Transition risks and opportunities
Climate transition issues are more material in the orderly and disorderly transition scenarios, where the focus is on reducing greenhouse gas emissions. These risks tend to arise over the short to medium term, due to the need to transition to a low carbon economy over this timeframe.
Stricter regulatory requirements for energy efficiency of properties
Leads to higher capital expenditure for retrofitting buildings and potential for stranded assets; potential for scarcity of low carbon materials.
Introduction of regulations requiring disclosure of energy and carbon performance for all properties
Results in additional operating costs for obtaining building performance certificates.
Increased costs of materials and building operations due to price of carbon
Impacts cost of materials and increases costs of upgrading buildings to meet energy efficiency targets.
Reduced investor appetite due to not meeting expectations
This could impact SIML’s business as a real estate investment manager.
Increased demand for electricity
Potentially results in increased cost of electricity and/or more uncertainty of supply, which could also impact tenant operations, potentially impacting tenant ability to pay rent.
Failure to meet technological advances and tenant expectations regarding low carbon technology
Resulting in reduced rental from properties that fail to meet tenant expectations, and the risk of stranded assets.