Fortune REIT - 2021 Climate Disclosure Report

Fortune REIT recognises the impact of its operations on the environment, and understands the potential risks that climate change poses to its business and operations. Fortune REIT strives for continuous improvement on its sustainability performance and aims to combat the impacts of climate change through the proactive identification of climate-related risks and opportunities, and by developing corresponding mitigation measures. In this Climate Disclosure Report, Fortune REIT will describe the potential impact of identified climate-related risks and opportunities, as well as its effort in managing these impacts.

1. Climate Governance

Climate-related risks are considered within Fortune REIT's existing sustainability governance structure, which the Board has the fundamental responsibility. The Board oversees all relevant sustainability issues, covering environmental, social and governance topics, and a Sustainability Committee was established to assist the Board in the effective execution of Fortune REIT's sustainability strategy, managing its sustainability performance and conveying its expectation to stakeholders, including employees and the Property Manager. The Sustainability Committee conducts bi-monthly meetings to review sustainability issues and progress of implemented measures, and considers climate-related risks and the potential impacts it may have on the Manager's operations, which are reported to the Board.

An effective risk management mechanism is essential in order to adapt to and mitigate against rising climate- related risks. Management assists the Board in managing relevant risks, and is responsible for risk identification, evaluation and the management of potential sustainability risks. To allow for a more comprehensive understanding of its operating landscape and preparedness, Fortune REIT conducts a risk assessment across multiple risk categories, identifying potential risks, outcomes/impacts, and mitigation measures for the identified risks. Given the increasing significance of climate change for Fortune REIT's stakeholders, Fortune REIT has also included climate change as an identified risk in its risk register, in order to ensure that these risks will be properly considered and managed.

Fortune REIT conducts a regular review of potential sustainability risks through an analysis of risk indicators from industry practices and global risk trends. Risks identified are then assessed for the severity of their impact on Fortune REIT and the likelihood of its occurrence. The risk management framework of Fortune REIT is reviewed by the Audit Committee, as delegated by the Board, on a semi-annual basis. Risks are then managed through the Manager setting out adaptive and mitigation measures according to the risk analysis results and reviewing the effectiveness of the measures regularly to ensure the risks identified are managed in an appropriate manner.

Fortune REIT's engagement policies are outlined across its Sustainability Strategy, Sustainability Policy Statement, Environmental Policy, Code of Corporate Governance and Stakeholder Engagement Policy. The following section describes how Fortune REIT identifies its material climate-related risks and how it manages said risks in practice.

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2. Investment Management

2.1 Climate-related Risk Identification

Within Fortune REIT's investment and capital management process, ESG-related risks (including climate change) are taken into consideration in investment, portfolio management and fund structuring activities. Fortune REIT invests in quality properties with good standing, reputation and track records. In assessing potential acquisitions, the Manager considers sustainability-related matters, including the consideration of environmental factors such as climate risks, renewable energy generation, sustainable procurement, energy efficiency, water efficiency, waste management and others, as well as investment analysis and valuation reports. Fortune REIT also conducts site visits, and regularly assesses the likelihood and potential physical damage that may be caused to its properties under extreme weather events. There are plans for the United Nations Principles of Responsible Investing to be adopted into Fortune REIT's investment and asset management practices in the near future.

To further identify potential impacts that may result due to climate-related risk, Fortune REIT engaged an external consultant to prioritise its climate-related risks and opportunities, including the identification and assessment of transitional and physical risks and opportunities.

Firstly, two consolidated scenarios were developed based on international standards such as IPCC's Representative Concentration Pathways and Shared Socioeconomic Pathways, International Energy Agency and Network for Greening the Financial System in order to identify relevant climate parameters. Based on the identified parameters, a list of potential climate-related risks and opportunities were developed.

2.2 Climate-related Risk Impact Assessment

Risks and/or opportunities that were identified as having potential medium to high impact to the Manager are outlined in the below table, along with the appropriate measures adopted by the Manager to mitigate against and effectively manage the climate-related risks.

Transition Risks/Opportunities

Risk

Potential impact to Fortune REIT

Tightened

The increased adoption of renewable

building

energy

energy in the market means that the Scope

codes

and

2 emissions of Fortune REIT may decrease.

increased

At the same time, this may present an

adoption

of

opportunity for Fortune REIT to participate

renewable energy

in renewable energy programmes to

further increase the use of renewable

energy and decrease its Scope 2 emissions.

