Empowering Sustainable Communities 2019 SUSTAINABILITY REPORT About this Report Leadership Message Company Profile Key Metrics Mission, Vision and Values Core Assets Contributions to Nation Building Part One: Governance Part Two: Sustainability Impacts Part Three: ESG Reporting Methodology Annex Contents About this Report 1 About this Report This is the fourth sustainability report for Metro We welcome feedback on this report and any matter 2 Leadership Message Pacific Investments Corporation (“MPIC”, “the concerning the sustainability performance of our 8 Company Profile / Key Metrics / Mission, Vision and Values Company” or “the Parent Company”) containing business. Please contact us at: information about our environmental, social and 9 Core Assets – Simplified Ownership Structure governance (“ESG” or “Sustainability”) impacts for Metro Pacific Investments Corporation 10 Contributions to Nation-Building the year ending December 2019. Investor Relations 14 Part One : Governance 10/F MGO Building, Legaspi corner Dela Rosa Streets, 15 Value Creation This report should be read in conjunction with Makati City, 0721, Philippines 19 Responsibility for ESG our SEC Form 17A and our 2019 Information +63 2 8888 0888 21 Economic Performance Statement. In line with our commitment to [email protected] 24 Investment Selection and Portfolio Management transparency and accountability, we have prepared this report in accordance with the Global 26 MPIC and the Sustainable Development Goals Reporting Initiative (“GRI”) Standards: Core 29 Part Two : Sustainability Impacts Option. DNV GL has provided an independent 30 Boundary of ESG Performance assurance statement for our sustainability / 31 Operational Efficiency non-financial disclosures. 49 Service Excellence 60 Engaged Employees and Safe Workplaces The 2018 Sustainability Report was published on 27 May 2019 and is also available for download from the 75 Social Responsibility corporate website. 90 Part Three : ESG Reporting Methodology 91 ESG Reporting Methodology HIGHLIGHTS FOR 2019 94 Annex Recognition of leadership in Sustainability Reporting 95 ESG Data Summary In 2019, we received several awards for our previous sustainability reports: 99 Integrated Management System Certifications • The Asset ESG Gold Award for Excellence in Environmental, Social and Governance • Philippine Quill Awards for the 2017 Digital Sustainability Report 102 GRI Content Index • Sustainable Business Award – Special Recognition for Stakeholder Engagement and Materiality 106 Independent Assurance Statement 1 About this Report Leadership Message Company Profile Key Metrics Mission, Vision and Values Core Assets Contributions to Nation Building Part One: Governance Part Two: Sustainability Impacts Part Three: ESG Reporting Methodology Annex Leadership Message TO OUR FELLOW STAKEHOLDERS, We are living in an era of marked progress yet rising uncertainty. Although considerable progress has been made in attaining the targets outlined in the United Nations 2019 Sustainable Development Goals (“SDG”) Report1, enormous challenges remain. The report reveals that on current trends our region may not only fail to achieve any of the UN’s seventeen SDGs by 2030, we are also at risk of regression on several important development indicators, including clean water and sanitation (SDG 6), and decent work and economic growth (SDG 8). Some areas of concern cited in the report include the need to: fortify energy efficiency —along with increasing energy access and affordability— as a means to reduce greenhouse gas emissions (SDG 7); intensify electrification efforts to reach those who are displaced or living in remote, hard-to-reach communities (SDG 7 and 11); develop resilient infrastructure to promote inclusive and sustainable industrialization (SDG 9); improve access to water and sanitation services with higher water use efficiency and increased wastewater treatment (SDG 6); develop convenient public transport as a catalyst for economic growth and social inclusion (SDG 11); and additionally, to strengthen health care for all (SDG 3). Progress in these basic services are essential for a community to be sustainable. MANUEL V. PANGILINAN JOSE MA. K. LIM DAVID J. NICOL Chairman of the Board President and Chief Executive Vice President of Directors Executive Officer and Chief Financial Officer 2 About this Report Leadership Message Company Profile Key Metrics Mission, Vision and Values Core Assets Contributions to Nation Building Part One: Governance Part Two: Sustainability Impacts Part Three: ESG Reporting Methodology Annex Leadership Message EMPOWERING SUSTAINABLE COMMUNITIES – AT THE HEART OF MPIC’S for fair and transparent price increases in order to recover the significant capital costs required BUSINESSES for