Climate change is a significant threat across varied sections and in varied regions there has been a consensus about the need for businesses to play key role in ensuring transparency around climate risks and opportunities. To steer climate action, science-based emissions reduction targets validated by Science Based Target initiative (SBTi) and climate change scenario analysis based on the TCFD recommendations have been suggested to be adopted. These aimed to future proof businesses by identifying risks for mitigation and adaptation with the view to deliver value for business, investors, stakeholders and the environment at large. With real estate, contributing to one third of all the global carbon emissions according to UNEP, the responsibility has increased manifolds to address the impact of climate change on real estate portfolio.

1. 1
Setting Newer Positive Verticals for
Investors and Real Estate Developers –
A Primer on Know-how on Climate Value Risk
for Real Estate Sector and how to protect their
Portfolio
2020
Eco Endeavourers Network
Striving for the Planet in Peril
Authored by: Dr. Prachi Ugle Pimpalkhute

2. 2
How to Initiate Setting Positive Verticals for Investors and Real Estate
Developers?
Beginners Guide for Setting Real Estate Portfolio
Climate change is a significant threat across varied sections and in varied regions there has been a
consensus about the need for businesses to play key role in ensuring transparency around climate
risks and opportunities. To steer climate action, science-based emissions reduction targets
validated by Science Based Target initiative (SBTi) and climate change scenario analysis based on
the TCFD recommendations have been suggested to be adopted. These aimed to future proof
businesses by identifying risks for mitigation and adaptation with the view to deliver value for
business, investors, stakeholders and the environment at large. With real estate, contributing to one
third of all the global carbon emissions according to UNEP, the responsibility has increased
manifolds to address the impact of climate change on real estate portfolio. Also climate risk has
added another variable that needs to be addressed in evaluating “Value at Risk” by developing and
implementing steps to safeguard client’s investments in real estate properties. Climate resilience
here means the future of communities and citizens who are connected to the buildings, who reside
needs to be better managed and be served to strengthen and cater to their benefits. Considering
this, the investors and real estate developers have a major role to play in moving the world to a low
carbon future. Qualitative and quantitative approach will be needed to prioritize the development
and deployment of effective asset level climate mitigation strategies in real estate sector.
“The onus is to Walk the Talk on Climate Value Risk and on how to better manage the
real estate asset portfolio”
Ever since the “Task Force on Climate-Related Financial Disclosures” (TCFD) released its final
recommendations in 2017, more and more financial institutions across the globe are responding
to climate risk. Also, leading investors, perceive strong connection between the ability to generate
positive returns and capacity to manage the risks posed by climate change. Effective asset
allocation and management decision making depends on inputs on risks institutions and on how
their investments are exposed and also on how climate risk creates opportunity amidst their
exposure to slowdown. A main crucial point of mention is that TCFD providesframework to assess,
measure and disclose information by key stakeholders both externally and internally. Another,
key point of relevance is prime targets for emission reductions to be in line with below 20 targets.
As such though the in-use energy intensity of building is falling, the reduction is quite less than
what is required to offset the rise in global floor area and also in bending the sector emission
trajectory strongly downwards.

3. 3
Since buildings are energy-intensive to build and operate, they are key targets in global efforts to
reduce carbon emissions. Also, since two-thirds of the overall building stocks currently in most
countries is expected to be in-situ in 2050 according to UNEP, there will be need of deep and
potentially costly retrofits to increase energy efficiency and in switching towards lower carbon
power sources to meet expected jurisdictive requirements as cities and countries target on
net-zero emissions. Without upgrading the design, fittings and plan outs there shall be risk of
buildings which are inefficient becoming “Stranded.” To match with the asset level and whole of
portfolio analysis TCFD most recommended “Climate Value at Risk” (CVaR) and “Warming
Potential” metrics would be best suited for assessing the impact of climate change related
transition and physical risks on real estate property value. Also the policy risk (transition risk)
model which combines top down and bottom up hybrid methodology to assess policy risks from
future efforts to address climate change. Moving ahead, the physical risk model utilizes climate
hazard data for the set of assets where they are located.
Methodological steps in the Regulatory Transition and Physical Risk computations as per
UNEP
Regulatory Transition Risks
Physical Risks
Assets
Energy
/Emissions
Reduction
Requirements
Costs
Assets Emissions Locations Costs
Climate
VaR
Climate
VaR

