CLS : Sustainability Report 2023

Proactive Sustainability Solutions

CLS Holdings plc

Sustainability Report 2023

Welcome to our new Sustainability Report, in which we set out our commitments and progress against our Sustainability Strategy ambitions and interim targets.

Companion to the 2023 Annual Report

This report contains metrics and information to cover multiple sustainability and ESG frameworks and is to be read alongside the 2023 Annual Report. The Annual Report provides a high level summary on ESG as well as required regulatory disclosures.

Contents

Chief Executive's review 02

Q&A: In discussion with Will Ray 03

Sustainability Strategy to 2030 05

Performance Metrics and Reporting 06

Social 27

Our Social Strategy 28

2023 Focus Areas & Performance 29

Social Value 30

Stakeholder Engagement 35

Our People 36

Health & Safety 39

• 07 Environment

• 08 Our Environment Strategy

• 09 2023 Focus Areas & Performance

• 10 Energy & Carbon

• 15 Climate-related Risks & Opportunities

• 24 Environmental Impacts

• 41 Governance

• 42 Our Governance Strategy

• 43 2023 Focus Areas & Performance

• 44 Sustainability Governance & Reporting Frameworks

• 46 Sustainability Risk

• 47 Sustainability Risk Register Summary 2023

• 49 Compliance and Business Ethics

• 50 Appendices

• 51 Extended Sustainability Metrics

• 59 Scope, Boundaries & Methodology 2023

Chief Executive's review

Fredrik Widlund

Chief Executive Officer

Dear Stakeholders,

It is with a sense of both pride and responsibility that I introduce CLS Holdings' new dedicated Sustainability Report for 2023. It presents a comprehensive overview of key sustainability performance data as well as the environmental, social, and governance (ESG) initiatives we have undertaken throughout the past year.

Importantly, we have made progress against some of our key targets and commitments from our Sustainability Strategy and Net Zero Carbon Pathway. Sustainability remains a strategic imperative for CLS. This report is a testament to our dedication to transparency, accountability, and measurable progress in addressing key ESG issues.

In recent years we combined our detailed ESG reporting with the Annual Report. However, as a listed business aiming to match best practice in the UK and EU, the volume of content had become too much for a single report. So, we took the decision to create this separate report, published alongside our Annual Report, to meet the needs of our stakeholders.

Throughout this report, you will find detailed insights into our efforts, from innovative energy-saving initiatives to growing our social value., We have continued to take further significant strides to align our assets and operations with a sustainable future.

This year we have continued to reduce our greenhouse gas emissions and energy use in all three countries we operate in, capitalising on previous investments and rolling out more energy saving measures.

IMPORTANTLY, WE HAVE MADE PROGRESS AGAINST SOME OF OUR KEY TARGETS AND COMMITMENTS FROM OUR SUSTAINABILITY STRATEGY

AND NET ZERO CARBON PATHWAY.

This report also highlights the initiatives we have implemented to foster social value in the communities we operate in. The 37% improvement we made includes donations, volunteering and our work with youth skills and employability. These and other social initiatives aim to utilise our business to make a meaningful impact on people's lives and society.

The governance section of this report outlines our robust governance framework, risk management, policies and ethical standards that underpin our decision-making processes. Continuing good governance, integrity and transparency, are foundations of our long-term success.

This report is more than just a compilation of data and it shows we have not only identified key issues, but have taken concrete steps to address them. Our commitment extends beyond rhetoric, and we invite you to explore the tangible outcomes of our efforts as we strive for continuous improvement.

As we navigate today's challenges, we remain steadfast in our pursuit of a sustainable and responsible business model. Thank you for your commitment to sustainability, and we look forward to your engagement with CLS Holdings' 2023 Sustainability Report.

Fredrik Widlund

Chief Executive Officer, CLS Holdings PLC

Q&A

Will Ray

Head of Sustainability

Q. How has the CLS performed in its sustainability focus areas for 2023?

We made good progress against the sustainability key focus areas we set ourselves for 2023: achieving or partially achieving 17 out of 18 goals. Crucially, we are seeing energy and carbon reductions in different categories of 5% or more in line with our Net Zero Carbon Pathway.

