Climate change risk management

Top six risks related to climate change identified by our business:

Risk type	Description	Potential impact	Timeframe	How we monitor and manage this risk *
Transition: Policy and Regulations	The rise in regulations (e.g. new requirement of an EPC C rating by 2027) and increasing pressure to disclose further on environmental performance (e.g. SBT, TCFD, CDP) pose costs to our business and even risks to assets.	Meeting evolving regulatory requirements could lead to growing resourcing and operational costs. The rise of regulations poses a risk to assets potentially becoming stranded.	Short term: 2022	We are working towards improved EPC ratings and continuously monitor and review legal requirements, working with Auditors and Sponsors to fulfil growing expectations. We also seek legal advice on regulations regarding premium listing requirements.
Transition: Market	Environmental performance requirements of premiumlisted companies could rise. Real or perceived poor climate performance could influence Industrials access to capital, ratings scores and negatively impact investor relations.	Concerns around Industrials’ business model and pace of migration to a more sustainable business and products could negatively influence Industrials’ ability to attract new investors or funding from equity and debt markets. As preference in ESG capital allocation increases, access to debt facilities might be hampered.	Long term: 2028-2050	Although we do not currently use green-badged financing, we actively consider all available opportunities in the market.
Transition: Reputation	Despite rising expectations for climate and ESG performance, Industrials may not successfully implement our ESG strategy. We may also fall behind our peers in ESG performance.	Failure to meet stakeholder expectations of our emissions reduction strategy and ESG performance could damage Industrials’ ESG ratings and rankings. This could influence market valuation, decrease stock price and damage investor relations, ultimately impacting Industrials’ reputation and credibility.	Medium term: 2023-2027	We are developing metrics to track and communicate our key performance and progress towards targets. We are also committed to implementing green solutions to facilitate lowcarbon performance where it is feasible.
Transition: Reputation	If customers have significant carbon footprints, this could jeopardise Industrials’ ability to meet our own performance targets.	Customer electricity consumption and GHG emissions could affect Industrials’ performance and progress towards our targets. This could have a negative impact on our reputation	Medium term: 2027-2035	We have recently conducted a customer engagement survey to understand our customer needs and will be looking to enhance our customer engagement programme over the course of 2023.
Physical: Acute	Increasing intensity and frequency of floods and storms in the UK could damage Industrials’ estates, leading to asset loss and/or damage. Simultaneously, it could affect customers by damaging leased space and inventory, disrupting their business continuity.	Damaged or lost assets and operational disruptions could lead to financial losses from void units and write downs to asset value. Loss of rent could result due to customer business disruption.	Long term: 2028- 2050	We undertake an environmental survey and flood assessment at the point of acquisition and have insurance on our assets. Where perceived flood risks exist, we collaborate with local authorities to ensure that mitigating controls are in place.
Physical: Acute	A rise in extreme weather events may make insurance conditions less favourable.	Having a higher number of assets affected by these events could increase the costs of insurance premiums or render assets uninsurable.	Long term: 2028-2025	We undertake an environmental survey and flood assessment at the point of acquisition. Where perceived flood risks exist, we ensure that mitigating controls are in place.

We continue to review and expand our climate-related risk controls which are further described in our annual report.

Opportunities

We also assessed the potential opportunities for Industrials REIT that may result from climate change. Since Industrials REIT has more than 1,500 occupiers, we could leverage our scale to help these small to medium-sized enterprises reduce their emissions. This would also help our assets retain value and be more resilient over the longer term, as well as meet growing requirements from investors, insurance providers and regulators. Our top four opportunities related to climate change can be found in the table below.

Opportunity Type	Description	Potential impact	Timeframe
Resilience	Industrials could generate our own electricity with on-site solar panels.	On-site solar panels could increase Industrials’ energy security, reduce the cost of energy and generate additional revenue. It could also meet customer demand for low-emissions and low-cost tenancy while helping to reduce Industrials’ Scope 3 emissions.	Medium term: 2023-2027
Resource Efficiency	Industrials could benefit from energy efficiency projects on assets.	Energy efficiency projects could lower GHG emissions and bring financial gain, while proving attractive to tenants.	Short term: 2022
Markets	By becoming a low-carbon business, Industrials could take advantage of green finance and preferential borrowing conditions.	Doing so would expand our access to green financing opportunities. We could also receive preferential borrowing conditions linked to sustainability performance: interest rates, sustainability-linked bonds and greenbadged loans.	Medium term: 2023-2027
Products & Services I	Industrials could advance our offering of low-emission products and services.	Industrials has the potential to offer supporting products and services to help customers decarbonise and achieve their ESG goals. New offerings could include refurbishment, retrofitting, EV charging infrastructure or renewable energy.	Medium term: 2023-2027

Resilience

To enhance our approach to climate-related risk and opportunity and further comply with the disclosure recommendations of the TCFD, we will continue to undertake more in-depth analysis on the impact of climate change on our business activities to gain a better understanding of how our business and assets may be impacted, allowing us to implement further mitigation measures to enhance our resilience.