Fortune Real Estate Investment Trust : ESG Report 2023

Stock Code: 778

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 2023

CONTENTS	2	Message from the CEO
	3	Sustainability Statement from the Board
	4	2023 Highlights
	6	About Fortune REIT
	7	Vision, Mission and Core Values
	8	Major Awards and Recognitions
	9	About this Report
	11	Value Creation
	12	Sustainability Approach
	14	Sustainability Strategy
	18	Stakeholder Engagement
	23	Our Space
	32	Our Conduct
	39	Our People
	45	Our Footprint
	59	Our Community
	68	ESG Awards and Certifications
	72	Performance Data Summary
	75	Independent Assurance Opinion Statement
	79	HKEX ESG Reporting Guide Content Index
	83	GRI Content Index
	85	TCFD Recommendations Content Index

2 ESG Report 2023

MESSAGE FROM THE CEO

From record high temperatures, to intense precipitation, typhoons and flooding, the brute force of climate change was thrust upon Hong Kong in 2023. With sustainability being embedded into our DNA as one of our core values, Fortune REIT has continually adopted best practices and is proud to be the first REIT in Hong Kong have committed to science-based targets during the Reporting Year, spearheading positive change in our industry. With the frequency and severity of extreme weather events becoming more prevalent, urgent concerted action to combat climate change is needed.

In recognition of our environmental footprint, during the Reporting Year, Fortune REIT has set science-based targets for the reduction in GHG emissions and new long-term 2035 environmental performance targets for energy, water and waste generated from our operations. Fortune REIT will continue to decarbonise its operations, foster positive social impact, continue to be an advocate to drive sustainable change and uphold high standards of governance across our business.

Fortune REIT is an ESG pioneer amongst its peers with a proven track record. Our dedication and incessant efforts in sustainability have been recognised by local and international prestigious organisations. We are honoured to be awarded 5-stars in the 2023 GRESB assessment, marking the third consecutive year that Fortune REIT has received the highest rating. In addition, Fortune REIT was recognised as a constituent of the Hang Seng Corporate Sustainability Benchmark Index for seven consecutive years. Amongst other recognitions, these two major recognitions are a true testament of our unrelenting pursuance of sustainability excellence.

In 2023, Fortune REIT celebrated its 20th anniversary. A series of events were held to commemorate this momentous occasion, showcasing Fortune Malls' dedication to the community over the years. A record 25 CSR events were held during the year and we hope to serve the community for many years to come.

One of our flagship malls, +WOO, has been undergoing asset enhancement initiatives since 2018 and is the first shopping mall in Hong Kong to be awarded BEAM PLUS Interiors certification for renovation - Gold rating. +WOO epitomises how existing buildings can be retrofitted into green buildings and offers a myriad of offerings for the expanding community to enjoy. These initiatives showcase the value creation of Fortune REIT to provide an enhanced experience for our shoppers and the community.

With the overarching objective of creating shared value for the local community and our stakeholders, our team worked tirelessly to accelerate our decarbonisation journey and to cement our position as a leading ESG company. I would like to thank our stakeholders for their unwavering support and collaborative effort on sustainability which has enabled Fortune REIT to achieve new milestones. We look forward to strengthening our partnerships with our stakeholders to build a more sustainable and brighter future for all.

CHIU YU, JUSTINA

Chief Executive Officer

ARA Asset Management (Fortune) Limited

as Manager of Fortune REIT

Fortune Real Estate Investment Trust

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SUSTAINABILITY STATEMENT FROM THE BOARD

The Board oversees all sustainability issues, covering environmental, social and governance issues, and a Sustainability Committee was established to assist the Board in the effective execution of Fortune REIT's sustainability strategy, managing its sustainability performance and conveying its expectation to stakeholders.

Fortune REIT's sustainability strategy focuses on five key focus areas, namely Our Footprint, Our Community, Our People, Our Space and Our Conduct. Management have implemented initiatives under each of these key focus areas to drive sustainability initiatives throughout the Reporting Year; details of which have been set out in this Report. This year, we have established new long-term targets for reducing energy intensity, water intensity, and waste recycling rate, building upon the achievements of our previous targets.