We implemented sustainability actions in all three of our countries. In the UK, we completed our photovoltaic roll out with 111 kWp installed at 5 sites and we also have nearly 100 electric vehicle charging points installed at 18 sites.

In France, we continued preparations for Décret Tertiaire and rolled out our first electric vehicle chargers with plans for more.

In Germany, we continued the roll out of smart thermostats and completed the installation of smart water leak detection across all sites.

Q. What sustainability achievements are you most proud of over the last 12 months?

The further reductions we made in energy consumption and carbon emissions. We had significant energy savings across gas, electricity and district heating, making our buildings more future-ready.

KEY HIGHLIGHTS

17

OUT OF 18 OF OUR 2023 SUSTAINABILITY TARGETS WERE PARTIALLY OR FULLY MET

-8%

LIKE-FOR-LIKE DECREASE

IN LANDLOARD ENERGY CONSUMPTION

I'm also proud of the continued rapid expansion of our roof-top solar PV portfolio, now one of the largest for an office landlord in Europe. Measures like this help our occupiers to be more sustainable and, at the same time, position our assets as the most sustainable offerings in local markets.

Finally, the increasing social value CLS is able to generate, now estimated to be over £261,000, through our support for charities and the communities we work in with charity donations, volunteering and other activities.

Q. Are you still making progress on your Net Zero Carbon pathway?

We continue to implementing our clear programme of upgrades this year with a further 73 projects completed saving an estimated 741 tonnes CO2e. This is 28% more than last year.

Despite the surprise carbon factor increases, we still saw positive energy and carbon reductions across our regional portfolios and all utilities, culminating in a 5% reduction in greenhouse gas emissions overall this year. As expected the impact of our ongoing work has begun to show more broadly as we enabled operational energy management tweaks to increase energy savings.

Q. How is CLS handling increased regulatory standards around ESG?

CLS is well placed to respond to the demands and standards set by UK and EU regulators. This includes minimum energy efficiency standards in the UK, Décret Tertiaire in France and the EU Taxonomy and Corporate Sustainability Reporting Directive.

53% of our UK portfolio properties are now rated EPC A or B.

We have also begun implementation of a cloud-based sustainability data platform to allow us to more easily report to multiple frameworks and regulations, as well as feeding the growing tenant demands for data. Bringing data and reporting systems into one place will increase our efficiency.

Finally, we are keen to continue our work on improving data for insights and reporting. This includes further work on smart metering and our new data platform.

I'M ALSO PROUD OF THE CONTINUED RAPID EXPANSION OF OUR ROOF-TOP SOLAR PV PORTFOLIO, NOW ONE OF THE LARGEST FOR AN OFFICE LANDLORD IN EUROPE.

Q. What are your ESG focus areas for the year ahead?

We have taken the decision to narrow down our focus areas this year to key areas needing intensive work.

Again, building on our work to deliver energy and carbon reductions through energy management and investment, we are targeting to be in line with the reductions planned in our Net Zero Carbon Pathway.

We also want to work on improvements in other environmental areas like biodiversity and waste.

On social value, now that we have an initial baseline, our goal is to focus our work, broaden our measurement and grow our social value particularly around helping young people with skills.

Sustainability Strategy to 2030

Our Sustainability Strategy, in place since 2021, maps the journey CLS will take up to 2030, with the key targets and milestones set appropriately to reflect the position we started from against each material element.

We believe that sustainable outcomes and shareholder returns are not a zero-sum game. Properly valuing and integrating sustainability risks and opportunities into our business strategy provides resilience to future disruption and unlocks potential for future growth.

Building a resilient business means taking steps to prepare and adapt before regulation requires it, or the environment and our customers demand it. A sustainable operating model and strategy reduces material risks to our reputation and balance sheet. Crucial to this is our commitment to being a Net Zero Carbon business by 2030.

Our strategy is summarised below.

Targets

For more detail seeour SustainabilityStrategy documenton our website.

Environmental

A positive environmental impact

We will invest in our properties and collaborate with occupiers to sustainably manage natural resources, support local environments and build resilience to climate risks; delivering future-ready assets.

Net Zero Carbon Pathway

See page 10

Social

Creating shared value

We will create and share value with our stakeholders by engaging collaboratively with our occupiers, supporting local communities and partnering with our supply chain.

