Lendlease Annual Report 2021

The Board recognises that the five focus areas of value creation, supported by disciplined governance and risk management, contribute to performance and drive the long term value of our business. During the year, in addition to the responsibilities and tasks set out in the Charter documents, the Board and Board Committees deliberated on the following specific matters and undertook a number of activities to support value creation. While these do not represent the full scope of Board activities, they highlight some of the areas of focus by the Board. Supporting value creation Health and Safety Material Issue: Operating safely across our operations and projects. Maintaining the health and wellbeing of our employees and those who engage with our assets and sites. The Board and Risk and Sustainability Committees undertook the following activities as part of their continued review of the Lendlease Health and Safety Framework and the unwavering commitment to the safety of our people and those who interact with Lendlease assets and sites. Activities and actions: • Formed a Board subcommittee to receive and discuss the measures and actions taken in response to two fatalities on two of our operations, at Curtin University and at Setia City Mall, Malaysia • In conjunction with the Risk Committee, received reports on the formation of the Design Risk Appetite Policy and endorsed the appointment of a Group Chief Engineer to strengthen the approach to safety and quality issues across the Group from a technical perspective • Received reports on the revised approach to the global safety standards to be applied in the updated Global Minimum Requirements (GMRs), released in March 2021 • Every Board member undertook the EH&S Passport training in May 2021 to understand the application of the 2021 GMRs and the role that our people play in safety • Received status updates on the completion of the mandatory online EH&S Passport training by our people. 95 per cent of our global workforce completed the EH&S Passport within 90 days of launch • In tandem with the People & Culture Committee, led the work on the approach to setting the guiding principles to manage remuneration adjustments following safety incidents • Continued to address the health and safety culture through on site and virtual site visits and received reports from management on the ways that safety issues were being managed on these projects • Received reports on the promotion of our health and safety expectations of our business partners • Received reports from business leaders on the ways that they had shared lessons learned from Level 3 critical incident reports. Financial Material Issue: Delivering securityholder returns. Maintaining strong capital management to enable investment in our future pipeline. The Board and Audit and Risk Committees undertook the following activities to help fulfil the Board’s oversight responsibilities in delivering returns to securityholders and by adopting a prudent approach to capital management with a view to maintaining a strong balance sheet throughout market cycles. Activities and actions: • Continued to consider project approvals in the context of the Portfolio Management Framework, with the object to maximising long term securityholder value • Formalised the audit tender policy so that at least once every ten years, an external audit tender is conducted, and if this has not been conducted within the ten year period, provide an explanation to securityholders in the Annual report as to the reasons for not conducting a tender • Continued to receive reports on how the risk appetite framework is gaining traction in the business, both at a project approval and enterprise level to drive more informed and consistent decision making • Received reports and monitored engagement with credit rating agencies on the Group’s rating outlook. Moody’s credit rating improved from Negative to Stable following completion of Engineering sale • Endorsed the Lendlease $500 million Green Bond which successfully launched in October 2020 and a further $300 million Green Bond in March 2021 to become the largest green bond issued by an Australian non financial corporate. The proceeds of the bond will be focused on green buildings and earmarked to eligible projects in Lendlease’s global portfolio, consisting of 23 major urbanisation projects • Oversaw the exit of the Engineering business and the operating framework for the delivery of remaining Engineering projects and the exit strategy for the Services business • Finalised the Core business ‘Go Forward’ strategy through the strategy refresh process and the communications of this to market. Sponsored through Board involvement five implementation workstreams to support the ‘Go Forward’ strategy. Our Customers Material Issue: Understanding our customers and responding to changes in the market. Designing and delivering innovative, customer driven solutions to win the projects we want to win and ultimately deliver the best places. The Board and its committees undertook the following activities as part of its support of the Group’s customer focused approach and to embed a process of continuous improvement based on customer insights and actions. Activities and