Savills ESG Sept 2023: GRESB, Climate Financial Disclosures and Risk Reporting
By 2025, TCFD reporting will be mandatory in the UK. This will improve climate related financial risk disclosures, exposing physical and transition risks to inform investment decisions. At the same time, the real estate sector is implementing change by enhancing reporting of carbon and energy performance data to achieve net-zero pledges. One of the key tools for this is GRESB, an open-data platform, supports progress tracking and industry benchmarking for responsible investing practices. Property owners and investors can measure their relative performance for risk management and resilience benchmarking to protect communities and asset value.
In plain English: Taskforce on climate related financial disclosures reporting
Mandatory TCFD reporting by 2025 will improve climate related financial risk for UK businesses. The Task Force guidelines will expose physical and transition risks like extreme weather, carbon regulations and make investment decisions more informed. As the real estate sector accounts for 40% of emissions, enhanced property-level carbon and energy performance data is crucial to help achieve 2030 and 2050 net zero pledges. Early adopters should conduct gap analysis of current vs recommended disclosures and develop implementation strategies with timescale and responsibilities defined. Overall, consistent climate reporting as per TCFD will mobilize capital towards climate solutions and a lower-carbon, resilient economy.
GRESB, the leading ESG benchmark for real estate investments, is an annual assessment that evaluates the environmental, social and governance performance for over US$4.8 trillion dollars worth of global property. With increasing investor focus on sustainability, the platform allows participants to track progress, identify areas for improvement and benchmark themselves against industry peers. Over 1,200 companies now participate annually, submitting performance metrics covering energy use, emissions, water consumption as well as social indicators and management. Consistent reporting to GRESB can help property investors integrate responsible investing practices and support the transition to a low-carbon economy.
Data provides the key to unlocking climate risk reporting in real estate
Quality data is critical for effective climate risk management in real estate. New technologies now provide asset-level analysis of physical risks like flooding and transition risks such as policy changes. This data better informs investment decisions regarding issues like building resilience and portfolio diversification. While methodologies vary, mandatory reporting rules in the UK and Europe will drive consistency. Mitigating risks requires understanding risks through data analysis. Real estate owners can identify resilience measures and engage stakeholders to safeguard assets against climate impacts. Underestimating risks delays adaptation, data integration is key to protecting communities and the environment; these frameworks can be adapted for use in Asia Pacific markets.
