Fortune REIT - 2021 Climate Disclosure Report
Fortune REIT recognises the impact of its operations on the environment, and understands the potential risks that climate change poses to its business and operations. Fortune REIT strives for continuous improvement on its sustainability performance and aims to combat the impacts of climate change through the proactive identification of climate-related risks and opportunities, and by developing corresponding mitigation measures. In this Climate Disclosure Report, Fortune REIT will describe the potential impact of identified climate-related risks and opportunities, as well as its effort in managing these impacts.
1. Climate Governance
Climate-related risks are considered within Fortune REIT's existing sustainability governance structure, which the Board has the fundamental responsibility. The Board oversees all relevant sustainability issues, covering environmental, social and governance topics, and a Sustainability Committee was established to assist the Board in the effective execution of Fortune REIT's sustainability strategy, managing its sustainability performance and conveying its expectation to stakeholders, including employees and the Property Manager. The Sustainability Committee conducts bi-monthly meetings to review sustainability issues and progress of implemented measures, and considers climate-related risks and the potential impacts it may have on the Manager's operations, which are reported to the Board.
An effective risk management mechanism is essential in order to adapt to and mitigate against rising climate- related risks. Management assists the Board in managing relevant risks, and is responsible for risk identification, evaluation and the management of potential sustainability risks. To allow for a more comprehensive understanding of its operating landscape and preparedness, Fortune REIT conducts a risk assessment across multiple risk categories, identifying potential risks, outcomes/impacts, and mitigation measures for the identified risks. Given the increasing significance of climate change for Fortune REIT's stakeholders, Fortune REIT has also included climate change as an identified risk in its risk register, in order to ensure that these risks will be properly considered and managed.
Fortune REIT conducts a regular review of potential sustainability risks through an analysis of risk indicators from industry practices and global risk trends. Risks identified are then assessed for the severity of their impact on Fortune REIT and the likelihood of its occurrence. The risk management framework of Fortune REIT is reviewed by the Audit Committee, as delegated by the Board, on a semi-annual basis. Risks are then managed through the Manager setting out adaptive and mitigation measures according to the risk analysis results and reviewing the effectiveness of the measures regularly to ensure the risks identified are managed in an appropriate manner.
Fortune REIT's engagement policies are outlined across its Sustainability Strategy, Sustainability Policy Statement, Environmental Policy, Code of Corporate Governance and Stakeholder Engagement Policy. The following section describes how Fortune REIT identifies its material climate-related risks and how it manages said risks in practice.
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2. Investment Management
2.1 Climate-related Risk Identification
Within Fortune REIT's investment and capital management process, ESG-related risks (including climate change) are taken into consideration in investment, portfolio management and fund structuring activities. Fortune REIT invests in quality properties with good standing, reputation and track records. In assessing potential acquisitions, the Manager considers sustainability-related matters, including the consideration of environmental factors such as climate risks, renewable energy generation, sustainable procurement, energy efficiency, water efficiency, waste management and others, as well as investment analysis and valuation reports. Fortune REIT also conducts site visits, and regularly assesses the likelihood and potential physical damage that may be caused to its properties under extreme weather events. There are plans for the United Nations Principles of Responsible Investing to be adopted into Fortune REIT's investment and asset management practices in the near future.
To further identify potential impacts that may result due to climate-related risk, Fortune REIT engaged an external consultant to prioritise its climate-related risks and opportunities, including the identification and assessment of transitional and physical risks and opportunities.
Firstly, two consolidated scenarios were developed based on international standards such as IPCC's Representative Concentration Pathways and Shared Socioeconomic Pathways, International Energy Agency and Network for Greening the Financial System in order to identify relevant climate parameters. Based on the identified parameters, a list of potential climate-related risks and opportunities were developed.
2.2 Climate-related Risk Impact Assessment
Risks and/or opportunities that were identified as having potential medium to high impact to the Manager are outlined in the below table, along with the appropriate measures adopted by the Manager to mitigate against and effectively manage the climate-related risks.
Transition Risks/Opportunities
Risk | Potential impact to Fortune REIT | |
Tightened | The increased adoption of renewable | |
building | energy | energy in the market means that the Scope |
codes | and | 2 emissions of Fortune REIT may decrease. |
increased | At the same time, this may present an | |
adoption | of | opportunity for Fortune REIT to participate |
renewable energy | in renewable energy programmes to | |
further increase the use of renewable | ||
energy and decrease its Scope 2 emissions. | ||
Governments may tighten building energy | ||
codes and guidelines in order to help | ||
achieve their carbon neutrality goals. This | ||
can then lead to the incompliance of some | ||
existing buildings. | ||
Key Mitigating Measures
Solar panels have been installed at Fortune City One, Laguna Plaza and Fortune Metropolis. The Manager will continue to explore the feasibility of installing more solar panels at its malls.
