Good corporate governance and risk management form the bedrock of a sustainable business and underpin its long-term success. The Group is continuously striving to embed good corporate governance practices in its day-to-day operations through the implementation of its Value Framework.
Corporate governance framework and code
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CLP has a robust corporate governance framework that promotes and safeguards the interests of its shareholders and other stakeholders. It is committed to maintaining a rigorous framework of corporate governance that upholds the Group’s credibility and reputation.
The CLP Code was updated in early 2023 to reflect the new requirements under the Corporate Governance Code Appendix C1 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Exchange). While embracing the requirements of the Exchange's Corporate Governance Code, the CLP Code goes beyond it by building on CLP’s own standards and past experience.
The Board is CLP’s highest governance body, and is responsible for directing and supervising all its affairs in a responsible and effective manner. Some of its responsibilities are delegated to five Board Committees. The two committees most involved in sustainability-related matters are the Sustainability Committee and the Audit & Risk Committee.
The CLP Corporate Governance Report in the Annual Report discloses the Company's governance performance in detail. Below are the highlights from 2023.
Board Succession - Announced the sucesssion plans for the CEO transition and appointed an Independent Non-Executive Director (INED) whose skills, experience and background are well aligned with the Board's focus on organisational talent capability;
Board Committees Refresh - Refreshed the composition of CLP Holdings Board Committees;
Implementing Findings from Board Review - Implemented two key initiatives from the 2022 External Board Review findings including introduction of Management Briefing sessions for the Board, and updates of the CLP Holdings Board Committee Chairs to the CLP Holdings Board at Board meetings; and
Governance Oversight and Key Announcements - Exercised oversight of a number of material developments and announced these to the market contemporaneously, including CEO transition, key developments for the Hong Kong Scheme of Control Business and profit warning.
CLP’s strong governance framework ensures that the sustainability issues it faces are incorporated into its corporate agenda and business strategy. The CLP Board has overall responsibility for CLP’s sustainability reporting and performance. Sustainability governance has been embedded in the corporate governance structure
throughout the Group, from Board-level committees to management-level Group functions and business units.
Two of the Board Committees, the Sustainability Committee and the Audit & Risk Committee, have separate but complementary roles in sustainability management. These two committees are supported by the Sustainability Executive Committee and coordinated by the Group Sustainability Department.
Ensuring that the Committee maintains a balanced view and is updated on the sustainability issues, the Committee was briefed by a leading external expert on the Path to Net Zero and also by management on the reflections and key takeaways from COP28.
In January 2024, the terms of reference of the Committee were revised to reflect the focus of the Committee that has evolved over time and its nature as a Non-executive Directors committee with oversight of management’s work on sustainability. The Committee endorsed key changes to the terms of reference which included updating the Committee membership, expanding the responsibilities of the Committee, updating the CLP Group-level sustainability-related frameworks and increasing the frequency of Committee meetings. The Committee’s responsibilities expand to include:
Reviewing CLP’s long-term corporate strategy from the perspectives of the Group’s sustainability risks and opportunities, goals, targets, material topics and performance;
Reviewing and recommending sustainability-related disclosures in the Annual Report, in addition to the Sustainability Report, for approval by the Board; and
Monitoring compliance with any applicable laws and regulations regarding sustainability-related disclosures in the jurisdictions where CLP operates.
The Committee is now led by an independent Chairman and is required to consist of at least five members being Non-executive Directors, with at least three Independent Non-executive Directors . The frequency of Committee meetings has increased from a minimum of twice a year to three times a year.
Overview of work conducted by the Sustainability Committee between 2023 and the date of this Report
2023
2024
Feb
Jun
Nov
Jan
Feb
Climate Change-related Matters
Other Sustainability Matters – risks, opportunities and emerging issues
Sustainability Reporting/Indices performance
Sustainability Governance
Health, Safety, Security and Environment
Community, Charitable and Environmental Partnerships and Initiatives
The Committee will continue its focus on longer-term emerging sustainability issues concerning the Group, in particular on climate change. It is well aware of the Group’s stakeholders’ increasing focus on climate-related issues.
Risks are managed at both the strategic and operational levels, in ways that support the long-term sustainability of CLP’s growth objectives and the operational needs of the current business.
