41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 74
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES continued
Risk
Transition
Technology
Reputation
Policy and legal
Market risk, commodity and
resource efficiency
Description
Risk that sufficient
improvements to an individual
asset’s performance cannot be
achieved at the pace or scale
required for the transition to a
low carbon economy.
Our 2021 student survey
highlighted climate
change as the number
one priority for students,
we expect climate change
to continue and to be of
increasing importance
for University partners,
investors and other
stakeholders.
Regulation and Government
Policy will continue to evolve and
increase minimum standards.
We face market risk through
energy pricing and increased
costs if our use of energy is not
mitigated through efficiency
investment.
Impacts
Individual assets’ operating
costs, asset value and liquidity
may be adversely impacted
if they do not meet evolving
regulatory standards such
as future Minimum Energy
Efficiency Standards (MEES)
for Energy Performance
Certificates (EPCs), or market or
shareholder expectations such
as decarbonisation in line with
the CRREM pathways.
Our leadership in
the sector may be
recognised by our
customers and partners
providing additional
business opportunities
or income benefits
from our leadership in
sustainability.
Regulations may require increases
in scale or pace of investment in
decarbonisation. Introduction
of mandatory carbon pricing
could impact the viability of
our development pipeline and
increase ongoing operating costs
of the existing portfolio.
Rapid changes in commodity
prices make planning
and forecasting financial
performance increasingly
challenging. Increases in utility
prices seen in 2022 could have
a significant impact on the
Group’s financial performance
if sustained and we have seen
utility cost per bed increase
from £380 in 2020/21 to £470
in 2021/22.
Time period
M
Financial
risks and
opportunities
We plan to invest c.£100 million
to support our sustainability
targets.
L
We target our sustainability
investments to pay back
in 10 years or less on an
undiscounted basis.
A “green premium” to asset
values has not yet manifested in
the PBSA sector. It is anticipated
that a “brown discount” will take
effect over the next 3–5 years if
assets are at risk of failing EPC
MEES or expectations on energy
and carbon.
Failure to at least meet
stakeholder expectations
could be detrimental to
business performance
through many channels
including our ability
to secure nomination
agreements and
increased financing costs.
S
M
L
Not usefully quantifiable
with existing data.
Failure to meet minimum
standards could also have
significant reputational impacts,
as set out in Principal Risk 8 on
page 85.
M
L
The UK Government has set a
legally binding net zero target of
2050. Under our more ambitious
strategy, we expect to spend £100
million on our transition to net
zero carbon by 2030.
It will not be lawful to let any
property not meeting EPC C by
2027 or B by 2029. 20% of our
portfolio is rated D or below,
implying around a £100 million
risk to income across the whole
portfolio if not addressed. The
portion of the portfolio rated C
or above has increased by 23%
during the year due to portfolio
changes, including completed
developments, refurbishment
and disposals, and a change in
classification of PBSA for EPC
certificates.
We have seen valuers start to
reflect increased utility costs
in asset valuations and would
expect further downwards
pressure on valuations
if energy efficiency is not
improved to offset this.
S
M
L
We spend around £37 million
per year on utilities, being our
second largest category of
spend after people. We expect
our utility costs to grow by
around 10%, p.a. over the next
two years due to rising prices.
We have targeted a 10 year
payback on our sustainability
investment, implying c.£10
million p.a. savings on our
£100 million of total planned
investment. If utility prices
remain high then the potential
savings from this investment
will also increase.