Fortune REIT conducted a risk assessment across multiple risk categories which included the topic of climate change, to allow for a more comprehensive understanding of its operating landscape and preparedness. The risk assessment of Fortune REIT is reviewed by the Audit Committee, as delegated by the Board, on a semi-annual basis. Risks are then managed through the Manager setting out adaptive and mitigation measures according to the risk analysis results and reviewing the effectiveness of the measures regularly to ensure the risks identified are managed in an appropriate manner.

To ensure these risks will be properly considered and managed, Fortune REIT has analysed financial impacts of climate- related risks and opportunities this year, following climate scenario analysis conducted in 2022.

The Board will continue to push forward Fortune REIT's sustainability plans to fruition, with the aim of delivering sustainability excellence and maximising shared value for all our stakeholders.

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2023 HIGHLIGHTS

1ST REIT IN HONG KONG TO ATTAIN

THE HIGHEST 5-STAR RATING FOR GRESB

OUR FOOTPRINT	OUR COMMUNITY	OUR CONDUCT
To minimise Fortune REIT's	To deliver value to the community	To set a solid foundation for
environmental footprint	and address their needs	our business success

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1ST REIT IN HONG KONG TO SET SCIENCE-BASED TARGETS FOR REDUCTION IN GHG EMISSIONS

OUR PEOPLE	OUR SPACE	MAJOR AWARDS
		AND RECOGNITIONS
To provide our employees a	To enhance our shoppers' experience
constructive and balanced	with advanced technologies and
working environment	pleasant shopping environment

Energy Efficiency	Waste Reduction
-10%	-5%

Giving Back

(Corporate Social Responsibility)

Business integrity and

sustainability governance

Employee Health	Customer Health
and Wellbeing	and Safety

(2023 Target reduce	(2023 Target reduce
5% against a 2018	1% against a 2018
baseline)	baseline)
Water Saving	Climate change
-24%	-33%
(2023 Target reduce	(2023 Target reduce
1% against a 2018	3% against a 2018
baseline)	baseline)

A record 25 CSR events held with approximately 790 CSR hours clocked

Building an Inclusive Community

Offered in-kind venue support for social enterprises and NGOs

Contractor Environmental Regulation, Contractor Safety Regulation and the Supplier's Code of Conduct in place

Provided ESG training for internal and external stakeholders

Zero work-related injuries or fatalities for employees of the Manager for the past 3 years and zero lost days

An average of 3.5 hours per employee on health and wellbeing workshops

DEI training was provided, employee satisfaction survey included DEI factors; 100% employee participation for the

Obtained Indoor Air Quality (IAQ) certification for 11 malls

+WOO is the first mall in Hong Kong to attain BEAM PLUS Interiors certification for renovation - Gold rating

All 16 Fortune Malls in Hong Kong have green building certification in Management

Installed over 1,000 pieces of solar panels at 5 Fortune Malls

Expanded EV charger coverage to 3 Fortune Malls

Standard tenancy agreements include green lease clauses

Installed building management and building optimisation system which covers 85% of total GFA

62% of loans are sustainability- linked

Stakeholder Engagement

Engaged with our stakeholders via the annual stakeholder survey, CSR events and various other means, including Farm@Fortune

Management of

sustainability-related risks

Zero incidence of non-compliance

Improved ESG disclosure with 2023 ESG report prepared in accordance with TCFD reporting principles and ISSB Standards

employee satisfaction survey

Training and Development

Average 20.5 training hours per permanent employee

100% employees trained on sustainability, compliance and cybersecurity topics

Innovation integration

Fortune Malls App underwent further development

Cleaning and disinfection

robots were deployed at

4 Fortune Malls

•  Fortune Metropolis •  Ma On Shan Plaza

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ABOUT FORTUNE REIT

Established in 2003, Fortune Real Estate Investment Trust ("Fortune REIT") is a real estate investment trust constituted by a trust deed (as amended, supplemented or otherwise modified from time to time). It is the first REIT to hold Hong Kong assets and is currently listed on the Main Board of the Stock Exchange of Hong Kong Limited (the "SEHK"). Fortune REIT holds a portfolio of 16 private housing estate properties in Hong Kong ("Fortune Malls") and 1 neighbourhood mall in Singapore, comprising 3.0 million square feet ("sq. ft.") of retail space and 2,793 car parking spaces.

