In a journey that began in 2014, KLCC is firmly on track to build on the momentum for its ESG initiatives. Under an ongoing roadmap that runs from 2019 through 2023, the group has achieved steady results with considerable progress made in terms of planning, implementation and reporting. Moving forward, KLCC will continue its effort to gear towards a low carbon footprint and enhance ESG data access and disclosure. Post a recent engagement, we are keeping our 3- star ESG rating for KLCC. Our stock call remains MARKET PERFORM with TP of RM6.60 (based on target yield of 5.5%).

Seeing is believing. Following an ESG-themed site tour hosted by KLCC recently, where we visited PETRONAS Twin Towers, Suria KLCC, Mandarin Oriental Kuala Lumpur and KLCC Park, we walked away with a deeper understanding and better awareness of the various ESG (Environmental, Social & Governance) initiatives being undertaken by the group. Please check out the narrative overleaf as we described our stop by-stop experience (with photo illustrations) during our half-day outing. The salient takeaways from our ESG engagement are as follows:

(1) KLCC’s ESG journey started in 2014 with the publication of its first full fledged Corporate Responsibility & Sustainability Report. Since then, it has attained many key milestones (see Appendix I), including: (a) the launching of a 5-year Sustainability Roadmap that is aligned with prioritized United Nation's Sustainable Development Goals (UNSDGs) in 2019, and (b) the award of GBI (Green Building Index) certification for PETRONAS Twin Towers (Gold) by scoring BEI (Building Energy Intensity) 111 kWh/m2 per year with 4-star EE (Energy Efficiency) rating and Menara 3 PETRONAS (Silver) by scoring BEI 128 kWh/m2 per year with 3.5-star EE rating.

(2) To measure the progress of its sustainability performance, a 5-year Sustainability Roadmap (2019 – 2023) has been established with three main goals: (a) building a smart, safe and sustainable KLCC precinct, (b) building an agile, inclusive and sustainable workforce in a VUCA (Volatility, Uncertainty, Complexity and Ambiguity) world, and (c) combating climate change and reducing environmental impact. Of the 24 targets set for 2021, 75% has been met while “target in progress” and “target not met” accounted for 8% and 17%, respectively (refer Appendix II). A 5-year sustainability performance data for selected metrics is also shown in Appendix III.

(3) For the Sustainability Report 2021, KLCC has taken guidance from the World Economic Forum’s Stakeholder Capitalism Metrics (WEF SCM) as best practice for a more focused ESG impact reporting (refer Appendix IV). Among the highlights, it has successfully achieved a reduction of 21.5% in GHG emission vs. 2020 from proactive measures in minimising carbon footprint and a reduction of 27.0% in water usage contributed by the ongoing water initiatives, equivalent to cost savings of RM0.4m.

The way forward. KLCC plans to strengthen its sustainability agenda by assessing readiness towards reporting its public disclosures aligning with the Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations. There will also be a continuous effort in providing easy access to its ESG data and disclosures on the ESG World Platform (an online platform that maps KLCC’s ESG data against various ESG frameworks and standards) with the latest information that summarizes KLCC’s ESG commitments and progress which will be updated on a regular basis. Please click on this landing page link (ESG Churchgate Partners).

Maintain our 3-star ESG rating. Following the site tour, we are reaffirming our 3-star ESG rating which is based on an average score of 10 criteria as appraised by us, notwithstanding there has been an increase in the overall score (refer to page 7). Hence, there is no adjustment to our TP of RM6.60 (which is derived from a target yield of 5.5% on FY23E DPS). Maintain stock call as MARKET PERFORM.

Source: Kenanga Research - 15 Sept 2022