SEGI ASTANA SDN BHD

(2 Degree Scenario). In addition, these countries have also committed to United Nation’s 17 Sustainable Development Goals that ... holding company wit...

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SEGI ASTANA SDN BHD ASEAN GREEN BOND PROPOSED MEDIUM-TERM NOTE FACILITY OF RM415.0 MILLION

SECOND OPINION REPORT 22 NOVEMBER 2017

Analysts Dinagaran Chandra (603) 7628 1039 [email protected]

Carmen Ng (603) 7628 1122 [email protected] Segi Astana Sdn Bhd

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RAM’S ENVIRONMENTAL BENEFIT ASSESSMENT

Climate change represents a fundamental threat to the planet and society and is already transforming life on Earth. The effects of climate change are wide-ranging and can be seen everywhere in our biosphere. The 2015 Paris Climate Accord (“COP21”) sets a global action plan for the 197 participating governments to limit global warming to well below 2oC above pre-industrial levels (2 Degree Scenario). In addition, these countries have also committed to United Nation’s 17 Sustainable Development Goals that could transform the world by addressing areas of critical importance for the planet and society. The ultimate objective of green bond/sukuk is to facilitate financing towards environmentally-friendly solutions that can help mitigate the effects of climate change and/or create value for surrounding ecosystem. RAM’s Green Bond assessment incorporates a subjective assessment of the project’s contributions towards a low carbon, sustainable future. In addition, transparency and disclosure strength of the Green Bond is also a key consideration.

▪ Project is an important component of low carbon future and has clear, demonstrable environmental benefits.

▪ Project is aligned towards a low carbon future and has some demonstrable environmental benefits.

▪ Project has minimal contribution towards a low carbon future and has minimal demonstrable environmental benefits.

▪ Project directly contributes towards substantial and sustainable reductions of greenhouse gas emissions.

▪ Project directly contributes towards improvements in greenhouse gas emissions.

▪ Project indirectly contributes to the broader environment and is focused on asset-level environmental improvements.

Projects that do not conform to the long-term vision of 2 Degrees Scenario reaffirmed under COP21 is not assigned an Environmental Benefit Rating.

Segi Astana Sdn Bhd

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SECOND OPINION ON GREEN BOND

Segi Astana Sdn Bhd (“Segi Astana” or the “Issuer”) is an incorporated joint venture company between WCT Holdings Berhad (“WCT” or the “Group”) and Malaysia Airport Holdings Berhad (“MAHB”) set up for the development of [email protected] The Proposed Medium-Term Note Facility of RM415 million (“Proposed ASEAN Green Bond”) shall be used to refinance the outstanding RM400 million Medium-Term Notes, including any accrued interest thereto and repay related company’s advances which were entirely used to finance the construction and development costs of [email protected] integrated complex in Sepang, Selangor of Malaysia. The integrated complex has been certified as Leadership in Energy & Environmental Design (“LEED”) Silver. The building was opened to the public on 2 May 2014. Overall, Segi Astana’s Green Bond Framework is aligned to the transparency and disclosure requirements of the ASEAN Green Bond Standards (“ASEAN GBS”) and the globally recognised Green Bond Principles (“GBP”). Equally important, financing for green-certified buildings are explicitly recognised under the ASEAN GBS. The issuer’s Green Bond Framework is clearly defined and provides clarity on important aspects of utilisation of proceeds, project evaluation and selection, management of proceeds and reporting commitments. Green building certification systems play an important role in defining green in the buildings sector. The rating systems provide a systematic and objective framework for measuring environmental performance and green building design. The [email protected] integrated complex has been certified as LEED Silver by EAG Consulting Sdn Bhd, a member of the U.S. Green Building Council. The integrated complex is a key infrastructure component of the Kuala Lumpur International Airport 2. The shopping complex is equipped with green features that help improve its environmental performance thereby reducing impact on the climate. This includes a wide range of energy-efficiency measures, installation of rainwater harvesting system, centralised waste disposal system etc. In addition, the Issuer also has a tenant engagement program to ensure the occupants play an active role in the building’s sustainability management. Integrated with the Kuala Lumpur International Airport 2 (“KLIA2”) airport terminal, [email protected] stands to benefit from the airport’s growing traffic. The shopping complex functions as a commercial activity center serving domestic and international tourists as well as employees working at the airport. 2 Degrees Scenario, or 2DS is reaffirmed in the Paris Agreement during the 21st U.N. Framework Convention on Climate Change (“UNFCCC”) Conference of the Parties (“COP21”). The goal is to limit global temperature rise to 2 degrees Celsius when compared against pre-industrial levels. The International Energy Agency (“IEA”) has identified the industries where the reductions in carbon emissions should be targeted to achieve this goal by 2050.

Segi Astana Sdn Bhd

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SECOND OPINION ON GREEN BOND

Cumulative CO2 reductions by sector and technology in the 2DS to 2050

Key point :

A portfolio of low-carbon technologies is needed to reach the 2DS; some solutions will be broadly applicable, while others will need to target specific sectors. (Source: Energy Technology Perspectives 2015, International Energy Agency)

Building on from IEA’s study, RAM’s Environmental Benefit assessment essentially tiers projects based on their overall contributions towards the 2DS. The top tiered projects comprise technologies that decarbonize the energy system. In comparison, green or high-performance buildings have a lower marginal impact towards the fulfillment of the 2DS. Based on an overall assessment of the project and Green Bond Framework, RAM has assigned the Segi Astana’s Proposed ASEAN Green Bond a Tier-3 Environmental Benefit.

