Climate change

In 2023, we launched our sustainability targets in support of global efforts to reduce global warming to 1.5¬ļC above pre-industrial levels and have set ambitious emissions reductions targets to play our role in limiting global warming.

By integrating sustainability considerations, including climate change, into the Centuria’s investment approach and operations, we continue to be a positive contributor towards improving the environment.

Governance

Governance

Climate change is one of our most material risks, and includes risks associated with physical climate change hazards and the transition towards decarbonisation and developing climate resiliency.

Board oversight

Governance of climate change risks and opportunities is managed consistently across the organisation, including operations in New Zealand. This year we approved our ESG Policy which sets a clear mandate for the Group to consider the impacts of climate change on its operations and investments.

Centuria’s Culture and ESG Committee supports the Board with its oversight of climate related strategy and risk management. The Board retains overall accountability for the Group’s risk profile.

Additionally, fund Responsible Entity (RE) Boards oversee the management of climate-related risks and opportunities aligned to the Group’s risk appetite. New investment opportunities are screened for physical climate-related risks, with any identified risks communicated to the fund RE Board who have ultimate sign-off.

Management’s role

The Audit, Risk & Compliance Committee and the Non-Financial Risk Committee inform management’s response to risks presented to the Group as part of their quarterly review.

The ESG Management Committee and Group Manager of Sustainability are responsible for converting Board strategy into implementation plans. Management is accountable for implementing these plans, with a linkage between targets and executive remuneration.

Updates on the physical and transitional risks of climate change are provided to the ESG Management Committee and the Culture and ESG Committee to keep management and our Board informed on progress made in relation to climate-related initiatives and strategy.

Strategy

Climate-related scenario analysis

In 2021, we disclosed our climate resiliency roadmap and have adopted scenario analysis to stress test the resilience of the organisation’s climate strategy in accordance with the TCFD recommendations. This has required a process of selection and adoption of different climate-related scenarios, including modelled future greenhouse gas emission scenarios for the planet.

We disclosed our first stage of scenario analysis in the 2021 Sustainability Report, which included an assessment of two scenarios, drawing on modelled analysis from the Intergovernmental Panel on Climate Change (IPCC).

Scenarios developed for Centuria include wider ESG aspects such as weather, energy, population and technology.

The below climate scenarios have informed our climate-related disclosures:

  • The Paris scenario ‚Äď representing a low emission future where global warming is limited to 1.5-2¬įC above pre-industrial levels
  • The Overshoot scenario ‚Äď representing a high emission future where global warming exceeds 2¬įC above pre-industrial levels.

This stress testing approach has been immediately adopted as the basis for climate-related physical risk assessments as part of the Group’s due diligence process for all future asset acquisitions.

Centuria completed its initial qualitative risk and opportunity analysis to identify current and anticipated exposure to climate-related risks and opportunities¬Ļ and identified management approaches to address them.

Risk management

Effective risk management is fundamental to minimising undesirable outcomes and supporting Centuria’s ability to achieve its strategic objectives and goals.

Centuria and each of the responsible entities has implemented a risk management framework that seeks to identify and manage material risks, prudently manage capital, ensure risk aware decision making and support a sound risk culture. This framework ensures that the respective Board’s appetite and tolerances for risk are understood, measured and reported against to ensure that Management accepts and / or manages risk within the parameters set by the Board.

We have long and well established processes for managing climate and environmental risks relating to its physical assets. However, Centuria acknowledges that its approach to managing longer term climate-related physical and transitional risks arising from climate change is a constantly evolving practice. Our Board Board is committed to further developing and continually improving Centuria’s approach to identifying and managing these longer term physical and transitional risks across the Group.

 

Process for identifying and assessing climate-related risks

We have set a clear mandate to consider the impacts of climate change on our operations and investments through an approved ESG Policy. This Policy sets the expectation for the Group to consider material ESG themes as part of their investment approach and day to day operations.