The Manager seeks to protect the environment and respond to climate change risks by reducing its carbon emissions through enhancing the energy efficiency of its facilities, monitoring its emissions intensity, reducing its consumption of natural resources, and raising environmental awareness amongst its employees.
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Increased | market | There has been a growing demand for | 100% green building certification has | ||||||||
demand for green | greener and climate friendly products and | been obtained across the entire | |||||||||
properties | brands, which may hence present an | Fortune REIT portfolio. | |||||||||
opportunity to Fortune REIT. By increasing | |||||||||||
the proportion of green buildings, Fortune | |||||||||||
REIT may be able to sharpen its | |||||||||||
competitive edge in meeting the growing | |||||||||||
consumer preference for green and | |||||||||||
climate resilient properties. | |||||||||||
Market | demand | The fast growing investor demand for | Reinforcing the Manager's on-going | ||||||||
for green finance | green and low carbon finance and | commitment | to | sustainable | |||||||
investment provides opportunities | for | development and the advancement of | |||||||||
Fortune REIT to unlock different financing | its ESG goals, Fortune REIT has secured | ||||||||||
streams. Leveraging Fortune REIT's ESG | a 5-yearsustainability-linked loan for | ||||||||||
performance may help secure lower long | HK$1.5 billion from OCBC Bank during | ||||||||||
term borrowing costs and expand its pool | 2021. The facility is the second of | ||||||||||
of ESG centric retail and institutional | Fortune | REIT's | green | financing | |||||||
investors and lenders. | initiatives, with sustainability-linked | ||||||||||
loan facilities amounting to an | |||||||||||
aggregate of HK$2.5 billion. Moreover, | |||||||||||
Fortune REIT has entered into its first | |||||||||||
sustainability-linked interest rate swap | |||||||||||
with DBS Bank, which upon the | |||||||||||
satisfaction of pre-determined targets | |||||||||||
concerning | community | engagement, | |||||||||
will enable Fortune REIT to receive a | |||||||||||
sponsorship from DBS Bank, giving rise | |||||||||||
to Farm@Fortune. | |||||||||||
Changing | The changing behaviour of tenants and | Through the launch of the Fortune | |||||||||
consumer | consumers can bring both risk and | Malls App, active asset management | |||||||||
behaviour | opportunity to Fortune REIT. If Fortune | and | asset | enhancement | initiatives, | ||||||
REIT cannot meet the expectations of its | Fortune | Malls | continually | revitalises | |||||||
consumers, it may face the risk of losing | and | addresses changing | consumer | ||||||||
them. However, if Fortune REIT can realise | behaviour at its malls, please refer to | ||||||||||
this trend earlier than its competitors, | pages 20- 21 of Fortune REIT's 2021 | ||||||||||
Fortune REIT may then be able to capture | ESG report for more information. | ||||||||||
this opportunity by meeting consumers' | |||||||||||
expectations and demands. | |||||||||||
Increased | Although the Hong Kong government has | Please refer to page 33 of Fortune | |||||||||
ambition | of | already set its carbon neutrality goals, it | REIT's 2021 ESG report for more | ||||||||
national | may increase its ambition during their | information | on | Fortune REIT's | |||||||
decarbonisation | decarbonisation journey. If Hong Kong sets | decarbonisation efforts. | |||||||||
strategies | more ambitious goals, this may affect | ||||||||||
climate policies, thereby affecting Fortune | |||||||||||
REIT's operations. | |||||||||||
Adoption | of | Technological advancement presents | an | The | Sustainability Committee of | ||||||
lower-carbon | opportunity for Fortune REIT to improve | Fortune REIT continually reviews the | |||||||||
technology | its energy efficiency, reduce energy cost, | efficiency of existing equipment and | |||||||||
reduce carbon emissions and support its | conducts | maintenance | as | needed, | |||||||
transition towards a lower carbon | including the replacement of chiller | ||||||||||
economy. Fortune REIT would be able to | plants | to | more | efficient | models, | ||||||
gain first mover advantage and gain more | |||||||||||
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in depth knowledge of the operation of | sewage/clear water pumps and LED | |||||
these technologies. | These | technologies | lighting. | |||
may be expensive at first, but with more | ||||||
demand and experience, the cost of these | ||||||
technologies may then decrease. Although | ||||||
it may be cheaper to jump on the | ||||||
bandwagon after industry leaders have | ||||||
already explored | these | technologies, | ||||
Fortune REIT may face the risks of being | ||||||
left behind on these technologies. | ||||||
Unsuccessful | investment | in | new | |||
technologies may also be a risk to Fortune | ||||||
REIT. |
Physical Risks/Opportunities
Risk | Potential impact to Fortune REIT | Key Mitigating Measures | ||||
Heatwaves | and | The increase in average temperatures can | As part of Fortune REIT's on-going | |||
increase | in | bring both risk and opportunity to Fortune | decarbonisation | and | climate | change |
average | REIT depending on the exact location of a | efforts, a smart building management | ||||