Segi Astana Sdn Bhd

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TABLE OF CONTENTS RAM’S ENVIRONMENTAL BENEFIT ASSESSMENT..................................................................................................... 2 SECOND OPINION ON GREEN BOND......................................................................................................................... 3 1.

SCOPE AND OBJECTIVES ................................................................................................................................ 6

2.

CORPORATE PROFILE..................................................................................................................................... 6

3. 3.1. 3.2. 3.3. 3.4.

REVIEW OF GREEN BOND FRAMEWORK ...................................................................................................... 7 Utilisation of Proceeds ................................................................................................................................... 7 Project Evaluation & Selection ....................................................................................................................... 7 Management of Proceeds .............................................................................................................................. 8 Reporting Commitments................................................................................................................................ 8

4. 4.1. 4.2. 4.3. 4.4.

SUSTAINABILITY ASSESSMENT ...................................................................................................................... 9 Growth of Green Buildings in Malaysia.......................................................................................................... 9 Group-Level Assessment ................................................................................................................................ 9 Sustainability Management of Green Building ............................................................................................ 10 Bond Positive Impact Creation..................................................................................................................... 11

APPENDIX 1 ASEAN GBS EXTERNAL REVIEW FORM................................................................................................. 13 APPENDIX 2 LIST OF DOCUMENTS REVIEWED ......................................................................................................... 20 APPENDIX 3 LEED CERTIFICATE RECEIVED BY [email protected] ............................................................................ 22 APPENDIX 4 LEED CERTIFICATION REVIEW REPORT ................................................................................................ 24 ABOUT RAM ............................................................................................................................................................. 26

Segi Astana Sdn Bhd

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1. SCOPE AND OBJECTIVES Segi Astana Sdn Bhd (“Segi Astana” or the “Issuer”) is an incorporated joint venture company between WCT Holdings Berhad (“WCT” or the “Group”) and Malaysia Airport Holdings Berhad (“MAHB”) set up for the development of [email protected] The Proposed Medium-Term Note Facility of RM415 million (“Proposed ASEAN Green Bond”) shall be used to refinance the outstanding RM400 million Medium-Term Notes, including any accrued interest thereto and repay related company’s advances which were entirely used to finance the construction and development costs of [email protected] integrated complex in Sepang, Selangor of Malaysia. Located between the drop-off point and Kuala Lumpur International Airport 2 (“KLIA2”) Main Terminal Building, the integrated complex has approximately 350,000 square feet of retail space that spans overs 4 levels. In addition, the building also functions as an integrated transportation hub that serves KLIA Express train, taxis, rented cars, buses and private transport. RAM Consultancy Services Sdn Bhd (“RAM”) has been appointed to provide a second party opinion on the Issuer’s Green Bond Framework. The review covers an assessment of the Issuer’s Green Bond Framework against the disclosure requirements of ASEAN Green Bond Standards1 (“ASEAN GBS”) and the sustainability responsibilities of the Issuer. Launched on 8 November 2017, the ASEAN GBS is developed based on the globally-recognised Green Bond Principles (“GBP”) established by the International Capital Markets Association (“ICMA”). The assessment includes a high-level review of public domain information and internal documents provided by the Issuer. The assessment is also supported by discussions with management and a site visit to the integrated complex. RAM did not undertake an audit or other assurance activities to ascertain the validity and accuracy of the information provided. This assessment does not include an opinion on the creditworthiness and financial performance of the bond.

2. CORPORATE PROFILE Segi Astana, a jointly-owned entity of WCT and MAHB, was formed on 1 October 2010. The majority shareholder, WCT, is responsible for the overall management of the Issuer. The Issuer was awarded a 25-year concession to build and operate the integrated complex from August 2011, with an option by the Issuer to extend the concession for another 10 years. The complex opened to the public on 2 May 2014. The table below provides a brief description on the background of the two shareholders. Table 1: Shareholders of Segi Astana Shareholders

WCT Holdings Berhad (through WCT Land Sdn Bhd)2

Ownership

70%

Description ▪ Listed on the Main Board of Bursa Malaysia, the Group is an investment holding company with principal business activities in engineering and construction, property development and investment and management activities. ▪ The Group’s major shareholders3 comprise Tan Sri Desmond Lim (19.57%)4, Lembaga Tabung Haji (9.39%) and AmanahRaya Trustees Berhad (6.32%) ▪ A public listed company in the Main Board of Bursa Malaysia, MAHB’s business operations are focused on the operations, management and maintenance of airports.

Malaysia Airport Holdings Berhad

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30% ▪ The company’s major shareholders5 comprise Khazanah Nasional Berhad (36.71%), Citigroup Nominees Sdn Bhd (9.65%) and Amanahraya Trustees Berhad (7.74%).

The ASEAN GBS is developed by the ASEAN Capital Markets Forum. Established in 2004, the ASEAN Capital Market Forum comprises capital market regulators from 10 ASEAN Countries. The standard applies to issuance of ASEAN Green Bonds. Similar to the GBP, the ASEAN GBS has four core components; (i) Use of Proceeds (ii) Process for Project Evaluation & Selection (iii) Management of Proceeds and (iv) Reporting.

