Strategic Report
Financial Statements
Additional Information
Governance
Recommendation
Commentary
Strategy continued Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning
The Board recognises that climate change will have an impact on our business and consequently we have enhanced our business strategy and financial planning to account for climate-related considerations, including the impact of climate-related risks on the Group’s current and future capital position. Having identified a broad range of climate-related risks and opportunities, we have integrated climate-related considerations into our business strategy in a number of ways. A core strategic focus is enhancing and adapting our assets through refurbishment and energy efficiency upgrades, and we consider a range of climate-related risks across each stage of the property lifecycle to continue to strive towards futureproofing our assets. For example, at the acquisition due diligence stage, we undertake on-site environmental assessments to identify risks associated with flooding and energy efficiency, and we use these findings to inform our investment decisions. We have strategies in place to take advantage of opportunities linked to the shift to a low carbon economy, including assessments as part of our Sustainability Action Plan that establish the feasibility to roll out in use certifications at our relevant assets and assessments as part of our Sustainable Refurbishment Guidelines to assess net zero (operational and embodied) capacity. Having conducted a rigorous climate risk assessment in early 2022 and developed our net zero carbon pathway, we are informed of a breadth of opportunities to further embed strong sustainability performance into our overall strategy. Throughout 2022 and beyond, we will begin implementing both climate resilience planning and our net zero carbon pathway. Both of these will create fundamental shifts in our business. The thorough climate risk assessment we undertook enabled us to understand and analyse our key material climate-related risks against the time horizons described above. Obtaining this information allowed us to understand a variety of mitigation measures to reduce our vulnerability and exposure to climate-related risks, which will enable us to proactively manage them and improve our resilience. Moreover, a number of climate- related risks (transition climate risks as well as physical risks associated with heat stress) will be effectively managed as we implement our net zero carbon pathway. Our net zero carbon pathway is aligned with targets for a 1.5°C scenario. The scenarios we selected for our analysis were the Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathways RCP4.5 and RCP8.5, aligning with industry best practice and covering the most likely range of average global temperature rises in the coming decades. Analysing these distinct climate scenarios has enabled us to understand the wide scope of climate-related risks and opportunities for the business and inform actions to support our resilience. The RCP4.5 scenario models average temperature rise by 2100 of 1.7-3.2°C and describes increased policy action over the coming decades aiming to meet the Paris Agreement. It therefore is characterised by transition risks, although physical risks are still substantial with this level of warming. RCP8.5 represents a ‘no additional policy’ scenario and models average temperature rise by 2100 of 3.2-5.4°C. This scenario is characterised by very severe physical climate risks.
Resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
Picton Property Income Limited Annual Report 2022
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