Sirius

As a business we fully support the aims and implementation of the TCFD, and we will continue to build on and improve on our actions and disclosure as we embed climate-related risks and opportunities into our business and strategy.

The information on this page regarding implementing the recommendations of TCFD relates specifically to the Group’s German operations and assets.

In the financial year ended 31 March 2022, we completed our next steps in the TCFD process by undertaking a climate scenario analysis based on the transition risks and potential impacts of 1.5–2.0°C of climate change in line with the Paris Agreement. We have also undertaken an initial assessment of our physical risks up to 1.2°C of climate change. In both cases we are looking to build on these assessments during the current financial year. We believe we are compliant with all the recommendations of TCFD, though we will always aim to continue to improve our performance and disclosure across Governance, Strategy, Risk Management and Metrics and Targets as we further embed climate-related risks and opportunities into our business and strategy.

We have been aware of and taken seriously our responsibilities to the environment for a number of years and we provide an estimated 94.6% of our electricity to tenants from renewable sources.

During the financial year to March 2022 we also completed a detailed assessment of the embodied carbon within our supply chain and how this relates to the refurbishment and modernisation of our assets. In addition to this, we have started on our detailed plans for carbon emissions reduction leading to a net zero strategy for our Scope 1, 2 and 3 emissions. This detailed assessment commenced in the beginning of calendar year 2022, prior to our reporting period ending, and we will be updating our stakeholders in due course. As a first step, we aim to be net-zero for our Scope 1 and 2 emissions in Germany in the current year.

Looking forward, during the financial year to March 2023, we aim to integrate BizSpace into our transition risks and potential impacts in line with the Paris Agreement; undertake a further climate scenario analysis for the business for 3.0–4.0°C of climate change; and also conduct a further physical risk assessment.

The table below outlines our progress to date against the TCFD recommendations:

Governance

Disclosure

Describe the Board’s oversight of climate-related risks and opportunities

The Board assumes overall responsibility and accountability for the management of climate-related risks and opportunities. The Chief Executive Officer provides regular updates to the Board on ESG and sustainability-related issues, through his role as Chair of the Sustainability and Ethics Committee. The Sustainability and Ethics Committee advises the Board on the economic sustainability of the business and works with the executive management to shape policy and strategy to improve the Group’s environmental performance. The Board is further supported by the Audit Committee which has responsibility for the review of the risk management methodology and the effectiveness of internal controls. The Board reviews the risk register on an annual basis. The Board also receives and discusses reports from the ESG Working Group.

Describe the management’s role in assessing and managing climate -related risks and opportunities

The Chief Marketing and Impact Officer is responsible for the management of climate change related issues. The Chief Marketing and Impact Officer also heads the ESG Working Group which meets monthly and is responsible for climate-related risks being integrated across all parts of the business. The other members of the ESG Working Group are the Chief Financial Officer, the Environmental Director, and the Asset Management Director.

The ESG Working Group identifies ESG within its Principal Risks, within which climate-related risks and opportunities are captured. A risk management framework is in place to ensure that relevant risks are identified and mitigated in order to significantly increase the chances of being able to achieve the Group’s objectives of creating and sustaining shareholder value.

The ESG Working Group is also currently in the process of finalising an ESG Framework for the business, which includes climate-related issues. The Framework will ensure that we operate responsibly in relation to the climate, biodiversity and other ESG issues for long-term sustainable growth.

The TCFD Working Group, also headed by the Chief Marketing and Impact Officer, has responsibility to implement the recommendations of TCFD in line with the Company’s business plan and strategy. The TCFD Working Group reports into the ESG Working Group which in turn reports into the Sustainability and Ethics Committee, detailed above.

Strategy

Disclosure

Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term

As already highlighted, this TCFD report relates to the Group’s German assets and operations. We intend to integrate BizSpace into the TCFD recommendations in the financial year ended 31 March 2023.

