In a move that changes everything the influential Productivity Commission says climate damage has a material cost and risk must be disclosed.
Property owners would be required to disclose climate risks about commercial and residential properties to prospective owners, including information about riverine flooding, sea level rise and fire, according to the Productivity Commission.
The nation’s productivity adviser is calling for disclosures based on climate change projections to cover a range of physical risks as part of its five-yearly Productivity Inquiry, which recommends a range of measures to boost economic development from education to migration, the labour market and managing the climate transition.
Climate disclosures could be included in building reports that state and territories already mandate in residential and commercial real estate transactions, the PC recommended. Physical climate risks should include those relating to flooding, sea level rise, subsidence, fire and other natural disasters made more frequent and extreme by climate change.
Such physical risks can be costed based on projections, and these costs could be incorporated into property transactions costs in new developments through developer levies, the PC report stated.
The Property Council of Australia is considering the report recommendations and will report back on its position in due course, a spokesperson told The Fifth Estate.
Feedback from the Task Force on Climate Disclosures (TCFD) indicates that real estate investors still have some way to go in relation to climate risk disclosures.
UN Principles for Responsible Investment data from 2020 shows that just under 40 per cent of real estate investors reporting under the Taskforce on Nature-related Financial Disclosure had set climate metrics and just 15 per cent had set climate-related targets. Firms involved in the study included UN PRI signatories with more than 50 per cent of their assets invested in real estate, infrastructure, forestry or farmland.
Established in 2015 by the G20’s Climate Stability Board, the TCFD provides a framework for investors to evaluate climate risks and opportunities in their investment processes but does not provide specific methodologies for firms to measure and report climate risk.
Australian companies are not required to report on the TCFD, but the government will consider making disclosures mandatory and Treasury is consulting on standardised reporting requirements for governance, strategy, risk management, targets and metrics, including greenhouse gases, according to a consultation paper released in December.
And the PC gets climate emissions
The PC has also proposed strengthened emissions reduction efforts by broadening the federal government’s Safeguard Mechanism, reducing thresholds so that all facilities which produce more than 25,000tC02-e are captured in the system.
It also recommends that all electricity generators be subject to the SM individually and not just at the sectoral level. The mechanism should then be extended to the transport sector to include liquid fuel wholesalers including downstream vehicle emissions, the PC report stated.