Materiality assessment

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Board and governance Materiality assessment Climate change Social issues Review of ESG progress Adoption of International ESG reporting framework

Materiality assessment

Materiality is the threshold at which ESG issues determined by the board are sufficiently important to investors and other stakeholders that they should be reported. A comprehensive description of a company's processes for identifying and assessing material ESG risks demonstrates the legitimacy and genuineness of the company's efforts in addressing investors' concerns with ESG issues. The ESG Reporting Code requires issuers to outline the process and criteria adopted to identify and assess material ESG issues (including climate-related risks and opportunities), and the process and results of stakeholder engagement conducted (if any). A proper disclosure of the process and results of materiality assessment explains why certain “comply-or-explain” provisions are considered to be not material to the issuer and thus not reported on in the ESG report.

Materiality assessment:
Disclosure of methodology

Commentary

CLP Holdings Limited (00002), 2023 Sustainability Report

(p.28)

Materiality assessment process

Overview of the assessment approach

In 2023, CLP considered the latest best practice advice from standard setters, including the following, amongst others:

The ISSB's IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, published in June 2023;

GRI 3: Material Topics 2021; and

Applying Enterprise Risk Management to Environment, Social and Governance-related Risk Guidelines, published by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and the WBCSD in October 2018.

…

(p. 29)

Enhancing the double materiality approach

In 2021, CLP proactively embraced the concept of double materiality to support its sustainability risk management and to inform the sustainability-related content of its annual suite of reports. This approach means that CLP’s Annual Report covers financially material sustainability topics that could reasonably be expected to affect the Company’s prospects, while the Sustainability Report includes sustainability topics that have a material impact on people, the environment and the economy.
…

(p.30)

The double materiality assessment cycle

CLP implements the double materiality assessment process was based on a three-year cycle. Each year, there are variations in the breadth and scope of the assessment process, with Year 1 involving a comprehensive assessment and Years 2 and 3 focusing on revalidation and the incorporation of incremental changes with reduced time requirements.
…

(p.31)

The assessment process in 2023

In 2023, CLP undertook the Year 3 assessment approach. For the first time, CLP has appointed a nonfinancial auditor to perform limited assurance over its materiality assessment process in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information.
…

CLP_31

…

Conduct stakeholder interviews

In 2023, CLP reviewed its earlier megatrend analysis through management interview and confirmed that the nine megatrends identified in 2021 remain relevant to CLP and its underlying strategic objectives.

Identify impacts, risks and opportunities

To identify sustainability-related impacts, risks and opportunities (IROs), CLP conducted a comprehensive analysis of various internal and external sources. These included CLP strategy and risk documentation, interviews collating views from a broad range of internal stakeholders from CLP’s middle and senior management, a review on megatrends to reflect CLP’s current operating context, and a review of the latest reporting standards.
…

Assess and valid impacts, risks and opportunities

To finalise the assessment phase, the significance of each negative impact or financial risk was evaluated for its severity and likelihood.
…

CLP_P32_v3

Commentary

The issuer made reference to international framework in the process of materiality assessment. The report outlined in detail the assessment approach, process and outcomes. The comprehensive framework of materiality assessment would help stakeholders understand how the material ESG risks and opportunities were identified and assessed. The issuer also appointed a non-financial auditor to perform limited assurance over its materiality assessment process to improve the integrity and creditability of its sustainability reporting.

Materiality assessment:
Disclosure of methodology

Commentary

The Hong Kong and China Gas Co. Limited (00003), Environmental, Social and Governance Report 2023

(p.24)

HK and china gas_24

Commentary

A materiality assessment was conducted to identify important issues that reflect the issuer's significant impacts on the economy, environment and society. The issuer adopted the internationally recommended three-step process of identification, prioritization and validation. It identified 27 material issues and presented the assessment results to the board for discussion and validation.

Materiality assessment:
Stakeholder engagement

Commentary

Swire Pacific Limited (00019), 2023 Sustainability Report

(p.102-103)

Engaging to shape our strategy

We continue to engage with our investors and employees and with policymakers, NGOs, the communities in which we operate and other companies to inform our approach to sustainable development.

…

In 2023, we commissioned an external consultancy to conduct engagement for our comprehensive double and dynamic materiality assessment, to ensure the material issues covered in this report continue to be relevant, and explore how topics may evolve.

Internal stakeholder input was acquired from Swire Pacific through 5 senior level interviews, topic expert focus group, and two sets of validation, which provided key insights into the impact of issues on Enterprise Value. External stakeholder input was also acquired through 10 one-on-one interviews with subject matter experts, which provided both quantitative and qualitative insight into the impact of issues on the environment and society.

swire_102

swire_103

…

Responding to stakeholder feedback

Feedback we receive from stakeholders informs our approach to sustainable development strategy development, our policies, practices, and target setting. Stakeholders considered Talent attraction and retention, Employee wellbeing, and Workplace health and safety to be topics requiring strong management practices. Read about our management of these topics in People and Talent Management.

