Climate change & energy

Understanding climate change

We are committed to better understanding and mitigating potential risks associated with climate change. According to the Intergovernmental Panel on Climate Change (IPCC), the impacts of climate change are appearing and further impacts are inevitable. Understanding emerging risks is key to ensuring we own, manage and develop resilient buildings and communities, able to withstand the future impacts of climate change.

The IPCC's Fourth Assessment report predicts that likely impacts on property will include more hot days, more frequent heavy precipitation events and increased incidence of extreme high sea level. If realised, these impacts would place greater demands on the built environment. They will also require solutions to make buildings more resilient to extreme weather events, such as flooding, wind and heavy rain. We have also seen state and local governments develop policy positions on sea level risk.

Adaptation

Our principal response to climate change is to reduce emissions by improving energy efficiency across all assets. We also need to address the emerging physical risks of climate change and explore mechanisms of adaptation.

We are engaging with specialists to examine these physical risks. In late 2008, our insurance brokers briefed our CR&S Board Committee on climate change risk. Our brokers shared data on recent severe weather events in Australia, and discussed risk mitigation currently undertaken by our organisation. For example, our shopping centres in North Queensland are at risk of cyclone impact. We have therefore undertaken work on our centre roofs to improve their capacity to withstand such a weather event. We will continue to review the structural integrity of assets located in extreme climate zones.

In addition, emerging government policy on sea level rise and the tragic Victorian bushfires of February 2009 led us to commission research to:

• Review our risks associated with flooding, storm surge and possible sea level rise,
• Review our risks associated with the threat of bushfire.

We currently rely largely on local and state planning requirements take risks in relation to flooding and fire. We expect that our research will inform a more strategic view on these risks, and may lead us to adopt a 'beyond compliance' approach.

While we see flooding and fire as posing particular risks for our Residential and Retirement Living businesses, we will also review risks for our Commercial Property business to confirm the resilience of our buildings to withstand the extreme weather events.

Our approach to energy efficiency and reducing greenhouse gas emissions

As a property business we recognise that energy efficiency presents the biggest and most cost-effective means to reduce emissions.

To help set targets for improved energy efficiency and reduced emissions, we began work on a carbon abatement cost curve. Put simply, this means understanding those actions that achieve emissions cuts at the lowest cost across our portfolio. Our cost curve is based on evidence from energy reduction projects to reduce emissions and energy use analysis across our portfolio.

In FY08 we identified projects to reduce emissions and energy use as part of our Energy Efficiency Opportunities (EEO) reporting obligations (see Regulation page), which identified 182 potential projects across 17 of our properties.

Methodology developed by an external consultancy, Kinesis, allowed us to identify specific abatement opportunities and the specific costs of implementing these measures. The methodology assesses the projects over a period of four years and demonstrates the average cost of abatement if each action is implemented cumulatively.

We have incorporated the cost curve methodology into our Climate Change Action Plan target-setting function. This will enable us to set an emissions reduction target and have an accurate, reality-based estimate of the costs associated with achieving that target. We will be able to quickly model the costs of reducing emissions across our entire range as well as at the individual asset level.

Over the past year we have made a significant reduction in greenhouse gas emissions, however this has been aided in part by the sale of assets and limited development of floor space. We have, however, continued to also achieve some improvement in energy intensity, demonstrating that our efforts are achieving real reductions.

We are committed to significantly improving energy efficiency across our Commercial Property portfolio. We track our performance through measuring energy and greenhouse gas emissions intensity (per m²), as well as attaining accredited NABERS ratings for our office buildings. We have set five year intensity and NABERS ratings targets. We also recognise that we need to track our absolute emissions. Reducing our overall emissions as our portfolio grows will prove challenging. We have also set a NABERS office Energy target of 4.5 Stars by FY14.

We have set ourselves the target of reducing greenhouse gas emissions intensity and energy use intensity across our Commercial Property portfolio by 20 per cent by FY14. We anticipate that this will enable us to maintain Commercial Property absolute greenhouse gas emissions at or below FY09 levels by FY14. This means that both our new and existing buildings will need to be substantially more efficient than current levels to achieve this outcome. We anticipate that our emissions profile will be lumpy during this time, reflecting the completion and leasing of our new development projects.