The assessment process

Overview of the materiality assessment process

GRI reference: 2-12, 3-1

The materiality assessment process is summarised in the diagram below, with further details outlined in this section.

Continuous analysis of its everchanging operating environment allows CLP to stay competitive and keep abreast of new developments.

Megatrends are large, transformative global forces that define the future by having a far-reaching impact on businesses, economies, industries, societies, and individuals. A megatrend is distinguished from other trends in that it cannot be stopped or significantly altered, even by powerful players such as governments.

CLP's megatrend analysis considers a range of information sources, including university research, consultant research and reports, industry surveys, media reports, government and United Nations resources, and investor reports and analysis. Currently, it has identified nine megatrends most relevant to CLP in the medium- to long-term.

The analysis also provides an understanding of how changes in the environment, society, governance and technology impact CLP’s strategy and operating environment, today and in the future. This provides clear context for reviewing environmental, social and governance (ESG) risks and opportunities, and when identifying and prioritising topics for CLP management and reporting.

Although the COVID-19 pandemic has caused significant disruption in the last two years, it was not identified as an individual megatrend. Instead, considerations were made relating to the pandemic’s contribution to, or acceleration of, other transformative global megatrends identified.

Senior management interviews provide insight into CLP’s operating environment and the business’ strengths, weaknesses, opportunities and threats.

The analysis of the interviews was instrumental to establish an internal view of which megatrends are expected to influence CLP’s operating environment and how those influences may differ over time.

The scope of interviewees was broader than previous years and included all members of the Group's senior management team, as well the Senior Director – Group Innovation and the Managing Director of CLPe. This strategy ensured the analyses considered a wide range of perspectives from different subject matters and geographies. Interviewees were invited to share their views of CLP’s strategic positioning on the megatrends which they considered most significant to CLP’s current business environment.

A variety of internal and external sources were used to identify the topics material to CLP.

While megatrend analyses and interviews provide forward-looking insights, the materiality assessment also considers other sources – such as CLP’s strategy, company policies, and reporting disclosures by CLP and its peers – which reflect current and future prospects.

Given Company collateral has already received senior management endorsement, it is more likely to contain content material to CLP, compared to desk-based megatrends research or external stakeholder engagement. Therefore, these sources serve as key references when identifying and shortlisting the material topics.

In identifying material topics, other external reporting frameworks and standards are also referenced, including the GRI Standards, the Integrated Reporting Framework and SASB Industry Standards outlined by the Value Reporting Foundation, as well as the Hong Kong Stock Exchange ESG Reporting Guide.

In all, a total of 19 material topics were shortlisted for prioritisation.

A prioritisation workshop was held to determine the topics most material to CLP, from financial and impact materiality perspectives.

The Sustainability Executive Committee (SEC) considered the 19 shortlisted topics in a prioritisation workshop. In line with the concept of double materiality, the topics were considered through two lenses:

• Financial materiality: Participants ranked topics based on their capacity to create or erode CLP’s enterprise value. This included: the potential of the topic to cause disruption to CLP’s business activities; how critical the topic was to CLP’s strategy and business priorities; and the level of investor interest the topic attracted.

A detailed discussion on the financially material topics can be found in the Capitals section in the 2021 Annual Report.

• Impact materiality: Participants were asked to rank each topic for impact materiality, relative to the other topics presented, based on impact on people, the environment and the economy.