Sirius considers itself to be a responsible business and is increasingly including climate-related risks and opportunities across its business activities. During the year we completed our review of an ESG Materiality Assessment which identified in declining order carbon emissions reduction; the modernisation/refurbishment of older buildings; water, waste, and energy management; the longer-term physical impacts of climate change; and biodiversity as areas for ESG consideration. We are developing our ESG Strategy, incorporating an environmental strategy, which will formalise the identification of climate-related risks and opportunities, supported by the findings of our materiality assessment and scenario analysis outcomes. As part of this process, we will further define the short-term, medium-term and long-term issues to better align with our Risk Management Framework. For the purposes of this TCFD report, we define the short-term as 1–5 years, the medium-term as 5–10 years and long-term as 10+ years. We will build on these going forward to better understand the strategic and financial impacts of the issues identified within these time horizons.

Short-term: 1–5 years

We will take a proactive approach to minimising the risks and maximising the opportunities as the regulatory landscape and our tenants’ expectations changes in relation to climate-related issues. Actions are already being undertaken in recognition of the importance of improving our environmental performance, our provision of renewable electricity, our roadmap to net-zero emissions, the role of our supply chain, our approach to biodiversity and working to minimise the risk of reputational damage where expectations are not met.

Medium-term: 5-10 years

In the medium term we will be focused on further managing the risks and opportunities related to climate change. We recognise the growing importance of having a clear net-zero pathway and the importance this will have to tenants, the capital markets and reputational value. We believe that our business strategy of extending the life of older buildings through refurbishment and modernisation together with actions we are taking on embodied carbon and biodiversity will provide resilience and opportunity to the business.

Long-term: 10+ years

Our initial scenario planning examines the potential impact of “early policy” changes, so we recognise we have more work to do on our long term assessment and this will be covered in the current year. As we continue to examine the long term, we will consider climate-related issues as well as an expected greater emphasis from regulators and tenants on the importance of a neutral to positive impact on the environment of our assets. This will have an increasing influence on asset valuations and income.

 

Describe the impact of climate-related risks and opportunities the organisation’s businesses, strategy and financial planning

As we continue to develop our ESG programme, we are beginning to factor climate-related risks and opportunities into our business, strategy, and financial planning, and as we develop our acquisition process and our approach to transforming and managing our assets. We are fully committed to decarbonising our business across Scope 1, 2 and 3 and will look to further develop our net zero roadmap. We will be net-zero for our Scope 1 & 2 emissions in Germany in the current year. We will add our German Scope 3 emissions and the BizSpace portfolio to our Net-Zero pathway in due course. Our work on our net-zero pathway includes reviews of individual assets in order to assess energy efficiency improvement opportunities and monitoring and management of consumption data across energy, water, waste, and embodied carbon. We are also modelling a sample of our German assets to understand the actions and investment needed to become net-zero. This model will then be rolled out across our German portfolio. Once completed a similar exercise will be undertaken for our UK assets. We believe future energy efficiency measures implemented will yield improvements in overall maintenance costs, resulting in direct financial savings and increased attraction to new and current tenants.

We focus on transforming our assets into high-quality conventional and flexible workspaces. Our capital investment and asset management plans incorporate environmental considerations, and we completed an embodied carbon project to better understand and measure the embodied carbon related to the operation and modernisation/refurbishment of our buildings. Going forward we will be working with our supply chain to reduce the levels of embodied carbon.

Our acquisition framework has been updated to include environmental considerations within the pre-acquisition due diligence.

A strategic priority for the Company for 2022/23 is to set out our ESG framework to allow us to build on our understanding and implementation of the climate-related risks and opportunities into our business, strategy, and financial planning in the short, medium and long-term.

Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2C or lower scenario

As described, we have reviewed our strategy against an “early policy” scenario aligned to 1.5-2.0 degrees of climate change, to meet the Government emissions targets in Germany, and have identified a number of climate-related risks and opportunities. The result of this review is being factored into both our ESG strategy and operational plans. We will also be undertaking a further risk and opportunity scenario for 3.0-4.0 degrees of climate change that could have a material financial impact to the Group in the current year.

We have undertaken an initial physical risk assessment to 1.2 degrees of climate change. It is our intention to undertake further physical risk assessments in the current year for two degrees and lower scenarios as well as greater levels of global temperature rises. This assessment will include changes to temperatures leading to increase cooling and heating loads, changes in precipitation leading to flash flooding and physical damage to buildings from extreme weather events.