4. 4
According to a report by UNEP “Changing Course” – Real Estate: the transition risk modelling
includes a 3°C Scenario (equivalent to the NDCs of the Paris Agreement), a 2°C scenario, and a
1.5°C Scenario (“Carbon Net Zero”). Emissions reductions required from the buildings sector are
based on a fair share principle, with the reduction for buildings equal to the share of emissions
from buildings out of the country’s total emissions. Country-level targets in the 2°C scenario are
calculated by amplifying the emission reduction targets in the NDC-compliant 3°C scenario using
the 2°C-compliant levels in line with the UNEP Gap report. For 1.5°C levels, the annual reduction
requirements are driven by the assumption that all buildings are carbon neutral by 2050.
UNEP states that emissions reductions are calculated against benchmark emission intensities
which are country and building-type specific. Asset-level carbon reductions for Scope 1 and 2
emissions rely on reported/actual data and are compared to reduction pathways for the 3°C, 2°C,
and 1.5°C compliant scenarios. The greenhouse gas (GHG) reduction requirements are given a
cost to the building owner using modelled future carbon prices according to the scenario.
Discount factors are utilized to calculate the present value of the cost of the emission reductions.
The results are also displayed as the level of anthropogenic warming an owner ‘s investments
correspond to – the asset or portfolio’s warming potential.
The physical risk modelling captures two types of physical climate risk: chronic risks, which
manifest slowly over time (extreme heat, extreme cold, and severe wind conditions), and acute
risks, which are the result of extreme weather events such as tropical cyclones and coastal
flooding. The methodology used to assess physical risks for real estate covers the financial
impacts due to asset damage by climatic events and trends for commercial and residential
buildings. The formula includes:
Methodological Components of the Physical Risk Model
VULNERABILITY Cost Function
HAZARD Extreme Weather
EXPOSURE Asset
Expected Cost = Vulnerability * Hazard * Exposure

5. 5
Most of the physical risks impacts are estimated under Business-As-Usual (BAU) scenario, rather
than different policy scenarios. Also, more so extreme physical risks are covered in an
‘aggressive’ scenario.
The CVaR for chronic risks is derived from costs from physical property damage as well as
changes in the operational costs to specific buildings. Thresholds for damage occurrences are
calculated for each of the chronic risks, and damage functions assigned for conditions that exceed
these thresholds.
Furthermore, calculation from asset damages and changes in operating needs are then
discounted for the present value. The Climate Value-at-Risk is the present value of cost in relation
to Gross Asset Value (GAV).
According to UNEP report Changing Course – Real Estate: For acute physical risks, value at risk
calculations are based on projections of future intensity and frequency derived from selected
hazard models. Costs are quantified based on expected damages, calculated as the product of the
value of the facility, and the proportion of damage expected. Similar to chronic risks, the
difference between future and current costs from the hazard are assessed and then discounted
for present value. To demonstrate the utility of the modelling and the information generated,
assets from several individual participating institutions are pooled into single portfolio. The data
is then anonymized so that no specific asset information or owner/manager details are disclosed.
The analysis of the portfolio reveals an aggregated CVaR of -1.9% of gross asset value, based on
the 2°C transition risk scenario and the average outcome of the physical risk scenario. The value
at risk significantly sits with the physical risk: -1.57% of the -1.9% total is due to physical rather
than transition risk factors. The findings also suggest that the transition CVaR is more sensitive
to the scenario utilized than is the case with the physical risk modelling. The transition costs
more than double moving from a 2°C to a 1.5°C scenario. Overall, the portfolio shows a weighted
warming potential of 3.16°C. Compared to the global Business-as-Usual (BAU) predicted
temperature rise of 3.8°C, the portfolio generally performs better in terms of carbon efficiency
compared to industry at large benchmarks but still is some distance from what is collectively
needed to avert the worst effects of climate change.
Results from the transition analysis are then mapped by region and property type against the
asset value and the carbon emission reduction requirements. Properties which have high
reduction requirements and a low value per m2 may be considered high risk: these properties
could face high retrofitting costs that may be difficult to absorb considering the lower property
value.
Physical Risk Impacts - Business –As-Usual (BAU) + Aggressive Scenario
Chronic Risks - Cost from physical property damage
+ Operational costs to specific buildings

