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TCFD Statement / Continued
Recommendation
Commentary
Risk management / Continued The organisation’s processes for managing climate-related risks
Our risk matrix and risk radar are reviewed and updated regularly by the Executive Committee to ensure that we remain attentive to the changing nature of these risks and to reflect evolving stakeholder requirements and the wider macroeconomic and geopolitical landscape. The risk matrix identifies individual climate-related risks with a residual risk ranking (low, medium and high) and mitigating controls and individual responsibility are determined to ensure risks are managed appropriately. Based on ranking, risks are communicated across relevant levels of our business. We do not accept any risk that exceeds our established risk thresholds that cannot be mitigated, transferred or controlled. From developing a comprehensive understanding of the material climate-related risks to our portfolio, last year we began undertaking asset resilience inspections to measure each asset’s resilience to its material climate-related risks. Continuing this in 2023, we commenced multiple projects to enhance the adaptive capacity of our assets to mitigate against material climate-related risks. We have replaced heating and cooling systems in three of our multi-let office buildings, ensuring adequate temperature control and thermal comfort for our occupiers as heat stress risk becomes increasingly material to the UK. In addition, we have an ongoing plant replacement project in the construction phase and four further projects are currently in the design phase. We acknowledge that this investment is vital to maintain the value of our assets and to remain attractive to occupiers seeking climate change resilience. We will continue to inspect properties on an ongoing basis to ensure the asset level strategy evolves with changing risks, information and technology, helping us to understand our portfolio’s baseline resilience to climate risk impacts and informing our asset resilience planning and capital expenditure requirements. This ensures that our most at-risk assets are prioritised, building our climate resilience where it matters most first. We also remain focused on the long-term nature of climate change and are in the initial stages of investigating water supply risks across our portfolio. While recognising this is a long-term risk to our portfolio, we believe it is important to build resilience now to ensure our portfolio can withstand any potential acceleration of climate trends, unforeseen climate extremes and potential short-term risks, such as reputation damage. In doing so, we are committed to future-proofing our portfolio and retaining its value. We have created a TCFD and net zero carbon action tracker that is utilised across the business to record the actions being taken to manage physical and transition climate-related risks at the portfolio level and asset level. This document is monitored centrally and reviewed by the Executive Committee to guarantee our climate resilience strategy is progressing as intended. To enhance our management of climate-related risks in occupier-controlled spaces, we have introduced green lease clauses and have updated our template to align with the new BBP Green Lease Toolkit. We proactively engage with our occupiers on sustainability and climate-related topics, tailoring our approach for our multi-let and single-let occupiers. Our property managers host regular meetings with our occupiers at our larger buildings. Sustainability and climate-related items are featured on the agenda, which include items such as data collection and sharing, energy saving initiatives, on-site renewables and waste. Sustainability and climate-related considerations are integrated across our engagement with occupiers at multiple levels, including in all commercial discussions, when conducting refurbishment works and through collaboration with external consultants. Furthermore, we conduct occupier surveys to gain greater insight into our occupiers’ user experiences, identify areas for improvement and to understand their comprehension of material sustainability and climate-related issues. The surveys have highlighted valuable opportunities to enhance our portfolio’s performance and climate-related resilience, plus have highlighted which of our occupiers are willing to engage and learn more about enhancing the sustainability of their buildings. In response, we are currently developing initiatives that will provide our occupiers with greater knowledge and expertise to optimise sustainability performance of their buildings. Conducting ESG audits has enabled us to identify opportunities to reduce energy consumption and improve efficiencies, supporting our ability to make informed decisions during our investment and capital allocation activities, as well as acquisition and divestment decisions to maximise the overall performance and resilience of our portfolio. This year we prepared thermal models of three of our multi-let office buildings to understand energy efficiency, loads and external factors. This information is valuable for optimising building performance, identifying areas of improvement and implementing effective strategies to maximise occupant comfort. We have also used thermographic imaging technology to assist with energy efficiency improvements. Our actions are yielding tangible results, including EPC rating improvements across our portfolio. Since 2021, the share of our portfolio achieving EPC A-C has grown from 64% to 80%. We remain committed to achieving our 2040 net zero carbon target, which will be key to support our resilience against transition climate risk impacts. We have published our net zero carbon pathway, which sets out our priority actions towards decarbonising the portfolio. As part of our action plan, we have implemented solar installations at multiple assets, with the capacity to generate 400 kWp, and conducted feasibility studies at others. Our feasibility studies consider energy analysis, system design, financial modelling and a net zero impact assessment, which, if deemed viable, informs our delivery approach to solar installations. In total, these activities cover 18% of our portfolio, in terms of floor area Where feasible, we aim to optimise the solar energy generation capacity. This year, we transformed how we collect and manage our climate-related data by moving from a third-party managed system to an internal system. This has enhanced our ability to access data and real-time updates across the portfolio, assisting our management of climate-related issues. We meet regularly – usually monthly – with our insurance advisers and periodically, we cover climate-related issues to ensure we remain aligned and aware of their position on these matters.
Picton Property Income Limited / Annual Report 2024 54
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