At the core of MPIC’s Sustainability Framework is our Mission to create long-term value for our stakeholders through six Core Drivers of our business that reflect the main roles, responsibilities and activities of the Parent Company — 1. Investment Selection and Portfolio Management, 2. Strategy Management and Leadership Selection, 3. Risk Management, 4. Good Governance and Ethical Business Practices, 5. Employee Welfare and 6. Social Responsibility.
In accordance with our Sustainability Framework, we monitor and evaluate our operating companies’ performance with respect to four pillars of sustainability: 1. Operational Efficiency, 2. Service Excellence, 3. Engaged Workforce and Safe Workplaces, and 4. Social Responsibility. The content of Part Two: Sustainability Impacts of this report aligns with these four pillars.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) STRATEGY
The Board of Directors regularly reviews the Company’s performance with respect to the six Core Drivers of our Sustainability Framework. Responsibility for execution of our strategies for sustainable development resides largely with of our operating companies’ respective leadership teams. Each operating company is required to:
- Assess sustainability issues that are relevant to its business
- Formulate and implement sustainability strategies through appropriate organizational structures
- Monitor and report ESG performance
Each major operating company has formed a Sustainability Working Team (“SWT”) to implement sustainability initiatives and collect and analyze relevant data. To support the operating companies, the Parent Company facilitates information sharing and harmonization of management approaches across the operating companies. The Parent Company SWT is responsible for analyzing and reporting ESG performance at group-level.
MATERIAL SUSTAINABILITY TOPICS ACROSS THE GROUP
We recognize that robust corporate governance is essential for long-term value creation in our business. In 2018, the Company affirmed its material compliance with the Code of Corporate Governance mandated by the Philippine Securities and Exchange Commission, the Philippine Stock Exchange and other regulatory authorities. Beyond compliance, we are committed to demonstrating leadership in good governance and to upholding the highest standards of ethical business conduct throughout our organization.
MPIC’s highest governance body is the Board of Directors led by the Chairman, which is composed of 15 Directors (three Executive Directors and 12 Non-Executive Directors), three of whom are Independent. It meets on average eight times a year to oversee management of the Company and ensure implementation of a robust governance framework.
In 2018, the composition of the Board included one female, and all members were over 50 years of age. In accordance with MPIC Guidelines on Search, Screening and Selection of Directors, the Board is composed of individuals with a wide spectrum of skills, experience and expertise, including leaders from each of our major operating companies. The large board allows MPIC to leverage board members’ sector knowledge and industry connections which are vital to steering the direction of the Company.
RELIANCE ON REGULATORY ENGAGEMENT
In evaluating our investment prospects, MPIC seeks to add value for customers and communities by improving the quality of infrastructure assets, enhancing the efficiency with which they are run, extending their coverage to more people and working closely with regulators to achieve shared goals.
With life cycles of 25 years or more, our infrastructure projects are by their very nature long-term. This means that our investments are intended to survive many political and economic cycles, and in managing our assets we expect to experience various regulatory and funding challenges from time to time. In order to recover the significant capital costs required for development and maintenance of high-quality infrastructure, our franchise and concession agreements provide for fair and transparent price increases.
However, just as the physical infrastructure in which we invest is underdeveloped, so, occasionally, are the political and economic institutions that support them. In our water, toll roads and light rail businesses, for example, regulators can be reluctant to approve various tariff adjustments. As far as possible, we take a constructive approach to these difficulties by working together with our counterparties to find satisfactory resolutions and not allowing setbacks to deter us from our corporate Mission, which is to be the leading Philippine infrastructure investment firm.
IMPACT OF CLIMATE CHANGE
Due to our geographical location, MPIC’s investments are vulnerable to the effects of earthquakes, volcanic eruptions and tropical storms, including strong winds, storm surge and heavy rains giving rise to landslides and extensive flooding. On average, the Philippines is affected by 20 typhoons per year, of which four or five may be considered “strong”, resulting in human casualties and moderate to heavy destruction of property.
In the face of uncertainty about the nature, scale and timeframe of environmental and social impacts that could be associated with climate change, MPIC adopts a precautionary approach to implementing cost-effective measures to manage and mitigate those risks in accordance with our long-term business objectives and willingness of regulators to approve the cost of these initiatives. We also support global efforts to mitigate the long-term effects of climate change and are studying how we can control emissions of GHGs.
By investing in the highest standards of infrastructure that our country can afford, such as reliable, clean and efficient coal-fired power generation, robust systems for water treatment, world-class expressways and enhanced light rail services, we expect that our portfolio of high-quality investments will continue to serve our business and our stakeholders productively for many years to come. Subject to cost considerations reflected in relevant concession and franchise agreements, our operating companies have purchased business interruption and environmental risk insurance to mitigate the risks of destruction to life and property, and are continuously reviewing and enhancing their business continuity processes, disaster recovery programs and crisis management capabilities.
Our approach to investment and management in the power sector focuses on developing, operating and maintaining socially and environmentally compatible energy sources and infrastructure.
In accordance with its franchise obligation and corporate mission to provide the best value in energy products and services, MERALCO manages the supply of electricity for distribution to its customers from a range of power sources including independent power producers, retail electricity suppliers and the WESM. In 2018, 39.1% of consolidated distributed electricity was sourced from natural gas plants, 29.9% from coal-fired plants, 0.2% from liquid fuels, including bio-fuels, and 30.9% from multi-fuel i.e. originating from coal, hydro, biomass and geothermal (2017: 37.5% natural gas, 34.1% coal, 1.6% liquid fuels and 26.8% multi-fuel).
MERALCO continues to achieve a steady reduction in system loss as a result of major investments in substation and distribution infrastructure as well as targeted implementation of system loss management and anti-electricity pilferage programs. The level of system loss in 2018, at 5.67%, improved 0.24 percentage points compared with the year before (2017: 5.91%). The difference between actual system loss and the declining level of the regulatory cap for system loss over the period 2008-2018 has saved MERALCO’s customers in excess of 39.6 billion, which is the equivalent of 0.11 centavos per kWh, and has also avoided 4,307 ktCO.e of GHG emissions. Since June 2018, the current level of the regulatory cap for system loss is 7.5%
To ensure compliance with relevant environmental standards and regulations, MERALCO monitors and installs pollution abatement systems to make sure that all emissions and discharges are within the allowable limits imposed by the regulating bodies.
As part of our overall sustainable development strategy, we are exploring various opportunities around the country to convert waste into energy. We recently finalized an agreement with Dole
Philippines—the local subsidiary of the world’s largest producer of fresh fruits, vegetables and cut flowers—to design, construct and operate integrated waste-to-energy facilities for its canneries in South Cotabato. These facilities will generate 5.7 MW of clean energy for Dole and reduce its GHG emissions by 100 ktCO2e per year. We are also leading a consortium with Covanta Energy and Macquarie Group to develop a 36 MW (net) waste-to-energy facility from up to 3,000 metric tons of municipal waste in Quezon City.
For more details, please refer to MPIC’s Sustainability Reports
10th Floor, Makati General Office Building
Legazpi corner Dela Rosa Street
Legaspi Village, 0721 Makati City, Philippines
10th Floor, Makati General Office Building
Legazpi corner Dela Rosa Streets
Legaspi Village, 0721 Makati City, Philippines
© 2019 Metro Pacific Investments Corporation