Our current actions, our plans for carbon emissions reduction, our roadmap to net-zero, the greater level of physical risk assessment and our biodiversity plans will be developed to support the resilience of our business as we look to address both the physical and transitional risks of climate change and maximise the opportunities.

Risks and opportunities

Disclosure

Describe the organisation’s processes for identifying, assessing, managing climate-related risks and how these are integrated into the organisation’s overall risk management

Sirius has policies and procedures in place for the timely identification, assessment and management of the Group’s material risks and how these are integrated into the organisations overall risk management.

The Group has an established risk management approach to identify, monitor, and mitigate risks, including ESG risks. These will be further developed as we progress with our ESG programme. Risk management is an integral part of the Group’s business and risks are considered at every level of decision making and across all business activities. The risk framework is updated annually and is regularly reviewed by the Audit Committee.

We have set out below an overview of the material climate-related transitional risks we have identified as part of our scenario process. These risks are being adopted within the current Risk Management Framework and are currently viewed on an equal risk basis. These risks will be considered further as we develop the recommendations of TCFD and our approach to climate risk and opportunities:

TRANSITIONAL RISKS Markets and technology

  •   Reduced market demand for assets without a carbon reduction plan;
  •   New technologies (smart meters etc) become a hygiene factor. Reputation
  •   Loss in confidence in management without emissions reduction/climate plan;
  •   Challenge in attracting new tenants and talent.

Policy changes

  •   Increased input/operating costs due to introduction of carbon price;
  •   Threats to licence to operate due to regulatory change.

Legal and insurance

  •   Higher insurance rates for buildings without green certification;
  •   Threat of lawsuits in regard to lack of climate risk disclosure.

PHYSICAL RISKS

We also recognise the importance of physical risk assessments and will be looking to develop this further in the current financial year and will update and disclose our findings in due course. We have undertaken an initial physical risk analysis of our German assets. This covers river flood, pluvial flood, coastal storm surge and windstorm for climate change up to 1.2 degrees.

In summary:

  •  15% of the portfolio are subject to a 0.5% chance of river flood over a 200 year return period;
  • 1% of the portfolio is subject to a 0.5% chance of rain related flooding over a 200 year return period and 1% is subject to a 0.2% rain related flooding over a 500 year return period;
  •  1% of the portfolio is subject to a 0.2% coastal storm surge over a 500 year return period;
  •  None of the portfolio are subject to wind storm.

Operationally and strategically, several mitigating actions to address these transitional and physical risks are being built into the ESG programme. These include:

» Creation and development of an ESG framework and strategy including climate-related risks; » The creation of carbon emissions reduction plan leading to net-zero strategy;
» The management of sustainability within the supply chain;
» Development of a biodiversity strategy with complete transparency on actions and targets;

» Continued monitoring of regulatory outlook;

» Rollout of smart meters and other energy efficiency technologies across the asset portfolio;

» Continued purchase of renewable electricity;

» Continued refurbishment and modernisation of assets;

» Continued development and management of the risk framework to include ESG and climate-related matters.

It is our intention to undertake further physical risk assessments in the current year for further climate warming scenarios and to expand the physical risk coverage in the current year.

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Metrics and targets

Disclosure

Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management processes

To date, we measure a wide range of consumption data relating to energy, water, waste, and embodied carbon. Carbon emissions is one of our main areas of focus and we report on GHG emissions, which are disclosed in the Annual Report including Scope 1, 2 and 3 emissions.

As our ESG programme develops including the implementation of TCFD, we expect to be able to identify and disclose additional metrics and KPIs, in particular in relation to our net zero plans.

Describe Scope 1, Scope 2 and if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks

Detailed reporting of our energy consumption and our Scope 1, 2 and 3 carbon emissions are disclosed in our Annual Report on pages 37 to 39. We calculate our emissions in line with the Greenhouse Gas (GHG) Protocol and provide the prior year performance.

Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets

As we develop our ESG programme and strategy, in particular as relates to our net-zero ambitions and climate- related actions, we have the ambition to set a number of challenging climate-related targets. We are in the process of building a carbon reduction plan leading to net-zero and it is our intention to announce a roadmap to net-zero for Scope 1 and Scope 2 in Germany in the current financial year, and for Scope 3 in due course. We intend to link metrics and targets to this process.

 

 

 

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