Governance
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Risk management The organisation’s processes for identifying and assessing climate-related risks
In recognition of the threat climate change poses to our business, sector and global economy, in early 2022 we conducted a rigorous climate risk assessment. At both the business and portfolio level, we identified our material climate-related risks and assessed their potential likelihood and significance, quantitatively and qualitatively, relative to each other. These results have been integrated into our risk matrix, containing all of our material corporate risks, and given probability, impact and residual impact ratings ranging from low to high to demonstrate the relative significance of climate-related risks to other risks. Furthermore, last year, we transformed our emerging risk dashboard into an upgraded risk radar that identifies the principal and emerging risks to the business. Our risk radar recognises ‘climate change’ as a top principal risk to the business, and therefore embeds climate-related considerations into all our risk management and decision-making processes. Climate-related risks are reviewed on an ongoing basis by the Executive Committee and presented to the Board as part of the annual Risk Management Policy review, or as necessary. Results from the climate risk assessments highlighted that flooding is a key physical risk facing our existing portfolio. Therefore, in 2022, we completed asset-level desktop assessments for our entire portfolio to understand our exposure to this climate risk at a more granular level, addressing flooding from rivers, surface water, reservoirs and sea. This helped us to assign a risk ranking to each asset, ranging from very low to high, whereby mitigation action is required at assets with a medium or high rank where flooding exposure is material. It is important to note that although we have prioritised certain assets as medium and high priority for resilience, this ranking is informed by our risk appetite thresholds. It does not imply that high priority assets are considered ‘high risk’ in terms of the UK’s overall exposure to flooding, which is significant in certain areas of the country. We have subscribed to flood warnings and alerts for high and medium priority properties, where feasible. At our top priority assets, this year we conducted in-depth evaluations to assess flood risk at an asset level, including site visits to assess factors such as elevation and existing flood defence measures. We found that pluvial flooding presented the greatest material risk, while fluvial flooding risk was minimal. Additionally, we assessed the resilience of local flood defences to withstand potential flooding events, using open source Government data. For example, we have reviewed flood alleviation schemes in Luton and Carlisle, two higher risks zones in our portfolio, to understand their long-term resilience capacity. By assessing asset-level risk and local resilience capacity, we gain a holistic understanding of the residual risk we face, enhancing our ability to make informed capital expenditure decisions. It also facilitates effective collaboration with property management teams, equipping them with knowledge of flood defences and operating procedures to mitigate risks. This exercise has and will continue to inform our investment into flood resilience measures.
Picton Property Income Limited / Annual Report 2024
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