2

WCT Land Sdn Bhd is a wholly owned subsidiary of WCT Holdings Berhad.

3

WCT Holdings Berhad 2016 Annual Report – Analysis of Shareholdings as at 31 March 2017 (page 202)

4

Deemed by virtue of his interest in Dominion Nexus Sdn Bhd. Tan Sri Desmond Lim Siew Choon is the Non-Executive Chairman of Malton Berhad.

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Malaysia Airport Holdings Berhad 2016 Annual Report – Statement of Shareholdings as at 31 March 2017 (page 362) Segi Astana Sdn Bhd

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3. REVIEW OF GREEN BOND FRAMEWORK The focus areas reviewed are grouped under the following four principles which are embedded in ASEAN GBS: (3.1) Utilisation of Proceeds (3.2) Project Evaluation & Selection (3.3) Management of Proceeds and (3.4) Reporting Commitments. Please refer to Appendix 1 for the External Review checklist developed for ASEAN GBS.

3.1. Utilisation of Proceeds The proceeds from the Proposed ASEAN Green Bond will be exclusively used to: (i) refinance the outstanding MediumTerm Notes Programme guaranteed by Danajamin Nasional Berhad6 of RM400.0 million, including any accrued interest thereto; (ii) repay related company’s advances; and (iii) defray any fees and expenses in relation to the Medium-Term Notes facility. The outstanding Medium-Term Notes Programme were issued on 10 January 2012 to finance the construction and development of [email protected] integrated complex. Broadly defined, green projects refer to innovative climate-friendly projects that help to deliver clear environmental benefits. The growth and development of built environment 7 has a huge influence on the climate and natural environment. Buildings, in particular are long-lived assets that can have a myriad of interconnected impacts on the surrounding ecosystem. Green Building, or also known as sustainable or high-performance building, aims to incorporate design measures and processes that are environmentally sound and resource-efficient throughout the lifecycle of the building8. Certified green buildings are explicitly recognised as a green project under the ASEAN GBS. Table 2: Green Building under ASEAN Green Bond Standards

4.1.5 (x)

ASEAN GBS Use of proceeds – green buildings which meet regional, national or internationally recognised standards or certifications.

In June 2017, the [email protected] integrated complex has achieved a LEED Silver certification under the LEED (Leadership in Energy and Environmental Design) rating system certification established by the U.S. Green Building Council9.

3.2. Project Evaluation & Selection Green building certification systems play an important role in defining green in the buildings sector. The rating system provide a systematic and objective framework for measuring environmental performance and green building design. The process typically requires an on-site assessment by an independent third-party certifier or assessor. LEED certification is an internationally-recognised green building rating system developed by the U.S. Green Building Council in 1998. The certification provides a science-based assessment on the sustainability attributes of the building in the following seven key areas; i. ii. iii. iv. v. vi. vii.

Sustainable Sites Water Efficiency Energy and Atmosphere Materials and Resources Indoor Environmental Quality Innovation in Design Regional Priority Credits

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Jointly owned by Ministry of Finance Incorporated (50%) and Credit Gurantee Corporation Malaysia Berhad (50%), Danajamin functions as a financial guarantor for financially viable companies to access the Private Debt Securities (PDS) market.

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Man-made surroundings

8

United States Environmental Protection Agency – Green Building

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Established in 1993, the U.S. Green Building Council is a non-profit organisation focused on promoting on sustainability in building design, construction and operation. Segi Astana Sdn Bhd

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LEED has become one of the world’s most widely used green building rating system, with more than 92,000 projects participating in LEED across 165 countries and territories 10. LEED uses a point-based system during the evaluation process. Points are awarded if a specific building criteria has been met. The certification levels are; Table 3: LEED Certification Levels Certification

Points

Certified

40 – 49

Silver

50 – 59

Gold

60 – 69

Platinum

80+

The Proposed ASEAN Green Bond is a one-off issuance intended only for [email protected] To manage the LEED certification exercise, WCT appointed an external sustainability service provider - EAG Consulting Sdn Bhd11. In June 2017, the [email protected] integrated complex was awarded 57 points of a maximum of 110, giving the building a LEED Silver Certification status. The building was rated under the LEED 2009 Core and Shell certification. The management of [email protected] is committed to play its part in helping to create an environmentally sustainable future via proper energy and resource management. The integrated complex comprises several green features. In addition, the green initiatives are managed by two different departments: (i) Mechanical & Engineering Department; and (ii) Housekeeping Department.

3.3. Management of Proceeds The net proceeds from the Proposed ASEAN Green Bond will be used immediately to (i) refinance the outstanding Medium-Term Notes Programme guaranteed by Danajamin Nasional Berhad of RM400.0 million, including any accrued interest thereto; (ii) repay related company’s advances; and (iii) defray any fees and expenses in relation to the Medium-Term Notes facility.

3.4. Reporting Commitments Transparency in reporting is an important characteristic of green bond. Issuers are encouraged to establish a formal process to communicate the Use of Proceeds Reporting and Impact Reporting. The Issuer has committed to report annually the following via the website of [email protected] (http://gatewayklia2.com.my/); Table 4: Segi Astana’s Reporting Commitments for [email protected] Use of Proceeds Reporting Impact Reporting

▪ All proceeds will be immediately used to repay the outstanding Medium-Term Notes Programme and related company’s advances. ▪ Energy Use Intensity (kWh per square meter) ▪ Carbon Emissions (metric tons of CO2 per square meter) ▪ Water Intensity (cubic meter per square meter) ▪ Sale of Recyclable Items (Kg)

Impact reporting serves to illustrate the climate and environmental benefits of the project. For green building projects, data on energy intensity, carbon emissions and water intensity are commonly used indicators to evaluate the environmental impact. Issuer’s reporting commitments are consistent with the requirements of ASEAN GBS.