Fortune REIT is managed by ARA Asset Management (Fortune) Limited (the "Manager") a wholly-owned subsidiary of ARA Asset Management Limited ("ARA"). ARA Asset Management Limited is part of the ESR Group ("ESR").

FORTUNE REIT'S STRUCTURE AND PROPERTIES PORTFOLIO

UNITHOLDERS

			INVESTMENT IN		DISTRIBUTIONS
									ACTS ON
MANAGER	MANAGEMENT					BEHALF OF	TRUSTEE
	FEES				UNITHOLDERS
ARA Asset											HSBC Institutional
Management											Trust Services
MANAGEMENT					TRUSTEE
(Fortune) Limited					(Asia) Limited
		SERVICES					FEES
				OWNERSHIP		DIVIDENDS/
				OF SHARES		DISTRIBUTIONS		PROPERTY
								MANAGEMENT
				PROPERTY		SERVICES	PROPERTY
				HOLDING
							MANAGER
				COMPANIES		PROPERTY
							MANAGEMENT
						100%			FEES

PROPERTIES

• +WOO	• Fortune Metropolis	• Caribbean Square	• Centre de Laguna
• Fortune City One	• Laguna Plaza	• Smartland	• Hampton Loft
• Ma On Shan Plaza	• Belvedere Square	• Jubilee Square	• Lido Avenue
• Metro Town	• Waldorf Avenue	• Tsing Yi Square	• Rhine Avenue
• Stars of Kovan
Property

Fortune Real Estate Investment Trust

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VISION, MISSION AND CORE VALUES

VISION	MISSION
The Board's vision to be the best-of-class	Fortune REIT's mission is to deliver
REIT manager, offering bespoke solutions	regular and stable returns to holders of
and enduring value to investors and	Fortune REIT units ("Unitholders")
partners of Fortune REIT.	through proactive management of Fortune
	REIT's portfolio of assets and acquiring
	properties that generate long term
	benefits to Unitholders.

VALUES

EXCELLENCE

We strive for excellence in every aspect of our business. We maintain high standards of performance and accountability, and we seek to learn, explore and improve continuously.

INCLUSION

We embrace diversity, equity and inclusion in the workplace. We believe trust and mutual respect among colleagues, partners and stakeholders are cornerstones of growth and success.

ENTREPRENEURSHIP

Our entrepreneurial spirit reflects our passion, courage and desire to succeed and ultimately drives the creation of opportunities and the delivery of superior outcomes in a competitive marketplace.

SUSTAINABILITY

Sustainability is central to our mission because we aspire to improve the environmental prospects of our planet. Our responsibilities to stakeholders, local communities and the world at large grow in tandem with our business. Accordingly, we commit to lead and embrace the highest standards of governance in forging a path to become a carbon neutral business.

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MAJOR AWARDS AND RECOGNITIONS

• Highest 5-starrating for three consecutive years

• Ranked 1st in Eastern-Asia Listed Retail

• Included for 7 years consecutively with A Rating or above
• Rated AA- for 2023-24

•Comprehensive Scheme Platinum rating for Fortune Metropolis and Ma On Shan Plaza

• Excellent rating in Management for all 16 Fortune Malls in
  Hong Kong
• +WOO - First mall in Hong Kong to attain BEAM PLUS Interiors certification for renovation - Gold rating
• Excellence in Real Estate by GRESB X HERA 2023 Awards
• Hong Kong Management Association Hong Kong Sustainability Award 2023 Corporate Award - Merit Award (Small and Medium-
  Sized Organisation Category)

For more information, please refer to the ESG Awards and Certifications section in this report.

Fortune Real Estate Investment Trust

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ABOUT THIS REPORT

Reporting Year and Scope

The Environmental, Social and Governance Report (the "Report") of Fortune REIT presents its sustainability performance for the financial year from 1 January to 31 December 2023 ("2023" or the "Reporting Year"). The reporting scope of this Report focuses on Fortune REIT's full scope of operations for 16 private housing estate retail properties in Hong Kong and 1 private housing estate retail property in Singapore.

