By Ding Li

The outcomes from COP23 will have long-term implications for Asian businesses – particularly the real estate sector. Ding Li, Senior Sustainability Consultant at Cundall, looks at the risks and opportunities and offers her top tips for businesses to stay one step ahead of climate risk.

The post-COP23 landscape in Asia

The outcomes from COP23 at the end of 2017 have significant implications for Asian businesses and, particularly, the real estate sector in terms of risk and opportunity.

After a few years of carbon emissions flatlining, 2017 saw world carbon emissions increase by almost 3% making the secondary COP23 target of 1.5-degree Celsius rise looking less likely. This increase in carbon emissions is expected to continue in 2018, increasing pressure on the COP23 delegates to come up with effective solutions both for the short and long term.

Delegates in Bonn focused on laying out the implementation process to prevent irreversible impacts of climate change. The Paris Agreement’s signatories need to define their action plans, including transparency rules, green financing and market transition, in order to achieve the 2 degrees target.

This is reflected in a number of newly enforced (or upcoming) regulatory requirements for Asian companies. For example, Carbon Tax in Singapore; Listed Companies ESG Reporting Requirements in Hong Kong; and National Emission Trading Scheme in China, etc.

We are also beginning to see a renewable energy boom in the region, encouraged by initiatives such as the Chinese renewable energy certificate (REC) trading scheme and the soon-to-be-launched feed-in tariff system in Hong Kong.

As renewable energy becomes increasingly affordable, financially preferred, we would expect to see installed capacity increase significantly in Asia over the next 10 years. The boom in renewables would echo progress being made in Europe where IRENA suggests the EU can double the share of renewable energy in its energy mix by 2030 against the 2016 baseline – with a net-positive economic impact.

Implications of COP23 to the Asian real estate sector

Buildings are currently responsible for approximately one-third of global energy consumption, and similar contribution to total carbon emissions. This figure is higher in Asia for example in Hong Kong buildings are responsible for approximately 90% of energy consumption. With COP23’s current emission trajectory to over 3 degrees of warming by the end of this century, we expect governments will have to massively increase efforts and update their emission-reduction targets significantly to achieve the Paris Agreement’s 2 degrees target, let alone the design to limit global warming to 1.5. China is implementing aggressive policies to reduce its carbon intensity by 60-65% by 2030 based on 2005 levels which will impact on the real estate sector.

The real estate sector has an important role to play to meet the beyond 2 degrees target by reducing the energy intensity of buildings through the adoption of highly efficient, low-carbon solutions for buildings and construction. We are already seeing major Asian developers setting reduction targets, through green energy adaptation plan, and efficiency standards for their portfolio. However, we now need to see a more determined and collective attempt to scale these practices.

Top three tips to start managing your climate risks

Companies are faced with a growing number of climate risks, from regulatory, reputational, market risk, to resource scarcity and physical risk from extreme weather events. Our top three tips to manage your climate risks:

Understand your carbon inventory and reduce emissions

  • Identify emission hotspots and use an internal carbon price as an indicator to reflect how future regulatory risk will impact upon the company;
  • Forecast the baseline carbon emissions according to the company’s projected business activities and market variances; and
  • Assess potential reduction opportunities (e.g. energy-efficiency) and set carbon-reduction targets.

Evaluate your energy supply options and move to renewables

  • Gain an understanding of renewable-energy options in the markets that the company operates;
  • Explore the potential of adopting renewables in the company’s operation including both on-site and off-site options; and
  • Establish a renewable energy roadmap based on availability and cost-effectiveness of each renewable-energy option.

Establish a climate change adaptation plan

  • Identify the climate risks that will have impact on the company’s business (e.g. water scarcity affecting the value chain, physical damage from extreme weather, etc.);
  • Based on their severity and likelihood, rank and determine their significance to the company; and
  • Determine the adaptation plan for the highest ranked risks.

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Ding Li, Sustainability, Sustainable strategy and governance

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