actions: • Endorsed the Group Customer Complaint Handling & Feedback Policy setting a minimum standard across the Group. Continued to receive reports on customer engagement, types of complaints and resolution timeframes for every region • Received reports on the progress of the Digital Strategy and the product development achievements of digital initiatives • Received a report on the application and Lendlease preparation for the Australian Government Payment Times Reporting Scheme for small business suppliers • Received external reports on the measuring of Board effectiveness as viewed by external investors. Continued the engagement program of major Board stakeholders through FY21 • Received a deep dive report from the Americas CEO to brief the Board on key customer relationships relevant to the US residential portfolio. Our People Material Issue: Attracting, developing and retaining diverse talent. Ensuring we have the right capability across the organisation to deliver results for all stakeholders. The Board, People and Culture Committee and Nomination Committee undertook the following activities to help attract, develop and retain diverse talent and to monitor the investment in developing leaders and capabilities. Activities and actions: • A key focus of the Board has been the CEO succession process, which came to a successful conclusion with Tony Lombardo formally taking over the role on 1 June 2021. This has been a disciplined process supported by an external advisor who assisted the Board in development of the leadership cohort • Reset CEO remuneration downwards and in line with market expectations. Oversaw the alignment of the structure of executive remuneration at Lendlease with the new CEO’s package • Endorsed changes to the Global Leadership Team with new external hires announced: Simon Dixon as Chief Financial Officer and Deborah Yates as Chief People Officer. Endorsed the new organisation structure at Lendlease • Continued the program of board refreshment by actively reviewing Board composition against the skills matrix • Continued to review and discuss the Group’s talent management and strategic resourcing strategy and endorsed actions to provide greater transparency on the talent process. Engaged with regional senior leaders through virtual meetups to continue engagement with the Board to gain greater visibility of the emerging pool of potential internal successors to the GLT • Approved a one-off payment to frontline and customer facing staff from the Hardship and Wellbeing Fund (seeded in part by the voluntary fee reduction agreed by Non Executive Directors and Lendlease senior executives) in recognition of the challenges presented by the COVID pandemic. Sustainability Material Issue: Designing, delivering and operating buildings and precincts that respond to the immediate challenge of reducing carbon emissions, while creating social value. Meeting the increasing expectations of key stakeholders for climate resilient assets that support human health and value natural capital. The Board and Sustainability Committee engaged in the following activities to help deliver inclusive, healthy and adaptable places that can thrive through change. Activities and actions: • Approved a commitment to reconciliation by endorsing the Group’s Reconciliation Action Plan which achieved ‘Elevate’ status in November 2020. Requested that management implement a quarterly reporting program to report on the progress of initiatives outlined in the Elevate RAP • Engaged with management, attended workshops and endorsed the Group’s two new sustainability targets to reflect the Group’s commitment to: - Net Zero Carbon for Scope 1 and 2 emissions by 2025, and Absolute Zero Carbon by 2040 - Delivering $250 million of measured social value by 2025 • Requesting that management implement quarterly progress reporting against both the carbon and social value targets • Received regular reports on ethical supply chains within the Group to ameliorate the risk of material substitution and modern slavery. Endorsed the 2020 Modern Slavery Statement following regular presentations from management • Continued to receive reports on the Group’s approach to social housing • Conducted a deep dive review of the ESG reporting frameworks and indices to understand in further detail various reporting and rating schemes • Received reports on the assessment against project approvals against the Group’s Environmental and Social Risk Assessment framework since launching in 2020 • Requested and received a report on the review of the Group’s approach to climate against ACSI’s new climate policy • Continued to receive reports at every meeting on the progress against the Task Force on Climate-related Financial Disclosures risk assessment and reporting framework • Received a case study on sustainability leadership in action focusing on the 1 Java, NewYork project and the risk assessment of different river flood impacts across the time horizons of now, 2050 and 2100 • Received regular reporting on the Lendlease FutureSteps initiative to address affordable and housing issues. Conducted a site visit of a partnership project with St George Community Housing in Redfern, Sydney. 81 A sense of place 80 Lendlease Annual Report 2021 Governance