Robert Costelloe: Thank you so much for joining our series Gill. I think a lot of people know MTR as Hong Kong’s rail operator but of course there is a lot more going on. It would be great to get an overview of MTR, the business and the history, as well as something you feel people don’t typically know about the firm.

Gill Meller : So we’re set up in Hong Kong to design, construct, operate and maintain the metro system here. We now have 99 heavy rail stations as well as a small light rail network. Alongside the railway business we have a fairly large property business which funds our investments in the railway lines.

And when it comes to building a public transport system that works, one of the biggest issues is financial sustainability. Railway systems around the world typically don’t make money. You can’t charge the fares that would be needed to build new lines or upgrade the infrastructure. We’ve plugged that funding gap through the creation of mixed use property developments around and above stations, working with local property developers. The income we receive from these covers the investment we’ve made in the rail lines. This is fantastic for financial sustainability but also in building communities around railway stations and contributing to ridership.

But not many other places have been able to copy this model. One of the challenges is that railways elsewhere tend to be a lot older. Obviously it’s easier to roll out this model when you’re building the railway and property infrastructure at the same time. It is possible to retrofit – we’re looking at a scheme around Liverpool Street Station in London, UK, to put a property development on top which would allow for redevelopment of the station. This would be massively beneficial to the travelling public. Network Rail in the UK are exploring if this type of redevelopment could be done elsewhere in the country.

The other challenge is a project or scheme involving different roles, organisations or government entities. For us we build the railway, we operate it, we maintain it, and work very closely with the property developers. Typically each of these roles can sit with a different entity which can mean that interests aren’t necessarily aligned. The thinking can be getting the railway built as fast as possible, as cheaply as possible rather than thinking from a lifecycle perspective and how to really maximise the value of the space.

RC: A fascinating model. And zooming in on your role specifically, what does your day to day look like? What’s taking up your time?

GM: I’m a lawyer by background so my role encompasses looking after any legal issues we get involved in be it the negotiation of project agreements, issues relating to the construction of railway lines, HR issues and anything we come up against. I’m also responsible for our overall corporate governance framework.

And when we talk about ESG, in my world you always have to start with the ‘G’ because you must have a governance framework that allows you to identify your different stakeholders, understand what their concerns are, and try and make decisions that best balance the different interests. Within the ESG area, while my team are responsible for the overall strategy and for reporting progress on an annual basis, a lot of the work is done in the different business units themselves.

I also look after risk and assurance – so very much a second line of defence to spot issues before they become real issues – as well as a central procurement and supply chain function.

So every day can vary enormously. This morning I was discussing renewable energy, then catching up with one of our law firms. I then had a lunch meeting with one of our insurers about one of our new railway projects in Hong Kong. Later in the week I have an audit and risk committee meeting with the board who I have to report to on a regular basis, so every week is different.

RC: So digging more into ESG at MTR, what’s the approach and how do you bring everything together?

GM: At MTR we try to fit the E and the S into our broader governance framework. For example, we have an ‘ESG Fund’ which can be used for environmental and social investments that may not show an immediate financial return, or it can be used to fund an environmental or social improvement to a ‘business as usual’ investment. For example, if you wanted to replace a car fleet with electric vehicles and this cost more than replacing like for like, you could come to the ESG Fund to apply for that additional spend. But the amount of money set aside for that fund obviously needs to be put within the context of our overall financial position and financial sustainability.

From the E and the S perspective, we revamped our corporate strategy a couple of years ago and identified three environmental and social objectives that are material to us as a company, but also to society and in particular to Hong Kong – social inclusion, advancement and opportunities, and our green pillar.

For social inclusion, that’s very much at the heart of who we are as a public transport operator. And that social inclusion objective is broken down into three core areas. The first of these is universal basic mobility – working to make sure our transport systems are safe, accessible and affordable for everybody. The second area is workforce D&I. Hong Kong probably lags behind other places in the world on this so we’ve been doing a lot of work such as setting a target for female membership on our board, and driving D&I at the grassroots level. For example, do we need to translate some of our frontline work instructions from Chinese to English so that we can broaden the group of potential employees we can attract? The third area is equal opportunities – our community investments and donations.

Going back to the core environmental and social objectives of our corporate strategy, the second objective – advancement and opportunities – is really a reflection that as we grow as a business, we create opportunities for others to grow as well. That means our employees – the employment and pre opportunities we provide, particularly to younger people. It also means our supply chain – how are we generating opportunities for small and medium sized enterprises, and how can we work with them to improve our E and S performance and theirs. And it means innovation, technology and the startup ecosystem in Hong Kong. We have a commitment in terms of our investment in startups and are working with academic institutions here in Hong Kong so that we can support them and equally they can support us.

Finally under our green pillar we have a science-based target to reduce our carbon emissions by 2030 with a longer term goal of carbon neutrality by 2050. We are looking at reneweable energy generation and also energy efficiency. One of our initiatives is kinetic braking – so using the energy that’s produced when a train brakes and slows down. We also focus on waste management and put a lot of work into low carbon designs for our future railway and property developments.

On an annual basis, we’re setting KPIs across all these objectives and really it’s about thinking more strategically about E and S. In the past we did a lot but it was very scattered, with different parts of the business doing different things. The new framework allows us to be clear about what we do but also what we don’t do. For example, someone may approach us and talk about cleaning Hong Kong harbour. It’s important, but it’s not really relevant or material to us as a business. We’ve also done a lot of work to make sure our employees understand why we’ve chosen these focus areas and how they can contribute to these areas in their work lives but also at home.

RC: When Hong Kong has the world’s highest percentage – 90% I believe - of daily journeys being done via public transport, what lessons do you think there are for other cities to learn?

GM: You have to give credit to the Hong Kong government in terms of thinking about city planning, designing new developments, thinking about the transport needs and supporting the rail and property model. I think one thing that’s at the heart of the success of MTR is the financial sustainability – that model which means our network has been continuously invested in over the 45 years we’ve existed. Other rail networks of a similar age haven’t had that level of continual investment. Performance eventually suffers without sufficient investment, but this may present a commercial opportunity for us in terms of figuring out how to fund and upgrade existing systems.

I want to see us continue to live our corporate purpose of ‘keeping cities moving’. I can be nervous about purpose statements as they can be used as just a marketing tagline. Through challenging times in Hong Kong recently, such as the pandemic, it’s been such an important foundation for keeping our staff motivated. We asked ourselves ‘What is our role? Why do we exist?’ and the answer was to keep the city moving. Focus on that and we think about how can we support our staff and continue delivering the railways and services to the people that need it.