10

U.S. Green Building Council website as at 13 November 2017. Link: https://new.usgbc.org/leed

11

EAG Consulting is a registered company in Malaysia and a member of U.S. Green Building Council. The company provides a range of services related to sustainability in the built environment. Segi Astana Sdn Bhd

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Carbon emissions is a core impact indicator for green bond reporting. However, there are varying carbon accounting methodologies that can be adopted. As a measure of additional transparency, RAM encourages the Issuer to provide information on the methodology and emission conversion factors used to calculate carbon emissions. Where possible, the Issuer is encouraged to report energy consumption forecasts that have been developed. This allows a comparison between the actual climate impact of the project with initial projections.

4. SUSTAINABILITY ASSESSMENT 4.1. Growth of Green Buildings in Malaysia According to the International Energy Agency (“IEA”) Transition to Sustainable Buildings report, buildings represents the largest energy consuming sector globally. As a result, they are responsible for roughly one-third of global carbon emissions. Therefore, energy and emission-friendly buildings are vital components for the development of sustainable and low carbon future. The 2 Degrees Scenario12 require an estimated 77% reduction 13 in total CO2 emissions in the buildings sector by 2050. During the COP21, a total of 197 countries signed the Paris Climate Accord to strengthen the global response to combat climate change. As a participant of the Paris Climate Accord, Malaysia has made the commitment to reduce its carbon intensity level of Gross Domestic Product by 45% by the year 2030 as compared with the 2005 level (emissions in the base year: 288,663 Gg CO2 eq14). Malaysia has undertaken a multitude of mitigation and adaption strategies in order to achieve its emission reduction targets. Under the 11th Malaysia Plan (2016-2020), building energy efficiency has been identified as a key driver to achieve a sustainable future in Malaysia. Measures detailed out include (i) the provision of grants for energy audits and energy management for commercial buildings; and (ii) energy audits, management and retrofit of government office buildings and hospitals. Further, Malaysia has developed several national green rating tools for buildings. The Malaysian Institute of Architects (“PAM”) and the Association of Consulting Engineers Malaysia (“ACEM”) developed the Green Building Index (“GBI”) in 2009. The rating tool was developed to customise sustainable design features based on the country’s tropical climate and current social, infrastructure and economic development. Another Malaysian green building tool was developed in 2013 - the Green Real Estate (“GreenRE”). The tool is the product of collaboration between the Real Estate and Housing Developers’ Association (“REDHA”) and the Ministry of Energy, Green Technology and Water (“KETTHA”). The GreenRE rating tool assesses the building’s performance with respect to energy efficiency, water efficiency, environmental protection, and indoor environmental quality and carbon emissions.

4.2. Group-Level Assessment The section provides a high-level sustainability assessment of the shareholders. With a 70% ownership in Segi Astana, WCT is the major shareholder and parent company of the Issuer. Therefore, this assessment is focused on WCT’s sustainability management measures. WCT currently has a land bank of approximately 924 acres in Malaysia. The Group’s portfolio of property assets includes townships, high-rise residences, luxury homes, industrial properties, integrated commercial developments etc. The Group also owns and operates three shopping malls and one hotel. Based on a review of the 2016 Annual Report’s Sustainability Statement, RAM notes WCT has made a corporate commitment to integrate key economic, environmental and social considerations in its business approach. Tan Sri Marzuki bin Mohd Noor, the Senior Independent Non-Executive Director, has been identified to spearhead the implementation of the Group’s sustainability strategy. The Group has also identified several priority sustainability

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2DS, or the 2 Degrees Scenario is the goal reaffirmed in the Paris Agreement during the 21 st U.N. Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21). The target is to limit global temperature rise to 2 degrees Celsius when compared against preindustrial levels.

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Compared against 2010 levels

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Intended Nationally Determined Contribution report of the Government of Malaysia Segi Astana Sdn Bhd

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themes that are material to the company; sustainable procurement, construction waste management, occupational health & safety and community investment. The Group currently maintains ISO standards such as ISO 14001 Environmental Management System, ISO 9001 Quality Management System and OHSAS 18001. RAM opines ISO standards help reaffirm a company’s commitment towards managing environmental and social challenges. The standards help create a compliance program that ensures consistency in practices and processes. Further, the ISO re-certification process requires a reassessment of the implementation of the management system. The process includes a close examination of documentations relating the management system, completion of internal audits and effectiveness levels of corrective and preventive actions undertaken. Given the stringent requirements for maintaining ISO standards, RAM opines WCT has a high level of sustainability readiness to support the [email protected] project. As measure of best practice, RAM encourages WCT to further enhance its sustainability strategy and disclosures. To this end, RAM opines it is important for corporations to develop a holistic and integrated sustainability strategy that encompasses; (i) long term sustainability vision, objectives and commitments (ii) regular and systematic consultation with identified stakeholders on important sustainability issues (iii) a robust governance and accountability mechanism to operationalise sustainability (iv) identification of key systems and processes to manage sustainability and (v) regular reporting of performance indicators against established targets. RAM carried out a high-level media scan of WCT and [email protected] in the web domain. There were no reported controversies pertaining environment, social and governance practices of the organisation. MAHB, the minority shareholder of Segi Astana, has been a strong proponent of sustainability. The airport operator has an overarching sustainability framework that drives the organisation. A dedicated sustainability team has been established and the company’s initiatives are aligned with selected United Nations 17 Sustainable Development Goals. As a signatory to the Aviation Industry Commitment to Action on Climate Change, MAHB also aspires to create a carbon-neutral growth pathway in its operations.

