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Climate Change Resilience Study
Sustainability
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Dec 10, 2020

In collaboration with QIC’s Responsible Investment team, QICGRE has been actively working to better understand and manage climate risk. This work includes the co-development of a ‘Climate Change Resilience Study’ with an academic partner to understand the potential physical impacts of climate change on our assets.

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Phase 1 of the study involved mapping climate projections over different periods for more than 40 retail and commercial assets in Australia. Work to combine the results of this project with QIC’s climate scenario modelling to build a comprehensive view of portfolio-level climate risk exposure is ongoing.

We are currently undertaking an analysis of all assets and developing a vulnerability assessment that combines:

  • Climate projections
  • Historical assessment of extreme weather variables
  • Climate resilience assessment
  • Exposure to extreme weather events.

Work has begun on Phase 2 of the study to understand the impacts of a transition to a low carbon economy. In FY20, we conducted a scenario analysis of our real estate assets to enhance our understanding of climate change transition risks and opportunities.

As part of our analysis, we developed three base climate change scenarios:

  • Rapid Transition: This scenario is aligned with achieving a 1.5oC warming outcome and involves a rapid curtailing of emissions, seeing a global peak in 2022. It is government led with penalties and/or forced closure of high emitting assets and sees fossil fuels being less than 20% of the global energy mix by 2040. It also assumes a high range carbon price is in place by 2030 and a reduction in consumption across all sectors, especially luxury, due to changing consumer preferences.
  • Market Based: This scenario is aligned with achieving a 2oC outcome and involves a business led reduction in greenhouse gas emissions. There is an increase in consumption globally with a focus on circular economy principles, natural gas is a bridging fuel and the energy transition is largely technology led where low carbon growth dominates and incumbent industries atrophy. It assumes a low range carbon price is in place at 2020 and medium ranger price is effective by 2030.
  • Head in the sand: The third scenario we examined is aligned with a 4oC outcome and involves a business-as-usual approach with little regulation beyond current levels. Fossil fuels remain ~50% of energy mix and there are high rates of global resource depletion and biodiversity loss. Inequality continues to increase across the globe.

Over the next year, we are planning a range of initiatives based on the findings of the scenario analysis. These initiatives will ensure that risks are integrated into existing management practices, and will allow us to track and review metrics, identifying which scenario is most likely and how this will impact our assets.

Additional information on our work on climate change, transition risk and opportunities, as well as our full Taskforce on Climate-related Financial Disclosures report, is available in the 2020 QIC Sustainability Report.

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Environment
ESG 2020
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