the development and maintenance of high-quality infrastructure. However, just as the We at Metro Pacific Investments Corporation (“MPIC” or “the Company”) desire to be a driver for physical infrastructure in which we invest is underdeveloped, so, occasionally, are the political sustainable development. Our operating companies make a difference to the lives of millions and economic institutions that support them. In our water, toll roads and light rail businesses, of Filipinos every day – powering commerce and households, delivering clean and safe water, for example, regulators have in the past been reluctant to approve various tariff adjustments. connecting people and places, and making world-class standards of healthcare available We have worked our way through some of these issues with the current administration and to all. Our continued investments in operating efficiency and service excellence reflect our have been pleased with the partial implementation of tariffs, thus far. But recent events commitment to empowering our communities toward becoming sustainable. following our continued expansion in our overall service coverage and attempted constructive engagement on residual tariff issues have, however, placed these operating companies at the On our fourth year of reporting, we wish to give emphasis to the two main areas which we forefront of government and public scrutiny once more. consider as challenges to the sustainability of our Company: governance, with regards to reliance on a stable regulatory environment; and climate change. Maynilad Water Services, Inc.’s (“Maynilad”) concession agreement, is being reviewed by the Government, which has advised us to expect the revised contract with inputs from Asian GOVERNANCE: RELIANCE ON A STABLE REGULATORY ENVIRONMENT Development Bank. As of this writing, we await further clarity but for now have assumed the In evaluating our investment prospects, MPIC seeks to add value for customers and following at Maynilad: no new debt shall be drawn; no tariff increases shall be implemented communities by improving the quality of infrastructure assets, enhancing the efficiency in the near term; and capital expenditure will be focused in completing existing projects. with which they are run, extending their coverage to more people and working closely with Consequently, we also assume that Maynilad will be unable to pay dividends in the foreseeable regulators to achieve shared goals. future and MPIC will need to recast its capital expenditure program. With life cycles of 20 years or more, our infrastructure projects are by their very nature long- In these circumstances, questions have been raised regarding investment in Philippine- term. This means that our investments are intended to survive many political and economic regulated infrastructure and the sources of capital to support this. There are no quick or easy cycles, and in managing our assets we expect to experience various regulatory and funding answers to these questions but the current model of a listed infrastructure business with a challenges from time to time. wide pool of dedicated Philippine and foreign shareholders putting their faith in these long- term contracts needs serious review. We remain cooperative with Government and believe For our business to be sustainable, we need to be able to apply a certain degree of reliance on that a mutually beneficial outcome can be achieved that will allow us to continue serving the the regulatory environment we operate in. Our franchise and concession agreements provide public together as partners. 3 About this Report Leadership Message Company Profile Key Metrics Mission, Vision and Values Core Assets Contributions to Nation Building Part One: Governance Part Two: Sustainability Impacts Part Three: ESG Reporting Methodology Annex Leadership Message CLIMATE CHANGE TOTAL PRIMARY ENERGY SUPPLY BY FUEL TYPE – BUSINESS AS USUAL VS CLEAN Globally, it is no surprise to note that the most urgent area for action is climate change. The UN ENERGY SCENARIO4 2019 SDG Report1 stresses that the compounded effects of climate change will be catastrophic and irreversible: increasing ocean acidification, coastal erosion, extreme weather conditions, the frequency and severity of natural disasters, continuing land degradation, loss of vital species and the collapse of ecosystems. Risk areas that are most relevant to our Company include rising greenhouse gas emissions and exacerbating disaster risk. RISING GREENHOUSE GAS EMISSIONS (“GHG”) Highlighted in an article from the Forbes Magazine2, globally, there has been a 20% drop in newly commissioned coal power capacity since 2017, a 24% drop in pre-construction activity and a 39% fall in new construction starts. Since 2015, the number of