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Strategy / Continued Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning
We recognise that climate change will impact our business and that we must play our part in tackling this global challenge. Therefore, we integrate sustainable thinking across our activities and accordingly, climate-related issues inform our business, strategy and financial planning decisions and processes. Our pathway to achieve net zero carbon by 2040 aligns with the Better Building Partnership’s (BBP) Net Zero Carbon Pathway Framework and the UK Green Building Council’s (UKGBC) net zero carbon hierarchy. To achieve our ambitious sustainability targets, including net zero, and enhance our resilience to climate change impacts, climate-related risks have been embedded into our business strategy and planning processes at all stages of the property life cycle. During the acquisition process, we undertake environmental assessments to identify climate and environmental-related risks associated with the property and ground conditions, including flooding. We have formally defined our risk appetite for acquisition due diligence in respect to ESG and climate risk. For example, all acquisitions must consider our net zero carbon pathway, and how the acquisition could impact its aims and timeline, including financial implications. Additionally, we set minimum criteria addressing physical and transition climate risks, such as flooding (fluvial and pluvial), building fabric and EPCs. This helps us identify and implement opportunities to strengthen our net zero readiness and make conscientious investment decisions. If an acquisition does not meet our minimum criteria there has to be a clear financial rationale to proceed, which considers the size of the asset relative to the risk and portfolio. Refurbishments provide an opportunity to undertake climate resilience and net zero carbon upgrades, therefore, we have created net zero carbon guides for all asset types (industrial, office, retail and leisure) in our portfolio, which outline best practice measures that should be assessed for installation to improve energy efficiency and enhance the asset’s climate resilience. Measures include, for example, on-site renewable energy generation and low-carbon heating and lighting alternatives. As we recognise that industry knowledge, technology and mitigation interventions are constantly improving, these guides will evolve to reflect market innovations, as well as our changing net zero carbon goals. These guides support our existing sustainable refurbishment guidelines, which integrate a range of climate-related minimum criteria. For example, medium refurbishments must meet minimum EPC B standards and building certification standards are defined for each asset type, such as BREEAM for our office portfolio, supporting our overall sustainability performance and resilience to climate-related risks. Additionally, we have appointed an in-house building surveyor to support our asset managers on all capital works projects to ensure they have access to sustainability expertise. Our asset managers proactively engage on sustainability and climate-related issues with our occupiers, identifying opportunities to enhance the portfolio’s resilience to material risks and improve building performance. When such opportunities are identified, our asset managers escalate proposed initiatives to the Climate Action Working Group and where appropriate to the Transactions and Finance Committee for approval, which then informs our strategy and financial planning for the asset in question. For example, one of our asset managers identified the opportunity to replace an asset’s gas-fired equipment and install on-site solar panels, which will enable a reduction in carbon emissions and yield energy efficiency improvements. Effective collaboration with our occupiers is essential if we are to achieve our net zero commitment. Therefore, we created occupier fit-out principles that outline a series of measures and criteria our occupiers should engage with during fit-out works to improve the asset’s sustainability performance and climate resilience. Principles are established relating to, but not limited to, occupier engagement, low energy use, EPCs, minimising and omitting fossil fuels, embodied carbon and waste, aligning with our strategic sustainability goals. In the last three years, our actions have changed how we address climate-related issues and our mission to future-proof our business and portfolio continues. This year, we formalised a Biodiversity Policy as we recognise the importance of biodiversity for the wellbeing of our planet and the communities in which we operate. As a responsible owner of commercial real estate, we are committed to integrating biodiversity considerations into our business practices to ensure our actions serve to preserve and enhance biodiversity, promote awareness among our stakeholders and support our targets. Our policy sets key objectives around compliance, awareness, assessment, integration, restoration and reporting, as well as five implementation areas, including engaging stakeholders, setting targets, making improvements, communicating with communities, and monitoring and evaluation. We will review this policy annually to ensure its effectiveness and relevance, amending as necessary in line with the business environment, regulations and best practice. Our sustainability action plan roadmap sets out key actions we intend to undertake in future to ensure we can continue to operate in a world with increasing climate change impacts. As a BBP member, underpinning our strategy are climate mitigation and climate adaptation, which we consider as equally necessary to achieve holistic climate resilience.
Picton Property Income Limited / Annual Report 2024
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