4.3. Sustainability Management of Green Building The LEED rating system provides a prescriptive framework for identifying feasible and measurable sustainable design measures that can be incorporated throughout the building lifecycle. The diagram below summarises [email protected]’s LEED certification performance scores. The shaded areas represent the individual component scores achieved by the building with respect to the predetermined criteria in the LEED rating system. Please refer to Appendix 4 for details of the assessment. The Issuer represented that the LEED certification will provide a sound baseline for management to further evaluate improvement opportunities that can be applied to [email protected] in the future. Diagram 1: LEED Certification Scorecard for [email protected] 40

Total Score 57/110 30

20

10

18

16 8

0 Sustainable Sites Water Efficiency

Energy & Atmosphere

4

3

4

4

Materials & Resources

Indoor Environmental Quality

Innovation In Design

Regional Priority Credits

Segi Astana Sdn Bhd

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Sustainable design features help to improve the building’s environmental footprint and ensure efficient use of resources. The integrated complex comprises the following green features: i. ii. iii. iv. v. vi.

Energy efficiency measures that include lighting and fan power reductions, heat recovery, demand-controlled ventilation, thermal envelope improvements etc. Rainwater harvesting system for internal usage. Centralised waste disposal system that uses vacuum suction. This contributes to energy savings when transporting waste to the bin centre. Dedicated areas for collection and storage for recycling. CO2 sensors at the shopping complex to ensure proper regulation of CO 2 levels inside the building. Sensor lights installed at the carpark to reduce energy consumption

Currently, the shopping complex’s green initiatives are managed by two different departments. The Mechanical & Engineering Department is responsible for the implementation of energy saving initiatives whilst the Housekeeping Department spearheads the recycling initiatives at the building. The Issuer has developed Guidelines for Energy Efficiency and Sustainability for the tenants of the building. The guideline is intended to provide actionable strategies and practices that can be used to improve energy efficiency and resource consumption. In addition, the Issuer represented that building management performs quarterly environmental audits on the tenants. RAM opines an active tenant engagement program can help to broaden the awareness levels on the importance of going green. More importantly, tenant education and behavior modification are vital to create an effective sustainability management program for buildings. As a measure of best practice, RAM encourages the Issuer to establish measurable conservation targets (especially energy and water) for the building. Long term goals provide a reference point against which performance is measured. In addition, target-setting can provide valuable insights into the design, implementation and evaluation of the building’s environmental action plans. RAM opines clearly defined targets can also help the Issuer to prioritise actions and investments into energy, emissions and resource savings. Examples of commonly-used targets for buildings include percent savings or reductions, desired energy use intensity target, etc. In addition to green features, truly sustainable buildings also ought to improve the wellbeing of tenants, customers and visitors. To this end, the Issuer has embarked on the following initiatives; i. 97 security guards have been hired to ensure safety and security of tenants and visitors. ii. The building is designed to improve accessibility for less-abled persons. iii. Community-focus activities conducted at the integrated complex. Past initiatives include art exhibitions, orphanage visit and hosting a charity event. iv. Satisfaction surveys carried out at [email protected] to solicit feedback on mall-related facilities, transportation hub, F&B outlets and shopping outlets. Target group for the survey includes passengers, shoppers and tenants.

4.4. Bond Positive Impact Creation The following section is a high-level assessment of the potential sustainable benefits that can be derived from Segi Astana’s [email protected] integrated complex. RAM opines the integrated complex will contribute towards (i) lower climate impact and (ii) stimulate local economic development. Buildings generally consume significant amount of energy and produce CO2 emissions during their long life-span. Given their significant impacts, green buildings can be an effective strategy to reduce the threat of climate change. Incorporating sustainable design and engineering measures in buildings can substantially transform the built environment to be more climate-friendly. As a result, green buildings make an important contribution towards Sustainable Development Goal 11: Sustainable Cities and Communities. The [email protected] integrated complex is a green building that has been certified as LEED Silver. The LEED rating system requirements provide a sound guideline for the Issuer to improve the building performance and managing climate impact. According to the U.S. Green Building Council, the average LEED certified building uses 32% less electricity when compared to a conventional building and saves 350 metric tons of CO2 on an annual basis.