Social Value Framework

See page 30

Governance

Being a responsible business

Strong governance and transparency will provide the basis for demonstrating our values, supporting people and working with our stakeholders to uphold high standards.

Monitoring and regulatory reportingSee page 44

Performance, Metrics and Reporting

2023 Performance

Our total Scope 1 and 2 GHG Emissions have decreased by 5% Like-for-Like in 2023 due to energy efficiency projects. Absolute emissions were up slightly, mainly due to the temporary effect of worsening carbon factors for electricity and district heating caused by the Ukraine war requiring more coal to be burnt to replace gas. That said, the introduction of 3 new buildings and major refurbishments also impacted.

As a part of this there has been a decrease in total landlord electricity consumption from the 70 like-for-like buildings of 4% across the Group and a reduction of 5% in tenant areas. Similarly, absolute electricity consumption in landlord spaces has decreased by 2% primarily resulting from energy efficiency projects. Scope 3 emissions remained high due to our larger spending on major construction and refurbishment projects.

Water consumption increased as offices continued to get more use by occupants post-pandemic, although waste across the Group decreased.

We have maintained the social metrics upon which we report as well. See the Social section of this report for more commentary.

Methodology

The scope, boundary and methodology adopted for the calculation of the Scopes 1, 2 and 3 GHG emissions, Streamlined Energy and Carbon Reporting ('SECR') metrics, and other environmental and social indicators are set out in the Sustainability Metrics: Scope, Boundaries & Methodology section at the back of this report.

Sustainability Metrics: Scope, Boundaries & MethodologySee page 58

Reporting frameworks

We align to EPRA sBPR, SASB and GRESB frameworks for reporting and benchmarking sustainability. The full tables, with splits by country, can be found in the Extended Sustainability Metrics section on pages 50 through 57. These include all the required regulatory disclosures as well as those for EPRA sustainability best practices reporting guidelines and SASB indicators as well as geographical splits of the data.

We also provide our annual sustainability data as a downloadable file from our website in CSV format for easy use.

Sustainability Governance & Reporting FrameworksSee page 44

Assurance

For a fourth year we engaged DNV, an independent expert in assurance and risk management, to undertake limited independent assurance on key EPRA SBPR metrics in our Annual Report. We have retained the expanded scope covering water, waste and Scope 3 emissions data indicators as well as our 2023 Scope 1 and 2 emissions and energy metrics. The specific metrics that have been subject to assurance are identified in the Annual Report pages 34, 35 and 38 and in the extended data table in the Appendices of this report.

A copy of DNV's Assurance Statement can be found on our website.

Having reviewed our processes during assurance, we have identified several metrics from previous years that require restating to ensure alignment with the 2023 methodology. The restated figures have not been subject to assurance and are identified by appropriate footnotes in the data tables.

2023 Highlights

LIKE-FOR-LIKE DECREASE IN TOTAL GROUP SCOPES 1 & 2 GHG EMISSIONS

ELECTRIC VEHICLE CHARGING POINTS AVAILABLE TO TENANTS

5%

>100

PROPORTION OF TOTAL GROUP ELECTRICITY FROM RENEWABLE OR CARBON-FREE SOURCESNET ZERO CARBON PATHWAY PROJECTS COMPLETED

99.5%

73

EQUIVALENT SOCIAL VALUE GENERATED (EXCLUDING SUPPLY CHAIN)SOLAR PHOTOVOLTAIC PANELS INSTALLED

£261,948 111kWp

EMPLOYEE VOLUNTEERINGSMART WATER LEAK DETECTION SYSTEMS INSTALLED

HOURS COMMUNITY AND CHARITABLE ORGANISATIONS

29

985 hours

Environment

In this section

Our Environment Strategy 08

2023 Focus Areas & Performance 09

Energy & Carbon 10

Climate-related Risks & Opportunities 15

Environmental Impacts 24

Our Environment Strategy

A positive environmental impact

We will invest in our properties and collaborate with occupiers to sustainably manage natural resources, support local environments and build resilience to climate risks, delivering future-ready assets

Applicable

2024 Focus Areas

UN Goal

Target

Applicable Indicator

Net Zero

• • Scope 1 & 2 GHG emissions reduced by 5%, on a like-for-like basis

  Energy & Carbon - Reduction in carbon emissions and energy use in line with the Net Zero Carbon pathway model (3% like for like)