	Number of	Gross Rentable Area
Property	Car Parking Lots	(sq. ft.)
Fortune City One	653	414,469
+WOO	622	665,244
Ma On Shan Plaza	290	310,084
Metro Town	74	180,822
Fortune Metropolis	179	332,168
Laguna Plaza	150	163,203
Belvedere Square	329	276,862
Caribbean Square	117	63,018
Jubilee Square	97	170,616
Smartland	67	123,544
Hampton Loft	35	74,734
Waldorf Avenue	73	80,842
Tsing Yi Square	27	78,836
Centre de Laguna	-	43,000
Lido Avenue	-	9,836
Rhine Avenue	-	14,604
Stars of Kovan Property	80	22,638
Total	2,793	3,024,520

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About this Report

Reporting Standards and Principles

The Report is prepared in accordance with the "comply or explain" provisions of the Environmental, Social and Governance Reporting Guide (the "ESG Reporting Guide") under Appendix C2 (formerly Appendix 27) of the Rules Governing the Listing of Securities on the SEHK.

In addition, this Report refers to the Global Reporting Initiative ("GRI") Standards on certain material issues. This Report references Disclosures 2-3,2-5,2-7 to 2-9,2-12,2-22,2-27,2-29 from GRI 2: General Disclosures 2021, Disclosure 205-2 to 205-3 from GRI 205: Anti-corruption 2016; Disclosures 302-1 and 302-3 from GRI 302: Energy 2016; Disclosures 305-1 to 305-4 from GRI 305: Emissions 2016; Disclosures 405-1 from GRI 405: Diversity and Equal Opportunity 2016; and Disclosure 416-2 from GRI 416: Customer Health and Safety 2016. The Report also refers to the recommendations from the Task Force on Climate-Related Financial Disclosures ("TCFD") and in accordance with item 19 of Hong Kong's Securities and Futures Commission's 'Circular to Licensed Corporations, Management, and Disclosure of Climate-related Risks by Fund Managers'. The report is also prepared with reference to the International Sustainability Standards Board's ("ISSB") new IFRS S2 Climate-related Disclosures published in June 2023.

Fortune REIT adheres to the following reporting principles in defining its reporting content:

• Materiality: Fortune REIT focuses on issues that have a significant impact on its business and are important to its stakeholders. Material issues are identified through a series of stakeholder engagement activities and are validated.
• Quantification: In order to illustrate the performance of Fortune REIT, key performance indicators are presented in quantitative terms with methodology explained whenever feasible.
• Balance: The Report provides stakeholders with an unbiased picture of Fortune REIT's achievements and the risks it faces.
• Consistency and comparability: Fortune REIT employs a consistent measurement methodology to allow for meaningful comparison of ESG data over time. There is no significant change in the methodology in the preparation of the Report during the Reporting Year.
• Completeness: The Report responds to the material topics identified in the Reporting Year to avoid omission of any aspects that are material to stakeholders.
• Accuracy: Fortune REIT is committed to upholding the truthfulness of the information set out in the Report and ensuring its traceability.
• Timeliness: To allow timely and informed decisions of stakeholders, the Report discloses its impact on the environment and society with the Reporting Year.
• Clarity: The Report is written in a manner that is comprehensible and accessible to relevant stakeholders.

Report Assurance

Fortune REIT has established internal controls and a formal review process to ensure that any information presented in the Report is as accurate and reliable as possible. With the assistance of the Sustainability Committee, the Manager's Board of Directors (the "Board") has reviewed and approved the Report.

In the Reporting Year, Fortune REIT appointed the British Standards Institution ("BSI") to provide independent assurance of the Report and the environmental data (including energy, water, greenhouse gas and waste) in accordance with the ESG Reporting Guide. The assurance, the scope of work and conclusions can be found in the Independent Assurance Statement on pages 75 to 78.

Feedback Mechanism

Fortune REIT values feedback and comments from stakeholders. Stakeholders are welcome to share their views with Fortune REIT via [e-mail] to help define and strengthen its future sustainability strategy.