Segi Astana Sdn Bhd

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The [email protected] shopping complex is integrated with the Kuala Lumpur International Airport 2 (“KLIA2”) terminal. The shopping complex has approximately 350,000 square feet of retail space that spans over 4 levels. In addition, the shopping complex is also connected to the local transportation network that includes the KLIA Express Train, taxis, rented cars, buses and private transport. In 2016, KLIA2 handled 27.1 million passenger movements. Combined with the Kuala Lumpur International Airport Main Terminal 15, the airport currently caters to more than 60 airlines that serve more than 130 direct destinations16. With passenger traffic from various parts of the world, KLIA is one of the most highly transited airports in Southeast Asia. Airports are increasingly being viewed as an important node that drives economic and social progress. As a key transport infrastructure asset, RAM opines the [email protected] shopping complex makes a vital contribution to the local economic development. Integrated with the KLIA2 airport terminal, [email protected] stands to benefit from the airport’s growing traffic. The shopping complex operates 24/7 as a commercial activity center serving domestic and international tourists as well as employees working at the airport. Further, the shopping complex also provides direct and indirect employment opportunities in the retail outlets, food & beverage services and mall maintenance. As at November 2017, there are 108 active tenants at the shopping complex. In this regard, [email protected] helps to contribute towards Sustainable Development Goal 8: Decent Work & Economic Growth.

15

The KLIA Main Terminal Building is directly connected to the KLIA2

16

Malaysian Airport Holdings Berhad 2016 Annual Report – page 56 & 57 Segi Astana Sdn Bhd

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APPENDIX 1

Segi Astana Sdn Bhd

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APPENDIX 1 – ASEAN GBS EXTERNAL REVIEW FORM ASEAN Green Bond / ASEAN Green Bond Programme External Review Form (modified by RAM from the Green Bond / Green Bond Programme External Review Form by the International Capital Markets Association (“ICMA”). This checklist provides a broad overview of the Issuer’s framework against the requirements of the ASEAN Green Bond Standards.)

Section 1.

Basic Information

1. Issuer name: Segi Astana Sdn Bhd (“Segi Astana”) 2. Green Bond ISIN or Issuer Green Bond Framework Name, if applicable: Segi Astana Green Bond 3. Completion date of this form: 22 November 2017 ■ Yes 4. ASEAN Issuer: ☐ No 5. Location of eligible Green Project:

Section 2.



Brunei



Myanmar



Cambodia



the Philippines



Indonesia



Singapore



Lao PDR



Thailand



Malaysia



Vietnam

Review overview

SCOPE OF REVIEW The following may be used or adapted, where appropriate, to summarise the scope of the review.

The review assessed the following elements and confirmed their alignment with the ASEAN GBS: ■ ■

Use of Proceeds Management of Proceeds

■ ■

Process for Project Evaluation and Selection Reporting

ROLE(S) OF REVIEW PROVIDER ■

Consultancy (incl. 2nd opinion)



Certification



Verification



Rating



Other (please specify):

Note: In case of multiple reviews / different providers, please provide separate forms for each review.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable) Please refer to Second Opinion Report on Segi Astana ASEAN Green Bond prepared by RAM Consultancy Services Sdn Bhd. Segi Astana Sdn Bhd

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Section 3.

Detailed review

Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review.

1. USE OF PROCEEDS Overall comment on section (if applicable): The proceeds from the Green Bond will be exclusively used to: (i) refinance the outstanding Medium-Term Notes Programme guaranteed by Danajamin Nasional Berhad of RM400.0 million, including any accrued interest thereto; (ii) repay related company’s advances; and (iii) defray any fees and expenses in relation to the Medium-Term Notes facility. The outstanding Medium-Term Notes were issued on 10 January 2012 to finance the construction and development of [email protected] integrated complex. In June 2017, the [email protected] integrated complex has achieved a LEED Silver certification under the LEED (Leadership in Energy and Environmental Design) rating system certification established by the U.S. Green Building Council17. The certification attained is based on the LEED 2009 Core and Shell Development criteria.

1. Use of proceeds categories as per ASEAN GBS: ☐

Renewable energy



Energy efficiency



Pollution prevention and control



Environmentally sustainable management of living natural resources and land use



Terrestrial and aquatic biodiversity conservation



Clean transportation



Sustainable water and waste water management



Climate change adaptation



Eco-efficient products, production technologies and processes



Green buildings which meet regional, national or internationally recognised standards or certifications.



Other (please specify):

If applicable please specify the environmental taxonomy, if other than ASEAN GBS:

2. Overall comment on specific Green Projects to which the ASEAN Green Bond proceeds will be allocated (if applicable):

All proceeds will be exclusively used (i) refinance the outstanding Medium-Term Notes Programme guaranteed by Danajamin Nasional Berhad of RM400.0 million, including any accrued interest thereto; (ii) repay related company’s advances; and (iii) defray any fees and expenses in relation to the Medium-Term Notes facility. The outstanding Medium-Term Notes Programme were issued to finance the construction and development of [email protected] integrated complex. 17

Established in 1993, the U.S. Green Building Council is a non-profit organisation focused on promoting on sustainability in building design, construction and operation. Segi Astana Sdn Bhd

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3. Overall comment on the environmental benefits of the Green Projects: The [email protected] integrated complex is a green building that has been certified as LEED Silver. Buildings generally consume significant amount of energy and produce CO2 emissions during their long life-span. Given their significant impacts, green buildings can be an effective strategy to reduce the threat of climate change. Incorporating sustainable design and engineering measures in buildings can substantially transform the built environment to be more climate-friendly.