temperatures | building. It may be a risk when there is a | system will be installed at Fortune | ||||
higher energy consumption used for | Malls. The cloud-based automated | |||||
cooling in summer, whereas it may be an | building solution will first cover up to | |||||
opportunity when there is a lower energy | 69% of Fortune REIT's portfolio area, | |||||
consumption used for heating in winter. | allowing centralised | collection and | ||||
monitoring of building data, serving to | ||||||
Heatwaves could cause illnesses such as | optimise energy efficiency. | |||||
heatstroke. With prolonged exposure to | ||||||
heatwaves, workers such as security staff | ||||||
and cleaners could suffer from illnesses | ||||||
related to heatwaves, which could lead to | ||||||
an increased rate of injury or occupational | ||||||
illness and may restrict the working hours | ||||||
of Fortune REIT's outdoor labour, | ||||||
ultimately decreasing labour productivity. | ||||||
Extreme | Fortune Malls may be damaged when | Despite the Property Manager's efforts | ||||
weather | extreme weather hits. Subsequent events | to adapt to climate change by | ||||
(Tropical | such as landslips and flooding may cause | implementing | its extreme | weather | ||
cyclones, | more damage than strong winds. Climate | policy, typhoons have caused minimal | ||||
intense | change may exacerbate the frequency and | disruption to operations and damage to | ||||
precipitation, | strength of extreme weather events like | some Fortune Malls in the past, | ||||
flooding, storm | tropical cyclones. | including broken windows, glass doors | ||||
surges, sea level | and water leakage. | |||||
rise) |
Water stress
resources. While there is a significant | also committed to optimizing water | ||||
amount of water imported from Mainland, | usage | and | minimizing | wastewater | |
water stress issues in the Pearl River Delta | generation within its operations in line | ||||
may disrupt the water supply to Hong Kong | with or better than regulatory | ||||
due to the limited water it may be able to | guidelines. The initiatives implemented | ||||
source. | to meet these targets include the | ||||
installation of water-saving taps and | |||||
regular inspection to prevent water | |||||
leakage, the utilization of reclaimed | |||||
water | for | landscaping | irrigation, | ||
rainwater harvesting, as well as the | |||||
installation of smart irrigation at | |||||
Farm@Fortune at Fortune City One. |
3. Risk Management
Fortune REIT is committed to building resilience to climate change, a critical risk to all businesses and communities around the world. As a responsible corporate citizen, the Manager is conscious of the environmental impact of its operations and seeks to identify and mitigate significant climate-related issues that may impact its malls. The Manager has incorporated the consideration of climate change into its Sustainability Strategy and has in place a Climate change Adoption Policy, alongside which regular inspections are carried out to ensure Fortune Malls are resilient to extreme weather events.
Furthermore, the Manager also implemented proactive mitigation initiatives through various channels to reduce the release of GHG emissions into the atmosphere. The Manager's initiatives include long-term reduction targets and monitoring its environmental performance against its targets, adoption of energy efficiency and industry best practices, use of renewable energy, sustainability-anchored procurement and supply chain management processes, and incorporation of climate-related considerations into its risk management framework. These initiatives are embedded within the Manager's business processes and policies, demonstrating the Manager's determination to sustainable development and to reduce its carbon footprint.
Lastly, Fortune REIT will continue to regularly assess climate-related risks, with regards to both physical and transition risks, in order to ensure the appropriate processes and management mechanisms are in place to handle any changes to the Manager's risk environment.
4. Carbon Footprint
Recognising the impact of Fortune REIT's operations on the environment and in line with its sustainability objectives, the Manager has undertaken proactive action to minimise its carbon footprint. Carbon footprint- related metrics are used during this process as a starting point and an effective tool for Fortune REIT to determine the impact of climate change, as well as to facilitate Fortune REIT's stakeholders in easily assessing the Manager's environmental performance against peers. Various initiatives and measures have been put in place regarding climate change, emissions and energy efficiency to further bolster the Manager's environmental performance pursuant to its Environmental Policy, Climate Change Policy and GHG Emissions Policy. As detailed in these policies, the Manager seeks to protect the environment and respond to climate change risks by reducing its carbon emissions through enhancing the energy efficiency of its facilities, monitoring its emissions intensity, reducing its consumption of natural resources, and raising environmental
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Fortune Real Estate Investment Trust published this content on 18 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 August 2022 07:03:01 UTC.