Property owners have a huge new world of responsibility falling on their shoulders with the climate emergency and Dexus is taking things seriously.
If the world fails to act on the climate emergency and average temperatures spiral upwards of 3°C by 2100, it will be up to building owners to provide safe spaces to shelter from weather extremes and help the community cope with climate change-induced shocks.
This is the sobering reality of the worst-case climate change scenario as painted by Dexus, an Australian real estate investment trust that owns a $31.8 billion office, retail, industrial and healthcare portfolio, in its recently released Climate Resilience Report.
The report represents a company going the extra mile on the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), opting for a detailed roadmap that explains how the company will tackle climate risk instead of burying this detail deep inside its annual reports.
According to David Yates, executive general manager, investor relations, communication and sustainability, the report really “reaffirmed the way we do business”.
“There was a very varied group of teams on the strategy research – people from investor relations, asset management … a real broad cross spectrum.
“What this reaffirmed was that climate change is on the radar across our whole business.”
He says climate risk has infiltrated the board level, which now has a newly established ESG committee.
He says the strategy work started right when the bushfires hit, which made it “even more urgent”, with the pandemic only driving home the importance of planning for risk.
“Who would have thought a year ago that a pandemic would have done what it’s done?”
Yates says Covid will not weaken the company’s sustainability commitments, which includes a net zero emissions target by 2030 that’s been certified by the Science Based Targets initiative as aligned with a “below 1.5°C” trajectory.
Importantly, the target covers all properties managed by the group, across all funds and all asset classes. According to Yates, not all his company’s competitors have all-encompassing net zero targets – they often just cover the office portfolio, or part of a fund.
Meeting these targets will involve “continually investing in energy efficiency technology” as part of a broader strategy to hit net zero within a decade.
“The main thing is we have the right structure to remain on the tracks and achieve the targets we have set.”
The property company was also the second Australian property group, following Mirvac, to join the global RE100 initiative (a pledge to source 100 per cent renewables across the company’s entire operations by 2030).
What Dexus has planned if we don’t meet Paris commitments
The company has a game plan under three different climate warming scenarios by 2100 (1.5°C, 2°C, over 3°C trajectories), which are used by the IPCC.
What’s interesting about the work is that it identifies not only risks to the portfolio but also the opportunities afforded by a quick and intelligent response.
For example, in the event the world gets its act together and there’s a steady, economy-wide transition in line with the Paris Agreement, the real estate investment trust, or REIT, will need to consider ways to diversify revenue streams beyond rental income. For instance, energy provision, fitout and workspace technology rentals, and flexible real estate models that will see space rented out “as a service” as tenants’ needs evolve.
In this scenario, Dexus recognises that it will need to deliver buildings tenants will want to rent – which are run on 100 per cent renewables, to start – if it wants to keep seeing healthy financial returns.
And while the energy efficiency upgrades and renewables infrastructure won’t come cheap, the potential introduction of carbon pricing will make non-renewable energy expensive.
We’re looking at a last-minute transition, Yates says. This means our inaction at the start of the decade will give us no choice but to rush through disruptive policy settings to rapidly curb emissions, so energy efficient buildings powered by renewable energy will be less exposed to costs or penalties imposed by mandatory energy efficiency upgrades.
Even in a world where warming continues unchecked and average temperatures are 3°C plus, and governments all but give up on the low carbon transition, Dexus expects there will still be pressure to invest in emissions reductions and climate resilience, thanks to stakeholders.
On top of that, the report says it will be crucial for property companies to provide buildings and spaces that can withstand climate extreme and can support local communities in times of need.
Water, waste also on the agenda
Reducing emissions and planning for climate change are top of the company’s sustainability agenda but Yates says that it has also been “extremely focused” on water conservation.
It’s rolled out water meters cross its buildings to identify leaks quicker, and a water awareness program so that when tenants are using the end of trip facilities, water usage is “top of mind”.
On waste, the company has been working hard on its workspace defit program, which aims to stop tenants throwing out perfectly good furnishings at the end of each lease.
Yates say the company has had some success chasing its 80 per cent resource recovery rate – even managing to recycle carpet tiles in the building.
He says that the circular economy will “become more important for us, and an area we’ll want to increase.”
A better understanding about what and how much waste customers are producing is key to managing waste better, which is why new cleaning contracts that include waste removal will be useful.
Yates says that the company will have waste data at the customer level that it will be able to share for educational purposes.
A formidable pipeline to deliver
The company has some big opportunities to put its sustainability ambitions into practice.
This includes the $2.1 billion Waterfront Brisbane to revitalise Brisbane’s Eagle Street Pier. The project will include a new “green’” corridor connecting Eagle Street to the Riverwalk, along with two commercial towers and new restaurants.
Th company has also partnered with Frasers Property Australia to develop Central Place Sydney, which will neighbour the recently announced Atlassian headquarters – set to the largest combined timber structure in the world – and include up to 150,000 square metres of workspace across two towers.
The buildings will be powered by 100 per cent renewable energy and designed to target net zero emissions in operation, consistent with the ambitious vision for sustainability across what will be known as Sydney’s Innovation and Technology Precinct.
In Melbourne, the company is behind a $550 million development of sites at 60 & 52 Collins Street.
It’s also just finished off an interesting project at Willows Shopping Centre in Townsville, which makes better use of a carpark by covering it in shading devices that double as solar panels.