2. PROCESS FOR PROJECT EVALUATION AND SELECTION Overall comment on section (if applicable): The LEED certification is an internationally-recognised green building rating system developed by the U.S. Green Building Council in 1998. LEED has become one of the world’s most widely used green building rating system, with more than 92,000 projects participating in LEED across 165 countries and territories. The Proposed Green Bond is a one-off issuance intended only for the LEED-certified [email protected]

1. Overall comment on the environmental sustainability objectives of the issuer: The issuer is committed to play its part in helping to create an environmentally sustainable future via proper energy and resource management of [email protected] integrated complex.

2. Evaluation and selection ☐ ☐

Defined and transparent criteria for projects eligible for Green Bond proceeds Summary criteria for project evaluation and selection publicly available

☐ ■

Documented process to determine that projects fit within defined categories Other (please specify): The LEED certification exercise provides reasonable assurance that the building is green.

3. Overall comment on the eligibility criteria, exclusion criteria or any other process to identify and manage potentially material risks associated with the Green Projects: External verifier, EAG Consulting Sdn Bhd, was appointed to certify the building against the requirements of LEED. The LEED components provide a sound framework for the issuer to identify and evaluate environmental factors that are important for buildings. The integrated complex comprises several green features. The green initiatives are managed by two different departments of Segi Astana: (i) Mechanical & Engineering Department; and (ii) Housekeeping Department.

4. Information on responsibilities and accountability of evaluation criteria ■ Evaluation / Selection criteria subject to ☐ In-house assessment external advice or verification Other (please specify): ☐

Segi Astana Sdn Bhd

16

3. MANAGEMENT OF PROCEEDS Overall comment on section (if applicable): The proceeds from the Green Bond will be used immediately to (i) refinance the outstanding Medium-Term Notes Programme guaranteed by Danajamin Nasional Berhad of RM400.0 million, including any accrued interest thereto; (ii) repay related company’s advances; and (iii) defray any fees and expenses in relation to the Medium-Term Notes facility.

1. Tracking of proceeds: ☐

Green Bond proceeds segregated or tracked by the issuer in a systematic manner ☐ Credited into a sub-account ☐ Moved to a sub-portfolio Other (please specify) : ☐

☐ ■

Disclosure of intended types of temporary investment instruments for unallocated proceeds Other (please specify): Proceeds will be immediately used to repay. No tracking of proceeds required.

2. Additional disclosure: ☐

Allocations to future investments only





Allocation to individual disbursements



Allocations to both existing and future investments Allocation to a portfolio of disbursements



Disclosure of portfolio balance of unallocated proceeds



Other (please specify): Proceeds will be immediately used to repay. No tracking of proceeds required.

4. REPORTING Overall comment on section (if applicable): The Issuer has committed to report annually the following via the website of [email protected]: (i) Energy Use Intensity (kWh per square meter); (ii) Carbon Emissions (metric tons of CO2 per square meter); (iii) Water Intensity (cubic meter per square meter); and (iv) Sale of Recyclable Items (Kg).

1. Commitment to make the following publicly available on a website designated by the Issuer: i) Process for project evaluation



Yes



No

ii) Use of proceeds



Yes



No

iii) External review report on the process of project evaluation (if any)



Yes



No

☐ Not Applicable

iv) External review report on the internal tracking method and allocation of funds (if any)



Yes



No



Segi Astana Sdn Bhd

Not Applicable

17

2. Commitment to appoint a third party to verify internal tracking method and allocation of funds from proceeds

☐ Yes

☐ No



Not Applicable

3. Use of proceeds reporting: ☐

Project-by-project



On a project portfolio basis



Linkage to individual bond(s)



Other (please specify):



GB financed share of total investment



Semi-annual

Information reported: ☐ Allocated amounts ■ Other (please specify): 100% used to repay.

Frequency: ☐Annual

■ Other (please specify): One-off. The drawdown is one off only.

4. Impact reporting: ☐

Project-by-project



On a project portfolio basis



Linkage to individual bond(s)



Other (please specify): Related to the [email protected] shopping complex.

Information reported (expected or ex-post): ■ GHG Emissions / Savings



Energy Savings

■ Other ESG indicators (please specify): Water intensity and Sale of Recyclable Items.

Frequency: ■ Annual



Semi-annual

☐ Other (please specify): 5. Means of Disclosure ☐

Information published in financial report



Information published in sustainability report



Information published in ad hoc documents Reporting reviewed (if yes, please specify



Other (please specify): Website of [email protected]



(http://gatewayklia2.com.my/)

which parts of the reporting are subject to external review):

Where appropriate, please specify name and date of publication in the useful links section.

USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.) Website of [email protected] (http://gatewayklia2.com.my/)

Segi Astana Sdn Bhd

18

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE Type(s) of Review provided: ☐

Consultancy (incl. 2nd opinion)



Certification



Verification / Audit



Rating



Other (please specify):



Not Applicable

Review provider(s):

Date of publication:

ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE ASEAN GBS (i)

Consultant Review: An Issuer can seek advice from consultants and/or institutions with recognised expertise in environmental sustainability or other aspects of the issuance of ASEAN Green Bonds, such as the establishment/review of an Issuer’s ASEAN Green Bonds framework. “Second party opinions” may fall into this category.

(ii)

Verification: An Issuer can have its ASEAN Green Bonds, associated ASEAN Green Bonds framework, or underlying assets independently verified by qualified parties, such as auditors. In contrast to certification, verification may focus on alignment with internal standards or claims made by the Issuer. Evaluation of the environmentally sustainable features of underlying assets may be termed verification and may reference external criteria.