Governments may tighten building energy

codes and guidelines in order to help

achieve their carbon neutrality goals. This

can then lead to the incompliance of some

existing buildings.

Key Mitigating Measures

Solar panels have been installed at Fortune City One, Laguna Plaza and Fortune Metropolis. The Manager will continue to explore the feasibility of installing more solar panels at its malls.

The Manager seeks to protect the environment and respond to climate change risks by reducing its carbon emissions through enhancing the energy efficiency of its facilities, monitoring its emissions intensity, reducing its consumption of natural resources, and raising environmental awareness amongst its employees.

2

Increased

market

There has been a growing demand for

100% green building certification has

demand for green

greener and climate friendly products and

been obtained across the entire

properties

brands, which may hence present an

Fortune REIT portfolio.

opportunity to Fortune REIT. By increasing

the proportion of green buildings, Fortune

REIT may be able to sharpen its

competitive edge in meeting the growing

consumer preference for green and

climate resilient properties.

Market

demand

The fast growing investor demand for

Reinforcing the Manager's on-going

for green finance

green and low carbon finance and

commitment

to

sustainable

investment provides opportunities

for

development and the advancement of

Fortune REIT to unlock different financing

its ESG goals, Fortune REIT has secured

streams. Leveraging Fortune REIT's ESG

a 5-yearsustainability-linked loan for

performance may help secure lower long

HK$1.5 billion from OCBC Bank during

term borrowing costs and expand its pool

2021. The facility is the second of

of ESG centric retail and institutional

Fortune

REIT's

green

financing

investors and lenders.

initiatives, with sustainability-linked

loan facilities amounting to an

aggregate of HK$2.5 billion. Moreover,

Fortune REIT has entered into its first

sustainability-linked interest rate swap

with DBS Bank, which upon the

satisfaction of pre-determined targets

concerning

community

engagement,

will enable Fortune REIT to receive a

sponsorship from DBS Bank, giving rise

to Farm@Fortune.

Changing

The changing behaviour of tenants and

Through the launch of the Fortune

consumer

consumers can bring both risk and

Malls App, active asset management

behaviour

opportunity to Fortune REIT. If Fortune

and

asset

enhancement

initiatives,

REIT cannot meet the expectations of its

Fortune

Malls

continually

revitalises

consumers, it may face the risk of losing

and

addresses changing

consumer

them. However, if Fortune REIT can realise

behaviour at its malls, please refer to

this trend earlier than its competitors,

pages 20- 21 of Fortune REIT's 2021

Fortune REIT may then be able to capture

ESG report for more information.

this opportunity by meeting consumers'

expectations and demands.

Increased

Although the Hong Kong government has

Please refer to page 33 of Fortune

ambition

of

already set its carbon neutrality goals, it

REIT's 2021 ESG report for more

national

may increase its ambition during their

information

on

Fortune REIT's

decarbonisation

decarbonisation journey. If Hong Kong sets

decarbonisation efforts.

strategies

more ambitious goals, this may affect

climate policies, thereby affecting Fortune

REIT's operations.

Adoption

of

Technological advancement presents

an

The

Sustainability Committee of

lower-carbon

opportunity for Fortune REIT to improve

Fortune REIT continually reviews the

technology

its energy efficiency, reduce energy cost,

efficiency of existing equipment and

reduce carbon emissions and support its

conducts

maintenance

as

needed,

transition towards a lower carbon

including the replacement of chiller

economy. Fortune REIT would be able to

plants

to

more

efficient

models,

gain first mover advantage and gain more

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4
Flooding would potentially affect Fortune
REIT's properties that are located in low As further protection against extreme lying, coastal or riverside areas, resulting in weather events, the Manager has suspension of business, increase in undertaken insurance policies for all its maintenance costs and insurance malls covering damage arising from
premiums etc.climate-relatedextreme weather, including tropical cyclones (typhoons) and floods.
Climate change may impact on the spatial In addition to energy efficiency and and temporal distribution in China's water emissions reduction, Fortune REIT is

in depth knowledge of the operation of

sewage/clear water pumps and LED

these technologies.

These

technologies

lighting.

may be expensive at first, but with more

demand and experience, the cost of these

technologies may then decrease. Although

it may be cheaper to jump on the

bandwagon after industry leaders have

already explored

these

technologies,

Fortune REIT may face the risks of being

left behind on these technologies.