6. 6
Data modelling shows that average Climate Value-at-Risk can appear relatively low across
portfolios and selectively for individual assets. Also missing hazards to which modelling
challenges remain (such as fluvial flooding and wildfire); and modelling being limited to direct
impacts and excluding indirect ones (e.g., climate change if unaddressed will create an economy-
wide strain on growth and GDP which will indirectly affect real estate values). Public policy and
private actions are aligning with strengthening political commitment as global leaders
implement measures to keep temperature to ‘’well below 2°C “as was set out at the UN Climate
Summit in Paris in 2015. Also the second set of nationally determined contributions (NDCs) are
due to be recommitted by the parties at UNFCCC - COP26 in December 2020 (nearly 90 countries
have registered building-sector actions in their current NDCs), though COP 26 meet at the
conference level platform has been cancelled in lieu of COVID 19 pandemic, however
at the virtual/online level platform conference and its deliberations will be done to derive best
possible solutions, recommendations and major outcomes. Earlier in September, 2019, 77
countries and more than 100 cities committed themselves by setting up targets to be net zero
carbon emissions by 2050 at the Climate Action Summit; and 3,000 city-level commitments were
registered under the United Nations Framework Convention on Climate Change (UNFCCC).
SETTING REAL ESTATE PORTFOLIO – Starting, Growing and Implementing
Starting: A real estate portfolio is a group of different investments assets that are being hold and
managed to achieve financial goals and set new positive verticals for the real estate sector. It
includes, planned catalog of current and past real estate dealing, be it with regard to rental
properties, REITs or for rehabs to have ease of financial returns. Not all real estate portfolio shall
look the same, the matter that are considered part of the portfolio will generally be dependent
on a combination of factors such as their aim, time horizon and risk tolerance. Risk and incentives
are inherently interconnected with real estate investment, so the risk tolerance will ultimately
be decided by an investor’s willingness to lose some–or all–of their original investment in pursuit
of achieving their financial targets. A well-designed portfolio will basically include personal
investment goals and strategies, the intrinsic workings of deals completed and currently owned,
as well as success or failure rate. The type of real estate investment, one has in the portfolio will
play significant role in achieving the goal – such as rental properties and multifamily properties
aim is to achieve passive income, while assets such as wholesaling and rehabs look into accruing
short-term gains.
Real Estate Portfolio building depends upon the following aspects:
 NUMBERS: They provide a window towards transparency in the very way deals are done.
It shall include each of the investment asset being broken by various numbers such as
purchase price, transaction or holding costs. Profit, repair costs and sales price.
 FINANCING: Includes how finding and structuring the financing options of the deals is
done. Also whether financing is being done through traditional institutes like Banks or
from private money lenders is looked upon.
 IMPROVEMENT COSTS: Includes operating costs, associated costs and how to leverage
the potential of earning profits.

7. 7
Growing of Real Estate Portfolio:
In order to grow a real estate portfolio, the key aspect shall be leveraging the potential to pursue
newer positive verticals. It includes:
Using the asset to resource to advantage
Collection of assets being leveraged to gain credibility in the market.
Reducing risks by diversifying the portfolio
Implementation:
Implementation includes: executing efficient systems so that economies or savings of scale
become achievable.
Example Case: COVID 19 Pandemic
Are we seeing the Fuzzy Objects or Known Unknowns or is it worsening of market being
considered as the beginning of New Normal?
As regard to housing market bubble, wherein land and residential prices drift far above their
intrinsic values, there are parallel disconnects between the cost of a house, the cost to rent, and real
wage growth. Though the rebates and perks being given by the government shows that real estate
sector is in recovery mode, it is other way round as there is downturn of the economic growth bell
rather than that of virus. The resultant of pandemic is construction projects got delayed, new sales
slip and expenses continue to rise. The government have had in March announced under Atma-
Nirbhar Bharat Schemes varied, multiple relief options to the developers which includes: special
liquidity scheme worth INR 30,000 crore for Non-Banking Finance Companies (NBFC’s), Housing
Finance Corporations (HFC’s) and Micro Finance Institutions (MFI’s), which carry a guarantee by the
Government of India. Further, an amendment was made under the Real Estate (Regulation and
Development) Act, wherein COVID-19 disruption will be treated as force majeure and an extension
of 6 months/9 months (depending on which part of the country the project is being constructed)
will be provided for varied to completion timelines. Though it reaped some benefits like infusion of
liquidity to let the survival of green shoots, empowering the promoters as well as the developers’ via
loan rebates by allowing Date of Commencement for Commercial Operations (DCCO) by one year,
and assistance such as collateral and guarantee free loans, equity funding options, better access to
government procurement, e-market linkage and higher thresholds.
What were the Gaps and What would also have been included?
Reduced homes loans – would have benefited those investing in property during that period, also
enhancing sales, huge task of covering the loss time and uncertainty in constant cash flow, migrant
labour crisis – as government has announced a certain percentage of labour at construction sites for
operating - migrant crisis, reduced labour force as per the capacity requirement shall not sustain
projects construction for long as there shall be delay in delivering and causing higher interest rates
which shall neither benefit the sector nor the customers. As regard to the government Atma-Nirbhar
Bharat Scheme for housing other than the above mentioned rebates provided, for any future
amendments to the scheme - government should include Hedge funds along with private equity
curbs towards risks return for reaping long term benefits, optimized asset allocation benefits and
reducing volatility.