(iii) Certification: An Issuer can have its ASEAN Green Bonds or associated ASEAN Green Bonds framework or use of proceeds certified against an external green assessment standard. An assessment standard defines criteria, and alignment with such criteria is tested by qualified third parties/ certifiers.

(iv) Rating: An Issuer can have its ASEAN Green Bonds or associated ASEAN Green Bonds framework rated by qualified third parties, such as specialised research providers or rating agencies. Green bond ratings are separate from an Issuer’s environmental, social and governance rating as they typically apply to individual securities or ASEAN Green Bonds frameworks/programmes.

Segi Astana Sdn Bhd

19

APPENDIX 2

Segi Astana Sdn Bhd

20

APPENDIX 2 – LIST OF DOCUMENTS REVIEWED

No. 1

Document LEED Certification Review Report

2

Tenant Guidelines for Energy-Efficiency and Sustainability

3

Green Building Activity

4

[email protected] CSR Program

5

[email protected] Customer Satisfaction Survey Report

6

Standard Operating Procedure for Waste Disposal

7

2016 WCT Holdings Berhad Annual Report

8

Organisation Chart of Segi Astana

9

Green Bond Framework of Segi Astana

10

2016 Malaysian Airports Holdings Berhad Annual Report

11

2016 Malaysian Airports Holdings Berhad Sustainability Report

Segi Astana Sdn Bhd

21

APPENDIX 3

Segi Astana Sdn Bhd

22

APPENDIX 3 – LEED CERTIFICATE RECEIVED BY [email protected] MALL

Segi Astana Sdn Bhd

23

APPENDIX 4

Segi Astana Sdn Bhd

24

APPENDIX 4 – LEED CERTIFICATION REVIEW REPORT

Segi Astana Sdn Bhd

25

ABOUT RAM RAM Consultancy was incorporated on 31 May 2000 as a wholly-owned subsidiary of RAM Holdings Berhad. RAM Consultancy Services provides specialised services for public sector agencies and private sector businesses. These services leverage on RAM Group’s expertise and resources developed over the years in Sustainability Rating, Green Bonds, Sustainability Reporting, Credit Rating, Risk Management Advisory, Strategic Business Advisory and Economics Consultancy. On 11 August 2017, RAM Consultancy was approved to be a registered observer of the Green Bond Principles developed by ICMA. RAM Consultancy is the first ASEAN-based organisation to be admitted to the list of observers. RAM Holdings was set-up by Bank Negara Malaysia (Central Bank of Malaysia) in November 1990 as Malaysia’s first credit rating agency to spearhead the development of the Malaysian debt capital market. This has been highly successful as the Malaysian debt capital market has grown to be the largest debt capital market in developing economies. Over the last 27 years, RAM Holdings and its wholly-owned subsidiary, RAM Rating Services Berhad, has facilitated the raising of more than USD260 billion of funding in the form of both bonds and sukuk (Islamic bonds) that have primarily funded the many world class infrastructure in Malaysia. RAM Ratings is consistently voted as one of the leading credit rating agency in Asia and is currently the global market leader in Islamic Finance. In May 2016, RAM Ratings became one of six founding signatories to sign on to the United Nations-supported Principles for Responsible Investment’s (“UN-PRI”) Statement on ESG in Credit Ratings. The RAM Group (comprising RAM Holdings, RAM Ratings, RAM Solutions and RAM Consultancy) have extensive experience in project finance structures and comprehensive knowledge of issues influencing the Malaysian and regional financial markets. RAM’s network of clients includes domestic and international financial institutions, investors, corporates, government and public agencies. For more information, please visit https://www.ram.com.my/home/

Segi Astana Sdn Bhd

26

Disclaimer RAM Consultancy receives compensation for its opinion services which are normally paid by the issuers of Green Bond/SRI Sukuk. The receipt of this compensation has no influence on RAM Consultancy’s analytical process, diligence and professional opinion. In all instances, RAM Consultancy is committed to preserving the objectivity, integrity and independence of its opinion. RAM Consultancy is not aware of any conflict of interest relating to the opinion it provides in this report. RAM Consultancy will adequately disclose all related information in the report if there are such instances. In preparing this report, RAM Consultancy relied on information provided by the issuer. Therefore, RAM Consultancy does not warrant that the information contained herein is complete, accurate or up to date. This report explains why the proposed Green Bond/SRI Sukuk issuance is considered sustainable and responsible. The report is prepared for consumption of the readers of our Second Party Opinion and RAM Consultancy will not be liable for the substance of the opinion and/or any liability for damage arising from the use of our Second Party Opinion and/or the information contained in the report. Our report is not a recommendation to buy or sell securities. It is also not a credit assessment on the proposed Green Bond/SRI Sukuk. This Second Party Opinion may not be reproduced, transmitted or published in any form or by any means without the prior written permission of RAM Consultancy. All rights are reserved by RAM Consultancy.

Published by RAM Consultancy Services Sdn Bhd Reproduction or transmission in any form is prohibited except by permission from RAM Consultancy Services Sdn Bhd.  Copyright 2017 by RAM Consultancy Services Sdn Bhd

RAM Consultancy Services Sdn Bhd (515578-M) Suite 20.01, Level 20 The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur T: (603) 7628 1000 / (603) 2299 1000 F: (603) 2711 1701 E: [email protected] W: www.ram.com.my