Unsuccessful

investment

in

new

technologies may also be a risk to Fortune

REIT.

Physical Risks/Opportunities

Risk

Potential impact to Fortune REIT

Key Mitigating Measures

Heatwaves

and

The increase in average temperatures can

As part of Fortune REIT's on-going

increase

in

bring both risk and opportunity to Fortune

decarbonisation

and

climate

change

average

REIT depending on the exact location of a

efforts, a smart building management

temperatures

building. It may be a risk when there is a

system will be installed at Fortune

higher energy consumption used for

Malls. The cloud-based automated

cooling in summer, whereas it may be an

building solution will first cover up to

opportunity when there is a lower energy

69% of Fortune REIT's portfolio area,

consumption used for heating in winter.

allowing centralised

collection and

monitoring of building data, serving to

Heatwaves could cause illnesses such as

optimise energy efficiency.

heatstroke. With prolonged exposure to

heatwaves, workers such as security staff

and cleaners could suffer from illnesses

related to heatwaves, which could lead to

an increased rate of injury or occupational

illness and may restrict the working hours

of Fortune REIT's outdoor labour,

ultimately decreasing labour productivity.

Extreme

Fortune Malls may be damaged when

Despite the Property Manager's efforts

weather

extreme weather hits. Subsequent events

to adapt to climate change by

(Tropical

such as landslips and flooding may cause

implementing

its extreme

weather

cyclones,

more damage than strong winds. Climate

policy, typhoons have caused minimal

intense

change may exacerbate the frequency and

disruption to operations and damage to

precipitation,

strength of extreme weather events like

some Fortune Malls in the past,

flooding, storm

tropical cyclones.

including broken windows, glass doors

surges, sea level

and water leakage.

rise)

Water stress

resources. While there is a significant

also committed to optimizing water

amount of water imported from Mainland,

usage

and

minimizing

wastewater

water stress issues in the Pearl River Delta

generation within its operations in line

may disrupt the water supply to Hong Kong

with or better than regulatory

due to the limited water it may be able to

guidelines. The initiatives implemented

source.

to meet these targets include the

installation of water-saving taps and

regular inspection to prevent water

leakage, the utilization of reclaimed

water

for

landscaping

irrigation,

rainwater harvesting, as well as the

installation of smart irrigation at

Farm@Fortune at Fortune City One.

3. Risk Management

Fortune REIT is committed to building resilience to climate change, a critical risk to all businesses and communities around the world. As a responsible corporate citizen, the Manager is conscious of the environmental impact of its operations and seeks to identify and mitigate significant climate-related issues that may impact its malls. The Manager has incorporated the consideration of climate change into its Sustainability Strategy and has in place a Climate change Adoption Policy, alongside which regular inspections are carried out to ensure Fortune Malls are resilient to extreme weather events.

Furthermore, the Manager also implemented proactive mitigation initiatives through various channels to reduce the release of GHG emissions into the atmosphere. The Manager's initiatives include long-term reduction targets and monitoring its environmental performance against its targets, adoption of energy efficiency and industry best practices, use of renewable energy, sustainability-anchored procurement and supply chain management processes, and incorporation of climate-related considerations into its risk management framework. These initiatives are embedded within the Manager's business processes and policies, demonstrating the Manager's determination to sustainable development and to reduce its carbon footprint.

Lastly, Fortune REIT will continue to regularly assess climate-related risks, with regards to both physical and transition risks, in order to ensure the appropriate processes and management mechanisms are in place to handle any changes to the Manager's risk environment.

4. Carbon Footprint

Recognising the impact of Fortune REIT's operations on the environment and in line with its sustainability objectives, the Manager has undertaken proactive action to minimise its carbon footprint. Carbon footprint- related metrics are used during this process as a starting point and an effective tool for Fortune REIT to determine the impact of climate change, as well as to facilitate Fortune REIT's stakeholders in easily assessing the Manager's environmental performance against peers. Various initiatives and measures have been put in place regarding climate change, emissions and energy efficiency to further bolster the Manager's environmental performance pursuant to its Environmental Policy, Climate Change Policy and GHG Emissions Policy. As detailed in these policies, the Manager seeks to protect the environment and respond to climate change risks by reducing its carbon emissions through enhancing the energy efficiency of its facilities, monitoring its emissions intensity, reducing its consumption of natural resources, and raising environmental

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Fortune Real Estate Investment Trust published this content on 18 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 August 2022 07:03:01 UTC.