The ARC is also responsible for ensuring appropriate data assurance of the ESG data in the Sustainability Report. Independent oversight is maintained through an assurance of the accuracy of metrics and reporting, following appropriate accounting principles and reporting practices, in addition to the robust internal control system. CLP’s independent non-financial auditor is responsible for key ESG data assurance, and their findings and observations are presented to management and the Board through the ARC.
The SEC is chaired by the Chief Executive Officer (CEO) as part of that role’s executive-level responsibility for economic, environmental and social matters. Set up in 2016, the SEC comprises the corporate senior management team of:
Mr T. K. Chiang (CEO) (since October 2023), in place of Mr Richard Lancaster (former CEO), Chairman, and member of the Sustainability Committee;
Mr Nicolas Tissot (Chief Financial Officer);
Mr Derek Parkin (Chief Operating Officer);
Mr David Simmonds (Chief Strategy, Sustainability and Governance Officer);
Ms Quince Chong (Chief Corporate Development Officer);
Ms Eileen Burnett-Kant (Chief Human Resources Officer); and
Mr Hendrik Rosenthal (Director – Group Sustainability).
The SEC steers the sustainability strategy of the Group and approves relevant deliverables. The CEO and CFO also hold management responsibilities for the assurance of ESG data, and jointly sign off the General Representation Letter connected with the assurance process.
In 2023, the SEC convened six times and served as a platform for the executive team to initiate or develop strategic sustainability projects, receive updates on ongoing initiatives, and engage in strategic discussions on emerging issues.
Key actions in 2023 are summarised below:
Provided direction to CLP's Climate Vision 2050 review, including the revision of Group-wide targets, in light of the latest developments of the business plan;
Reviewed the guidance on climate-related terminology to ensure the consistent communication of CLP’s climate strategy and initiatives across the Group, and to avoid ‘greenwashing’ risks;
Monitored feedback received on EnergyAustralia’s Climate Transition Action Plan published in August 2023;
Reviewed CLP’s response to public consultations, including the consultation by the Glasgow Financial Alliance for Net Zero (GFANZ) in relation to its new voluntary guidance for financial institutions;
Maintained oversight of the Company’s public disclosures on sustainability issues, including in the CLP Annual Report and Sustainability Report;
Monitored the evolving international ESG reporting standards, including the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and the IFRS S2 Climate-related Disclosures, and the Task Force on Nature-related Financial Disclosures (TNFD), and assessed their implications for the Company's own disclosures.
Provided direction for the Company’s response to various ESG disclosure standards, including the proposal by the Stock Exchange of Hong Kong to mandate climate-related disclosures in issuers’ ESG reports under Appendix 27 of the Exchange’s Listing Rules and Guidance;
Reviewed the material topics identified in the materiality assessment and determined the impact material topics and financially material topics to be featured in the Sustainability Report and the Annual Report respectively;
Monitored investor feedback during ESG roadshows and identified areas for improvement in the light of investors’ expectations relating to ESG performance and reporting;
Reviewed the performance of ESG indices results and trends of increasing demands for robust management of social issues, and disclosure of the financial impact of ESG issues;
Reviewed proposed data management solutions and their delivery strategy, including the Data Analytic Platform, to support Group-level data integration and reporting capabilities;
Reviewed the scope of sustainability data assurance;
Reviewed the updated procedure on accounting for avoided GHG emissions; and
Reviewed and endorsed CLP’s Nature and Biodiversity Action Plan, including a Group-level location-based biodiversity assessment.
The Department is responsible for managing the implementation of the Group’s climate change strategy. This includes reporting and reviewing progress on the implementation of CLP’s Climate Vision 2050 and IFRS standards, maintaining oversights of the development of carbon markets across CLP's markets and the Group's involvement in these markets, as well as monitoring changes in stakeholder expectations and assessing their implications for the Company.
The Department works to embed sustainability into existing operational practices and to inform the development of CLP’s business strategy and planning processes. It monitors sustainability issues and updates the Sustainability Committee and the SEC on emerging risks and opportunities. It also leads corporate sustainability reporting and identifies areas for improving operational performance.
The Department is committed to developing its ESG data reporting and performance management capacity and sharing its experience across organisations, sectors and countries. It supports and organises sustainability-related events and works closely with different stakeholder groups. For instance, the Department hosts Sustainability Forums and conducts regular meetings with Group functions and Business Units across regions to facilitate the sharing of experience and insights into advancing sustainability.
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