The Centuria Capital Board approves and oversees the implementation of the ESG Policy. The Culture and ESG Committee assists the Board in fulfilling its oversight responsibilities and receives regular updates from management on the Group’s adherence to this Policy.

Our risk management framework is applied to identify and manage risk across our business activities.

The Centuria Board is responsible for approving Centuria’s risk tolerances and monitoring material risks through quarterly risk reporting to the Audit Risk and Compliance Committee.

In assessing the risks associated with our business operations, we use a qualitative approach which describes the likelihood a risk may occur and the magnitude of any potential consequences. Using these assessment mechanisms, the Board:

  • determines the inherent risk rating (before consideration of mitigating controls);
  • identifies the controls and mitigation strategies in place;
  • rates the adequacy of these controls;
  • determines the residual risk rating (after controls);
  • determines whether to transfer, avoid, implement further controls (risk treatment) or accept the residual risk having regard to the Board‚Äôs risk tolerance; and
  • continuously monitors and reviews all material risks.

We have considered broad risk categories in identifying the material risks relevant to our operations, including environmental risks, which are the risks associated with the management of our physical assets derived from environmental factors (e.g. fire, flood, extreme heat).

Managing climate-related risks

We have made meaningful progress to improve Centuria’s climate resilience by continuing to implement physical climate-related risk assessments to be undertaken for all asset acquisitions irrespective of asset class.

 

Integration into Centuria’s overall risk management

Centuria has an established process for assessing the environment and climate-related physical risks (i.e. force majeure risks) for its physical assets and has recently introduced a climate risk assessment process and appetite / tolerances as part of its property acquisition process.

With the announcement of our new sustainability targets, the ongoing management and monitoring of these targets also falls within the risk management framework processes described above.

We will continue to evolve its approach to identifying and managing longer term climate-related physical and transitional risks through its existing ESG and risk management frameworks.

Metrics and targets

Our energy and emissions accounts have been disclosed as part of our wider ESG accounts, which may be found on page 76 of the report.

Green buildings

Centuria Capital Group is committed to delivering a high quality and sustainable portfolio. Efficient property management and retrofitting buildings with the latest technologies assists with managing resources efficiently and in turn minimises the impact on the environment. Developing efficient buildings also reduces operating costs for our customers and creates a positive impact for the communities in which we operate and the planet. Green building certifications are used to continuously assess and improve the assets’ performance over time. Green Star and NABERS certifications help ensure the Group’s assets have ongoing improvement opportunities and will lead to better performance and operational cost savings.

Green Star ratings

Centuria Capital Group continues to be a member of the Green Building Council of Australia (GBCA), which is the nation’s authority on sustainable buildings, communities and cities. Their Green Star rating system continues to be Australia‚Äôs largest quality management certification for sustainable development in the built environment. The rating system assesses the attributes of a project by focusing on a broad mix of sustainability impact categories, such as energy, waste, indoor environment quality, materials and land use. Our decarbonisation pathway involves a minimum 5-star Green Star rating for Centuria Industrial REIT and Centuria Office REIT development opportunities.

NABERS rating

The National Australian Built Environmental Rating System measures Australian buildings, tenancies and home environmental performance. The Group collaborates closely with NABERS, working with them to develop new rating tools for new asset classes such as warehouse, cold store and retail. An annual assessment on energy and water ratings for office assets are undertaken across the Group. The focus is on improving our scores year-on-year by tactical asset upgrades and tenant engagement. This year Centuria Capital Group is proud to report that the 2023 NABERS Sustainability Portfolio Index Energy rating for Centuria Office REIT was 4.9 star, which is an increase from the 4.8 star rating in 2022.

Energy and emissions

Centuria Capital Group focuses on key initiatives to minimise the Group’s carbon footprint and improve its energy efficiencies.

Initiatives are set with consideration of the unique real estate assets owned by the Group and aimed at maximising value for tenants and investors, while ensuring energy efficiencies are maximised. As the Group works towards our sustainability targets it is imperative that the Group sets initiatives that allow us to achieve zero scope 2 emissions and the elimination of gas and diesel from operations where practicable by 2035.

