastes, etc. KPI B1.1 The types of emissions and respective emissions data. KPI B1.2 Greenhouse gas emissions in total (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.3 Total hazardous waste produced (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.4 Total non-hazardous waste produced (in tonnes) and where appropriate, intensity (e.g. per unit of production volume, per facility). KPI B1.5 Description of measures to mitigate emissions and results achieved. KPI B1.6 Description of how hazardous and non-hazardous wastes are handled, reduction initiatives and results achieved. - 27 -

Environmental Protection: Emissions (B1) iv. Metric tonne carbon dioxide equivalent denoted as “MtCO2e v. Emissions of hydroflourocarbons (HFCs), sulphur hexaflouride (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 -

Environmental Protection: Use of Resources (B2) General disclosure Policies on efficient use of resources including energy, water and other raw materials Resources may be used in production, storage, transportation, buildings, electronic equipment etc. KPI B2.1 Direct and/or indirect energy consumption by type (e.g. electricity, gas, oil) in total (kwh in 000s) and intensity (e.g. per unit production volume) KPI B2.2 Water consumption in total and intensity (e.g. per unit of production volume, per facility) KPI B2.3 Description of energy use efficiency initiatives and results achieved KPI B2.4 Description of whether there is any issue in sourcing water that is fit for purpose, water efficiency initiatives and results achieved KPI B2.5 Total packaging material used for finished products (in tonnes) and if applicable with reference to per unit produced - 29 -

Environmental Protection: Use of Resources (B2) General disclosure Policies on efficient use of resources including energy, water and other raw materials Resources may be used in production, storage, transportation, buildings, electronic equipment etc. KPI B2.1 Direct and/or indirect energy consumption by type (e.g. electricity, gas, oil) in total (kwh in 000s) and intensity (e.g. per unit production volume) KPI B2.2 Water consumption in total and intensity (e.g. per unit of production volume, per facility) KPI B2.3 Description of energy use efficiency initiatives and results achieved KPI B2.4 Description of whether there is any issue in sourcing water that is fit for purpose, water efficiency initiatives and results achieved KPI B2.5 Total packaging material used for finished products (in tonnes) and if applicable with reference to per unit produced - 30 -

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 -

Operating Practices: Supply Chain Management (C1) General disclosure Policies on managing environmental and social risks of supply chain KPI C1.1 Number of suppliers by geographical region KPI C1.2 Description of practices relating to engaging suppliers, number of suppliers where the practices are being implemented, how they are implemented and monitored - 32 -

Operating Practices: Supply Chain Management (C1) General disclosure Policies on managing environmental and social risks of supply chain KPI C1.1 Number of suppliers by geographical region KPI C1.2 Description of practices relating to engaging suppliers, number of suppliers where the practices are being implemented, how they are implemented and monitored “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.” “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.” “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.” Source: Bank of China Hong Kong CSR Report 2011 - 33 -

Community Involvement: Community Investment (D1) General disclosure Policies on community engagement to understand the community’s needs where it operates and to ensure its activities take into consideration communities’ interests. KPI D1.1 Focus areas of contribution (e.g. education, environmental concerns, labour needs, health, culture, sport) KPI D1.2 Resources contributed (e.g. money or time) to the focus area - 34 -

Community Involvement: Community Investment (D1) General disclosure Policies on community engagement to understand the community’s needs where it operates and to ensure its activities take into consideration communities’ interests. KPI D1.1 Focus areas of contribution (e.g. education, environmental concerns, labour needs, health, culture, sport) KPI D1.2 Resources contributed (e.g. money or time) to the focus area Source: HSBC Sustainability Report 2012 - 35 -

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 -

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? Consider a) 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 -

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 -

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 -

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 -

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 -

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 -

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 -

Any questions?

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 -