Creating financial transparency on real estate climate risk

What was the initial approach used?

In our 2019 report, we disclosed a concise set of financial metrics which we hope will provide investors with accurate and useful insights about the level of climate-related risk associated with our business. To do this we drew from a two year research project carried out between 2017 and 2019. This was led by the sustainability, finance and insurance functions, and was designed to generate a forward-looking view of how climate change may affect the financial stability of our business. This involved quantitative analysis of our portfolio, as well as qualitative scenario analysis, assessing the risks and opportunities associated with climate change.

As well as providing investors with transparent climate-related financial risk information, we now use our research to inform property investment, development, operation and divestment decisions. Examples of our tangible activities we undertake include:

Assessing energy efficiency and climate-related financial risks when we buy new assets. We undertake risk assessments of developments where necessary to ensure resilience to physical risks from climate change such as windstorm and flooding.
Managing the risks presented by higher cooling costs and lower heating demand, by adapting building services design, reducing heating capacity and maintaining summer cooling capacity to cope with heatwaves.
Actively investing in our renewable energy generation capacity to improve our resilience, reduce carbon emissions and reduce operational costs.
Continuing to invest in reducing our contribution to climate change, reaching nearly half way toward our 2030 energy reduction target in 2018/19, with over £4m of avoided costs for our customers.

By focusing on taking action on climate-related risk rather than simply disclosing information, we have already generated evidence of positive financial outcomes for us and our customers, both of which contribute to long-term financial value for our shareholders. We believe our efforts to lead the real estate industry on climate risk reflect our ambition to act early, positioning our business for the conditions head, and taking a long-term view of value creation and protection.