41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 76
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES continued
New developments are expected to be net zero carbon, as
defined by the RIBA Climate Challenge, in addition to being
highly resource efficient through the use of technology such
as rainwater harvesting, low water usage shower heads
and solar electric generation. Developments are designed
to mitigate overheating risk and include associated cooling
requirements. For certain development sites, flooding is a
significant risk which must be mitigated through appropriate
design and construction methods to meet regulatory and
local authority planning requirements. The cost of this
mitigation is included within our investment appraisals and
we may require a higher return on investment where the
mitigated risk remains significant.
We assessed flooding and heat stress exposure of our
portfolio under scenarios based upon the Intergovernmental
Panel for Climate Change RCP scenarios consistent with
1.5°C, 2.0°C and 4.5°C temperature rises. The analysis
showed that under a 4.5°C scenario, heat waves, as defined
by the Met Office, become increasingly regular during the
Summer and the risk of flooding increases from a 1 in c.250
year event to a 1 in c.200 year event, with a marginal change
in frequency under 1.5°C and 2.0°C scenarios. Overall the
outputs give us confidence in the resilience of our strategy
under a 2.0°C or lower temperature rise scenario, whilst
we recognise that our strategy and adaptation measures
may need to evolve in the long term, particularly under a
4.5°C scenario.
Under a 4.5°C scenario, our analysis demonstrates that
changes to our strategy and financial planning will be
required as flooding and heat stress losses become more
likely. This will likely include divestment of assets which are
less resilient to extreme heat and rainfall, or investment to
limit the impact of flooding and coastal surge. This scenario
could also result in changes to our customers’ behaviour and
supply chain partners’ viability, including business failures
or supply chain disruption. Increased due diligence in supply
chain selection will be required, particularly considering the
sourcing of construction materials which may be processed
or manufactured in countries where the effects of climate
change are more extreme.
We will continue to assess potential risks in due diligence for
future acquisitions and to make appropriate adaptations,
where required, to our portfolio. We have assessed the
business’s exposure to transition risks and believe the
business’s strategy to deploy capital into highly efficient
properties and make upgrades to our existing assets,
whilst selling lower performing assets, leaves us wellplaced to meet the requirements of the net zero transition.
We consider our strategy to be resilient under both 1.5°C
and 4.5°C scenarios.
Risk management
Climate change is a principal risk affecting long-term
decisions made by the Group such as decisions on
investment and divestment. Therefore it is considered in
a broad context within the strategy and as part of our risk
management framework. ‘Create a Responsible and Resilient
Business’ is one of three main objectives of our strategy, with
our net zero commitment being a major part of this, together
with the broader objectives to reduce resource intensity and
work to enable our customers to live more sustainable lives
all contributing to this objective.
We work with teams across the organisation, senior
management, external advisors and stakeholders to identify
the strategic, operational, legal and compliance risks
facing our business. These are included on our Group Risk
Register, which is challenged and validated by the Executive
Committee. Our principal risks, which are a sub-set of our
Group risks, are reviewed by the Board twice annually.
Climate change has been identified as a principal risk and
is managed through our risk management framework. This
framework enables us to effectively manage climate-related
risks – all risks are allocated a risk owner, evaluated for the
potential impact and consequences; controls and control
owners are identified, and finally an evaluation of the
residual risk against our risk appetite is undertaken. Scenario
modelling, including the climate scenario analysis detailed in
this TCFD disclosure, is used to better understand the impact
of these risks on our business model when placed under
varying degrees of stress, enabling interdependencies to be
considered and plausible mitigation plans to be tested.
We undertook a climate-related risk scoping workshop
assessment, as part of our overall risk management process
described in the risk management report, covering the
constituent risks of our broader sustainability and ESG risk,
to identify the most material risks and assess their potential
impacts under different future climate scenarios, as well
as the likelihood, business consequences, and possible
management and mitigation strategies. Risks are assessed
for potential likelihood and impact, and rated using a 5 x
5 matrix on a scale of 1 to 25 (from “very low” to “critical”)
giving each risk a score. This approach is common across
all risks, allowing a comparison of climate risk with all other
risks identified by the Group. When we evaluate risk, we
consider the inherent risk (before any mitigating action)
and the residual risk (the risk that remains after mitigating
actions and controls) as well as the materiality of the risk in
the context of the Group.
