Julia is an urban planner based in Newcastle. The city is growing rapidly, but the council is not able to keep up with the demand for services nor assure compliance with regulation. The demand for social housing following the Covid-19 pandemic and subsequent economic collapse in the region is now at a crisis point, creating an urgent need to build new housing on BrownField sites. Risks from disasters (mainly flood,) are increasing, as the city is in a well-known flood area.
The city has invested funds into retrofitting some critical infrastructure to mitigate risks and developed a master plan for future infrastructure growth. They have census data that provides some information about buildings, and they have an asset database for critical infrastructure, but very little is known about the typology of buildings or their vulnerability, their distribution, or replacement costs.
Julia wants to know how the city can optimise the investment in improving critical infrastructure to improve day-to-day performance, how to maintain the infrastructure over time, how to reduce impacts from disasters for current urban infrastructure as well as the risks 20 years in the future, and how to have funds in place to recover from events that may occur. Julia would also like to know how much to invest in developing better control mechanisms such as building codes, and enforcement of code compliance. Can a climate-ready building passport, using the latest in sensor technologies, leveraging 5G network for real-time reporting help? (Data marked blue can all be covered by a building passport, the last item is related to a building passport – data on what materials / parts used in the building).
Pink Asset Managers (PAM) want to know the economic impacts of climate change on their substantial portfolio of commercial and industrial real estate. Their focus is on a long-term “buy and hold” strategy providing a stable dividend for their investors. They know that greenhouse gasses from construction (mainly cement manufacture) as well as the heating and ventilation of their aging portfolio are major contributors to climate change. They are concerned that substantial portions of their portfolio may be too costly to retrofit and over 20% of their total assets could be worthless if investors decide to “dump and run”. The talk of transition risk is increasing. They have a legal obligation to report their Scope 1, 2 and 3 carbon emissions as part of the TCFD reporting.
They want to be able to compare investments and estimate what the future value of their building stock would be with and without the impact of climate change in the next 25 years. This way they can ascertain how much of the value is at risk from climate change. They are interested in the impact of changes in extreme events as well as weather such as mean temperatures and extreme heat cold. They want to know things like the impact of climate change on physical locations / facilities, production & export capabilities, operating / energy costs (e.g. cooling/heating) and factors such as workforce supply, and the economy of the country in which they are operating needs to be taken into consideration. They are aware that some investments may be more able to adapt to climate change than others and would like to know what mitigating impact this could have.
Jack is a fund manager for Sustainable Real Estate Investment Trust. The real estate asset manager acts as an owner of the investment property and looks out for the property owner’s best interests. They are proficient in repositioning a property and streamlining operations to reduce expenses, increase income and improve property value. Jack is in charge of reviewing and managing a real estate portfolio, analysing the performance of the individual investments and identifying areas or opportunities for growing the portfolio.
He is keen to use technology to provide real-time information on building occupancy that would allow for the control of lighting, heating and air conditioning. He also wants data to support his responsibilities to the asset owners, who have a legal duty of disclosure on the carbon footprint of their properties.
Jack is keen to find solutions for the following areas:
- ESG Planning: He needs data to implement & monitor ESG strategy, targets, action plans; track regulatory compliance (EPC compliance); standardise and automate disclosure & reporting to GRESB and other stakeholders.
- Climate Resilience: Understand climate risks and mitigation strategies; Scope and visualise the trajectory of decarbonisation pathways; Track asset and portfolio progress including financial planning
- Data Intelligence: Performance Benchmark Reporting to make informed decisions; Improve efficiency and quality of data collection
- Transparency to ease data assurance and auditing
- Reporting: Live visualisations of assets; ability to feed into external reporting software like GRESB, BREAM, EPRA, INREV, SECR, etc; connect actual performance monitoring with disclosure
- Smart buildings: Asset and portfolio management; energy efficiency monitoring; integrate building performance, health and wellbeing data
- Infrastructure: Collation of asset and network performance data; data governance; repository for CEEQUAL accreditation and AA1000 assurance.
Icebreaker Insurance provides insurance for households and businesses against the risks of catastrophic loss from extreme events such as floods, windstorms, freeze and subsidence that are known to be increasing in frequency and severity. They see a massive “protection gap” growing where companies and individuals are choosing to self-insure as they see insurance as prohibitively expensive and not geared to their business. Insurers’ reputations were badly damaged following the Covid-19 pandemic where many refused to pay out on valid business interruption policies claiming there had been no physical damage. They know that losses from climate change are inevitable and that insureds need to do more to protect their assets.
Only 70% of the population currently takes out insurance, and after recent major flooding events, many people had to take out high-interest loans to re-open their businesses, and the government had to finance the rebuilding of 10,000s properties, a process which is still underway. Research from Lloyds has shown that a 1% increase in insurance penetration can reduce the disaster recovery burden on taxpayers by 22%. There is now support from multilateral development agencies to increase insurance penetration against climate-related risks in the country. However, previous claims have been much larger than expected and one of the other 8 insurance companies in the country went out of business. Icebreaker Insurance wants to understand what its potential losses might be from its growing portfolio, what level of risk they can afford to take on and at what price, what perils they will cover, and how much reinsurance they need to purchase to remain solvent in a worst-case scenario.
Dimitris is a regulator working with the Financial Conduct Authority and has been trying to get an under-resourced team to be able to enhance value by evaluating the risk management procedures of the Insurance Industry. Currently insurers are using what are often called “black box models”, which are very complex and hard to understand to price and monitor risk aggregations.
Dimitris hopes that Icebreaker One’s Standard for Environment Risk and Insurance (SERI) will create an Open Standard for data so that he can access models that will give a greater insight into the complexity of catastrophe models. He is also aware that many in the Insurance industry don’t have models available for all climate change scenarios and hopes that this initiative will be able to fill some of these gaps. He does think that this will be tough as the organisations he meets are already complaining of the amount of work to meet the existing regulation and hopes that whatever is done is consistent to merging standards of data, schemes and technology.
Stakeholder Recipients for ESG Reporting
Voluntary Disclosure Frameworks
- CDP – https://www.cdp.net/en
- DJSI – https://www.spglobal.com/esg/csa/indices/index
- GRESB – https://gresb.com/about/#do
- Bloomberg – https://www.bloomberg.com/professional/solution/esg/
- MSCI – https://www.msci.com
SustainAlytics – https://www.sustainalytics.com