Governance of social issues included the topics of Labour practices and human rights and Responsible sourcing. Read about our management of these topics in Supply Chain.

Community topics raised by our stakeholders included local development and income inequality. Read about our management of these topics in Communities.

Commentary

The report provided an overview of how the issuer conducted stakeholder engagement to inform sustainability development. In addition to outlining the channels and key topics for interaction with various stakeholders, it mapped engagement results against the five focus areas of its sustainability strategy (SwireTHRIVE), demonstrating how feedback received informed the issuer’s approach to sustainability development, policies, practices and target setting. The issuer highlighted the primary concerns of respective stakeholders and addressed these issues in the relevant sections of its sustainability report.

Materiality assessment:
Stakeholder engagement

Commentary

Link Real Estate Investment Trust (00823), Sustainability Compendium 2023/2024

(p.14-15)

Approach

Our Stakeholder Engagement Policy outlines how we utilise a range of mechanisms to establish clear and open communication to regularly and actively engage with internal and external stakeholders. Doing so has allowed us to better understand stakeholder concerns and expectations on a wide variety of issues including corporate priorities, performance and how we will manage emerging trends. We believe these interactions are valuable and provide an opportunity to identify and pursue common goals together. Beyond periodic stakeholder engagement, we adopt a Business as Mutual mindset throughout our business to maximise value creation.

In 2023/2024, we initiated a new round of precise engagement to better align with stakeholder interests, starting with tenants and operational partners. This enhanced approach references the AA1000 Stakeholder Engagement Standards and includes in-depth interviews and surveys. We will establish measurement methods and risk indicators to monitor the progress of this engagement.

link reit_14

…

(p. 17)

CONNECTION

CONNECTION is a stakeholder engagement event we host each year to deep dive into key ESG topics, challenges, and solutions. It is a sharing platform where we update participants from across our value chain on our business strategy and more importantly, seek input and feedback from our key partners on business priorities, upcoming challenges and how we can grow together. With an interactive format and adopting a collaborative mindset, we can understand the challenges across our different organisations and to ideate collective and encompassing solutions together.

link reit_17

Commentary

The issuer developed a Stakeholder Engagement Policy setting out comprehensive mechanisms to interact with a diverse range of stakeholders. The approach adopted in communicating with stakeholders references the AA1000 Stakeholder Engagement Standards.

In addition to disclosing the scope of engagement and approach (i.e. types of stakeholders engaged, reasons for engagement and engagement methods), the issuer also summarised the benefits derived from the process and measurement methods in the sustainability report. The issuer further indicated that it would establish measurement methods and risk indicators to monitor progress of the engagement. This enables the issuer to identify trends and shifts in preferences systematically over time. The issuer further used a case study to showcase proactive efforts to communicate and collaborate with stakeholders in tackling environmental challenges during the reporting period.

Materiality assessment:

Use of materiality matrix

Commentary

MTR Corporation Limited (00066), Sustainability Report 2023

(p.8)

mtr_8_resize

Commentary

The materiality matrix visually represented the significance of various ESG issues based on their importance to external interests and to business. ESG issues were categorised into distinct subject areas (e.g. “Governance”, “Customers” and “Employees”) and denoted by different colours.

Major changes in the materiality level as compared to previous year were highlighted, with reasons for changes. This allows stakeholders to understand changing trends and shifts in focus.

Materiality assessment:

Use of materiality matrix

Commentary

Pacific Basin Shipping Limited (02343), Sustainability Report 2023

(p.12)

pacific basin_12

Commentary

Identified issues were presented on the matrix according to their importance to stakeholders and impact on the issuer’s business. Issues on the top-right quadrant, being issues that have highest importance to stakeholders and highest impact on business, were considered to be the most material issues that should be prioritised by the company. The issuer used colour coding to denote the nature of identified issues (i.e. “Environmental”, “Social” and “Governance”) and varying dot sizes to visualise their level of focus and urgency.

Disclosure of methodology

Stakeholder engagement

Use of materiality matrix

ESG in Practice

Materiality assessment: Disclosure of methodology

Commentary

Materiality assessment: Disclosure of methodology

Commentary

Materiality assessment:Stakeholder engagement

Commentary

Materiality assessment:Stakeholder engagement

Commentary

Materiality assessment: Use of materiality matrix

Commentary

Materiality assessment: Use of materiality matrix

Commentary

Materiality assessment:
Disclosure of methodology

Materiality assessment:
Disclosure of methodology

Materiality assessment:
Stakeholder engagement

Materiality assessment:
Stakeholder engagement

Materiality assessment:

Use of materiality matrix

Materiality assessment:

Use of materiality matrix