8. 8
Implementation: How to Frame Climate Change in Investment Strategy?
In 2017, LaSalle added environmental factors to the housing investment strategy which are a
long term drivers of real estate demand, and includes: Demographics, Technology and
Urbanization. The E-factors include: energy conservation, carbon footprint reduction, climate
change, waste water reduction and waste recycling and green building certification/ratings.
Pricing of E- factors and the return on investment (ROI) for improving environmental
performance of an asset which takes local market into account is most often a Win- Win
Preposition. Also, economic and financial frameworks for analyzing risk return characteristics
of E- factors was introduced. These analytical tools ensure sustainability features are
appropriately priced in an organized way to improve both financial and environmental
performance.
Also introduced are economic and financial frameworks for analyzing the risk-return
characteristics of E-Factors. These analytical tools ensure that sustainability features are
appropriately priced in a well-organized way to improve both financial and environmental
performance. In framing ESG in E factor + investment strategy, concepts like resilience (which
focuses on adaptation strategies for climate change, in contrast to mitigation strategies for
greenhouse gas emissions), social sustainability (which focuses on economic/social justice
issues), and health/welfare (which focuses on the well-being and safety of individuals who
build, occupy and travel to buildings) are included. Real estate investors have a role to play in
how buildings contribute to a healthy and just society, as well as in better stewardship of
natural resources.
• Climate change
Impacts
•v Energy Efficiency
•Energy & Carbon
regulations
• Environmental Standards
Certification
• Water Scarcity
• Unrelenting
Urban Sprawl
•Planning regulations -
Allowing Density
•Impact of Urban Sprawl
•Regeneration of fringe areas
•Evolving customer expectations
(amenities and accessibility)
• Internet and e-commerce
•Retail & LogisticsImpact
•Shared Economy
•Innovation Districts
•Data Analytics &
Algorithms
•Smart Buildings
• Millenium Generation Impact
•Students,immigrants and
refugees
•Ageing, population and longivity
•Adaptive work places for
health, well -being &
productivity
•Rise of South East
Asia
Demographies Technology
Environment
Urban
Sprawl

9. 9
Global Real Estate Index:
The FTSE EPRA/ Nareit Global Real Estate Index is a free-float adjusted, market capitalization-
weighted index designed to track the performance of listed real estate companies in both developed
and emerging countries worldwide. Constituents of the Index are screened on liquidity, size and
revenue.
List of Real Estate Indexes
 Global Real Estate (View Global Real Estate ETFs)
 Alpha Shares China Real Estate Index
 Alpha Shares Emerging Markets Real Estate Index
 Cohen & Steers Global Realty Majors Index
 Dow Jones Global ex-U.S. Real Estate Securities Index
 Dow Jones Global ex-U.S. Select Real Estate Securities Total Return Net Index (USD) Hedged
 Dow Jones Global Select Real Estate Securities Index
 EPRA/NAREIT Emerging Index
 FTSE EPRA/NAREIT Developed Asia Index
 FTSE EPRA/NAREIT Developed Asia Real Estate Index
 FTSE EPRA/NAREIT Developed Europe Index
 FTSE EPRA/NAREIT Developed Index
 FTSE EPRA/NAREIT Developed Real Estate ex-North America Index
 FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index
 FTSE EPRA/NAREIT Developed Rental ex-U.S. Index
 FTSE EPRA/NAREIT Global Real Estate Index
 iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index
 MSCI China Real Estate 10/50 Index
 MVIS US Mortgage REITs Index
 Northern Trust Global Quality Real Estate Index
 S&P Asia Pacific Property Index
 S&P Developed BMI Property Index
 S&P Developed ex US Property Index
 S&P Developed Property Index
 S&P Europe Property Index
 S&P Global Developed Property Index
 S&P Global ex-U.S. Property Index
 S&P Global ex-U.S. REIT Index
 S&P Global REIT Index
 S&P/Citigroup World Ex-U.S. Index
 Wisdom Tree Global ex-US Hedged Real Estate Index
 Wisdom Tree Global ex-US Real Estate Index
 Wisdom Tree International Real Estate Index