  7.2 7.2.1

  7.3 7.3.1

  Affordable and clean energyOur properties and operations will be Net Zero Carbon by 2030 in line with Science Based Targets and CRREM pathways

• • Reduced landlord energy consumption by 8%, on a like-for-like basis

• • Reduction in Group energy consumption by 8%Energy & Carbon - Ensure completion of relevant planned NZC energy efficiency and PV projects for 2024 and capex plans set for key large NZC projects due prior to 2030

  12.5 12.5.1

  BREEAM

• • 73 out of planned 118 energy efficiency projects completed

  12.6 12.6.1

  Responsible consumption and productionAll new developments to achieve a minimum of BREEAM 'Excellent' (or equivalent)

• • 111 kWp solar PV capacity installedData - Review utilities metering and monitoring systems in each region and action any changes required to ensure they are providing accurate and timely data that is beyond reproach

  13.2 13.2.2

  Reduce water consumption

• • Over 50% of our UK portfolio is EPC A or B rated with plans in place to upgrade all EPC D rated buildings to B, by at least 2030

• • Embodied carbon assessments undertaken at new developments - The Coade and Artesian

  Climate action

  15.5 15.5.1

  Like-for-like portfolio reduction in potable water consumption of 20% from 2019 by 2030

• • Smart metering coverage now stands at 77% across main utilities

  Life on land

  Rewild

• • Waste management awareness days undertaken across worst performing sites in the UK

  Rewild 10% of maintained grassland under management by 2025

• • New UK landscaping contract includes biodiversity, rewilding and ecology requirements in line with our net-gain target

• • BREEAM In-use V6 assessments undertaken across UK, French and German portfolios ensuring compliance with the leading operational building performance standard

UN SDGs Covered

Long-Term Targets

Strategy Progress

2023 Focus Areas & Performance

FOCUS AREA

Reduce carbon emissions and energy use in line with the Net Zero Carbon Pathway (4% like-for-like) and complete planned energy efficiency and PV projects

Reduce energy intensity in top 15 energy-consuming buildings by 5% or more compared to 2022

Maintain or improve EPC (or country equivalent) ratings and the plans to upgrade all D-rated buildings in the UK

Undertake pilot assessments on embodied and whole life carbon for achieving net zero carbon buildings

Increase smart meter roll out for all utilities to >80% coverageUndertake waste education initiatives at assets covering >80% waste generationRelease Biodiversity Net Gain and Rewilding Plan and commence implementationStart update to BREEAM In-use V6 whilst maintaining ratings and clear plans to reach at least 'Very Good'

AchievedPartially achievedNot achieved

COMMENT

Scope 1 & 2 GHG emissions reduced by 5% like-for-like, only exceeding the annual NZC Pathway target due to worsening electricity carbon factors

Energy use reduced by 8% including district heating use down by 12%, and landlord electricity down by 8% 73 out of 118 planned Net Zero Carbon Pathway projects completed costing £4.8 million and saving an estimated 741 Tonnes of CO2e per year

Made significant gas and electricity reductions at most of our larger buildings Spring Mews had 51% gas savings from recommissioning the ground source heat pump system

Electricity use reductions included 16% at Harman House, 18% at Thameslink House and 14% at Hygeia

Over 50% of our UK properties now have EPCs of B or A

Some challenges with new EPC calculation method has meant one building was rerated as E. However, we have developed plans to improve all EPC D & E rated buildings to B No major changes in French & German building ratings

Embodied Carbon Assessments completed at The Coade and Artesian (Prescot Street) alongside operational carbon assessments

The results showed the need to focus on embodied carbon reduction of future developmentsSmart metering established in 77% of main utilities including nearly all electricity and gas meters All German water meters include smart leak detection with further roll out for other regions in 2024

District heating utility meters unable to have smart meters fitted currentlyWaste education days held at all lower performing UK properties (7 sites)

Recycling average dropped to 49% and needs further work to improve including more waste reduction training will be done in 2024

New biodiversity, rewilding and ecology requirements included in UK landscape maintenance contract

Biodiversity and rewilding initiatives based on baseline assessments deferred to 2024/25

Updated 29 buildings to BREEAM V6 and maintained or improved ratings with clear plans to achieve 'very good' for each building