Governance

As an area of focus, initiatives to reduce the Group’s overall energy and associated emissions are communicated to the ESG Management Committee, who provide regular updates to the Centuria Culture and ESG Board Committee. The Group will continue to focus on energy efficiency as a priority, while exploring opportunities for further emission reduction strategies.

Initiatives

In FY22, the Group disclosed that it procures its energy for a number of our tenants on embedded networks through a Progressive Purchasing Agreement (PPA). This year, the Group has identified that the PPA has been successful in generating electricity for 14 sites throughout Australia. The Group continues to develop on this initiative to increase the amount of renewable energy equivalent utilised.

In terms of electrification, the Group has planned to conduct a review of multiple assets within Centuria Office REIT to identify where heating, hot water systems and cooktops could be replaced by more efficient technological alternatives. This review, to be completed by an external party, will undertake market research on newer technologies and develop cost effective solutions to identify replacement of fossil fuel sources. The Group will analyse the findings of this report and create a strategic plan to implement the necessary changes.

In FY23, approximately 2.2MW of solar capacity became operational across the industrial, retail and office portfolios. The Group are committed to continuing to expand the installed solar capacity across assets including a number of solar installations in progress at the time of reporting.

FY23 energy and emissions data1,2

Emissions 2,332 scope 1 (tCO2e)
24,921 scope 2 (location based) (tCO2e)
27,253 total (tCO2e)
Energy 56,598 total energy consumption (MWh)
3,538 MWh solar generated accross office and retail assets
2.2 MW capacity of onsite solar installed across office, retail and industrial assets

Waste and water

The Group is focused on responsible natural resource management, which largely includes waste and water. Efficient water consumption and reducing the amount of operational waste across the Group’s portfolio better serves stakeholders and the planet. This year, Centuria Capital Group implemented multiple initiatives in waste and water management, under the guidance of the Board.

Governance

Waste and water management is integrated in various environmental strategies when developing efficient assets. The ESG Management Committee oversees the systems set in place for future and current assets. Regular updates are provided to the Culture and ESG Board Committee, who then present any material information to the Board.

Initiatives

This year, the Group worked in partnership with an external consultancy to identify waste tracking and reporting processes for the Australian office portfolio. By establishing a baseline, supplier reviews, cost optimisation and tenant engagement, the Group plans on conducting NABERS waste assessments and data driven improvement strategies to efficiently manage the waste generated by assets in the long term.

The strategic plan aims to introduce the Bintracker program, where the source and weight of all waste generated on-site will be measured. This creates efficient waste collection strategies and insights into the types of waste generated that could help the Group have more effective engagement with tenants on how best to manage their waste.

This year marked a remarkable achievement in Centuria Capital Group‚Äôs water management systems. Two assets, Exchange Tower and 140 St Georges Terrace, were recognised among Western Australia‚Äôs most water efficient office buildings by the Water Corporation‚Äôs Waterwise Development Program. Exchange Tower was the recipient of the ‘Platinum’ Waterwise award, which recognises one business as a leader in water efficiency, demonstrating best practice and innovation in water management for the reporting year.

Waste and water data3

Water, waste and recycling4 FY23
Total water consumption (kL) 651,590
Total waste (t) 6,983
Waste to landfill (t) 5,184
Waste diverted (t) 1,799
Waste diverted (%) 26%
  1. ¬†All values in the above ‚ÄúFY23 energy and emissions data‚ÄĚ summary has been assured, apart from ‚Äėcapacity of onsite solar installed‚Äô.
  2. Centuria’s reporting scope for FY23 includes Australian and New Zealand assets under operational control and the Group’s employee offices. For more information, please refer to the Group’s ESG data summary.
  3. All values in the above “Waste and water data” summary has been assured, apart from ‘waste diverted (%)’.
  4. Centuria’s reporting scope for FY23 includes Australian and New Zealand assets under operational control and the Group’s emplyee offices. For more information, please refer to the Group’s ESG data summary.

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