10. 10
Real Estate (Real Estate ETFs)
 Benchmark Data & Infrastructure Real Estate SCTR Index
 Benchmark Industrial Real Estate SCTR Index
 Benchmark Retail Real Estate SCTR Index
 BofA Merrill Lynch US Real Estate Index
 Cohen & Steers Realty Majors Index
 Dow Jones U.S. Real Estate Index
 Dow Jones U.S. Select REIT Index
 Dow Jones U.S. Select Short-Term REIT Index
 Dow Jones Wilshire Real Estate Securities Index
 FTSE EPRA/NAREIT Global REIT Index
 FTSE EPRA/NAREIT North America Index
 FTSE NAREIT All Mortgage Capped Index
 FTSE NAREIT All Mortgage Capped Index (price return)
 FTSE NAREIT All Residential Capped Index
 FTSE NAREIT Equity REITs Index
 FTSE NAREIT Industrial/Office Capped Index
 FTSE NAREIT Real Estate 50 Index
 FTSE NAREIT Retail Capped Index
 FTSE/NAREIT All REIT Index
 Fundamental Income Net Lease Real Estate Index
 Hartford Risk-Optimized Multifactor REIT Index
 Hoya Capital Housing 100 Index
 Indxx Real Asset Income Index
 IQ US Real Estate Small Cap Index
 KBW Premium Yield Equity REIT Index
 Morgan Stanley REIT Index
 Morningstar Real Estate Index
 MSCI REIT Preferred Index
 MSCI US REIT Index
 MSCI USA IMI Liquid Real Estate Index
 MSCI USA IMI Real Estate Index
 MVIS Global Mortgage REITs Index
 Northern Trust Real Assets Allocation Index
 PPTYX - US Diversified Real Estate Index
 PPTYX – U.S. Diversified Real Estate Index
 Real Estate Select Sector Index
 S&P 500 Equal Weight Real Estate Index
 S&P U.S. Property Index
 S&P United States REIT Index
 S-Network REIT Dividend Dogs Index
 Solactive Global SuperDividend REIT Index
 Solactive Latin America Real Estate Index
 Wachovia Hybrid and Preferred Securities REIT Index

11. 11
 Wilshire U.S. Real Estate Investment Trust Index
 Wilshire U.S. Real Estate Securities Index
MSCI World Real Estate Index
The MSCI World Real Estate Index is a free float-adjusted market capitalization index that
consists of large and mid-cap equity across 23 Developed Markets (DM) countries*. All
securities in the index are classified in the Real Estate Sector according to the Global Industry
Classification Standard (GICS). DM countries include: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US. MSCI
FaCS is a standard method for evaluating and reporting the factor characteristics of equity
portfolios. MSCI FaCS provides absolute factor exposures relative to abroad global index - MSCI
ACWI IMI. Neutral factor exposure (FaCS = 0) represents MSCI ACWI IMI.
FACTORS - KEY EXPOSURES THAT DRIVE RISK AND RETURNMSCI FACTOR BOX
Image Source Credit: MSCI World Real Estate Index, msci.com
MSCI FaCS
VALUE
Relatively in expensive Stocks
LOW SIZE
Smaller Companies
MOMENTUM
Rising Stocks
QUALITY
Sound Balance Sheet Stocks
YIELD
Cash Flow Paid Out
LOW VOLATILITY
Lower Risk Stocks

12. 12
Example Case: CBRE GLOBAL INVESTORS’ TCFD ALIGNMENT PROJECT
According to UNEP report Changing Course – Real Estate which focused on investors and TCDF
recommendations: CBRE Global Investors is committed to The Investors Agenda where in
Investors Disclosure Area of Impact and disclosure are in line with the recommendations of the
Financial Stability Board's Task Force for Climate-Related Financial Disclosures (“TCFD”).
Disclosure already includes participation in the pilot reporting based on TCFD recommendations
through the 2018 and 2019 Principles for Responsible Investment (“PRI”) reporting frameworkand
Global Real Estate Sustainability Benchmark (“GRESB”) Resilience Module. CBRE Global Investors’
programme report and act were in line with TCFD recommendations and were led by the Global
Head of ESG, overseen by the Global Responsible Investment Management Committee (“RIMCo”)
and sponsored at the executive level by the Global Chief Operating Officer and Global Chief
Investment Officer. CBRE Global Investors designed its overall approach to TCFD alignment in two
main phases
Phase 1: started in 2018 and is targeted for completion by the end of 2019. This phase covers
initiatives to:
1. Undertake an internal governance gap analysis of existing risk governance and implement any
amendments, and
2. Identify the most comprehensive tools and approaches to conduct portfolio scenario analyses of
risks and opportunities and develop a climate-change value-at-risk heat map.
The next phase, commencing in 2020, with a completion deadline in 2022, envisages full integration
of climate-change scenario analysis in the due diligence process, 'deep-dive' analysis of high-risk
assets identified through scenario mapping, integration of mitigation actions and cost assessments
in asset business plans and transparent reporting. Climate change analysis is thus to be explicitly
included across the investment process. For the indirect business, targeted engagement will be
undertaken with managers and companies to promote adoption and implementation of carbon
Example Case: LINK AND CLIMATE RISK
Link Real Estate Investment Trust (Link) is Asia’s largest REIT and one of the world’slargest REITs
(with focus on retail) in terms of market capitalization. With a diversified portfolio, we aim to
deliver sustainable growth and create long-term value for Unitholders and other stakeholders.
Committed to delivering on our vision to be a world classreal estate investor and manager, serving
and improving the lives of those around us, Link unveiled Vision 2025, outlining medium-term
goals in three focus areas: portfolio growth, culture of excellence and visionary creativity. Link
plays a leading role in the UNEP FI’s effort to develop ground-breaking and comprehensive
guidance on how to assess the impact of climate change on investment portfolios and in particular,
real estate-focused portfolios. Previously, Link relied on a set of primarily qualitative indicators
to quantify the portfolio’s overall climate risk. However, a lack of quantitative transparency and
accountability on specific assets at risk presented difficulties in developing and prioritizing both
portfolio and asset-level climate mitigation strategies. Through this pilot initiative, Link gained
better understanding of the short, medium and long-term climate-related risks the current
portfolio is exposed to, including extreme weather events such as flooding, tropical cyclones and
instances of very hot and cold days.

13. 13
targets, and enhanced reporting. Finally, the Phase 3 target is to achieve a full alignment with TCFD
guidelines in the CBRE Global Investors ESG Report to be published in 2023.
TASK FORCE CLIMATE RELATED DISCLOSURES
Source: CBRE GLOBAL INVESTORS’ TCFD ALIGNMENT PROJECT
PORTFOLIO SCENARIO ANALYSIS PHASE I
GOVERNANCE GAP ANALYSIS
ASSET DATA
• Location
• Type
• Age
• Size
• Value
TRANSITION RISKS
• Policy & Legal (e.g. stringent energy rating regulation)
• Technology (e.g. cost to upgrade an obsolete plant)
• Market (e.g. increased vacancy as tenants require green buildings)
• Reputation (e.g. fossil-fuel infrastructure investment fails to raise capital)
ASSET PERFORMANCE
• Energy & water use intensity
• Carbon intensity
• Energy rating
• Green certification
PHYSICAL RISKS
• Acute (e.g. plant in the
basement of an asset flooded)
• Chronic (e.g. over-heating
damages rail-lines)
OPPORTUNITIES
• Resource efficiency (e.g.
reduced operating cost)
• Energy source (e.g. reduced
exposure to energy cost
increases)
• Products/services (e.g.
increased rent for green RE)
• Markets (e.g. diversification to
green bonds)
• Resilience (e.g. increased
valuation)
POLICIES & PROCEDURES
INVESTMENT RISK
MANAGEMENT
PROCESSES
OPERATIONAL RISK
MANAGEMENT
PROCESSES
MONITORING AND
REPORTING PROCESSES
GOVERNANCE
• Board oversight
• Management role
RISK MANAGEMENT
• Identifying Risks
• Managing Risks
• Integration
METRICS AND TARGETS
GOVERNANCE
Existing risk
management and due
diligence processes
enhanced
VALUE-AT-RISK HEAT-
MAP

14. 14
Source: CBRE GLOBAL INVESTORS’ TCFD ALIGNMENT PROJECT
Warming Potential and Policy Risks:
According to the UNEP Changing Course – Real Estate: The Warming Potential allows investors to
understand the alignment of the portfolio to the global 2°C target. The aggregated portfolio has a
warming potential of 3.16°C (Figure 9), which means that the portfolio is currently in breach of a
global 2°C target. The global Business-as-Usual (BAU) predicted temperature rise is currently
3.8°C. This indicates that the properties in the portfolio are generally performing better in terms
of carbon efficiency compared to industry at large benchmarks, but still at some distance from
what is collectively needed to avert the worst effects of climate change
Global Real Estate Sustainability Benchmark (GRESB): The GRESB is an industry-driven
organization that assesses the sustainability performance of real estate portfolios across the world. It
conducts a survey every year that serves as input for its benchmark. The Sustainable Property Equities
portfolio has an overall average score of 81 in the GRESB analysis, versus 72 for the listed benchmark
average and 72 for the GRESB average out of 1,005 participating entities. The fund has high scores for
both of the two underlying dimensions: for implementation and measurement, it scores 78 (versus 69
for the benchmark), and for management and policy, it scores 88 (versus 80).
UNEP report mentions that cutting carbon footprints in real estate is important as the sector accounts
for nearly 40% of the world’s energy consumption and over 30% of global greenhouse gas emissions.
Robeco Sustainable Property Equities targets an environmental footprint that is at least 20% below
the index average. Additionally, Robeco actively engages with companies in the portfolio on carbon
management.
PHASE 2
PHASE 3
DEEP DIVE ANALYSIS
• High-risk high-value
assets prioritized
• Detailed climate change
impact analysis on asset
level
DUE DILIGENCE
• Phase 1 climate
change scenario
analysis at acquisition
• Enhanced DDQ and
engagement for indirect
ASSET BUSINESS
PLAN
• Phase 1 climate change
scenario analysis at
acquisition
FULL ALIGNMENT
• Increasing data granularity
• Increasing public and client disclosure
• Full TCFD recommendations
compliance 2023

15. 15
According to Carbon Report - SEB Fastighetsfond with focus on Global Real Estate Index
Total carbon emissions
measure the carbon footprint of a portfolio considering Scope 1-2 as well as Scope 3emissions.
Relative carbon footprint
 Is a normalized measure of the portfolio's contribution.
 It enables comparisons with a benchmark between multiple portfolios, over time and
regardless of portfolio size.
Carbon intensity
 Allows investors to measure how much carbon emissions per SEK of revenue are generated.
 It therefore measures the carbon efficiency of a portfolio per unit of output.
Next Step after setting up implementation of real estate portfolio is Risk Management:
Risk management are classified into five categories in the framework:
• Real Estate Exposure – Investors’ choice on overall allocation to real estate, within a multi-
asset class portfolio
• Vintage Year Exposure – Timing and pace of real estate exposure, including some
important considerations on measurement and monitoring of vintage year exposure
• Property Sector Exposure – Portfolio concentrations relative to managers, property types,
geography, strategic risk classification, investment life cycle, and investment structure
• Leverage – Approach and exposure to leverage in investment ventures and portfolios,
including suggested metrics for measuring and monitoring leverage.
Conclusions
Moving forward, aligning with the TCFD recommendations and fine tuning disclosures of climate
related financial information will be the key aspect of Real Estate Portfolio. Continuing collaboration
with investors and engaging more closely with city-level and regional-level policymakers to develop
comprehensive climate resilience strategies for housing projects and building real estate portfolio
trajectories.
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