06 October 2022
Which buildings in Bouwinvest’s portfolio are at greatest risk in terms of potential flooding and extreme heat conditions? And how can we reduce the risks? That is what we need to know to make the right choices to allow us to meet our high sustainability targets. Quite a big task, but a new Climate Risk Identification & Management tool (CIM) can help us map out a plan, according to Bernardo Korenberg, Head of Sustainability & Innovation at Bouwinvest, and Jeroen van Eekelen, a climate adaptation expert at advisory firm Sweco.
A big step
Bouwinvest has committed to making its entire real estate portfolio 'Paris Proof' by 2045 at the latest, Bernardo Korenberg explained: “That means using alternative energy sources to gas that are virtually carbon-neutral. We are also focusing on climate adaptation by identifying physical climate risks and taking measures to adapt the portfolio accordingly. It is a deliberate choice to act faster now and take matters into our own hands. That means we can plan the measures we need to take at times that are both natural and logical for us, as well as optimise the financing of our sustainability programme."
As one of the largest institutional investors in the Netherlands, Bouwinvest can make a significant contribution to sustainable and liveable cities, both at home and abroad, and create a positive impact on behalf of pension fund beneficiaries in the process.
Building-level climate scan
Last year, advisory firm Sweco developed the Climate Risk Identification & Management tool (CIM) for a building-level climate scan of 28,000 homes for Dutch residential investor Vesteda. ‘A great innovation,’ according to Sweco’s Jeroen van Eekelen. "We now include additional building features such as eaves and balconies as they also block sunlight. This new tool enables us to estimate the risks of flooding, heat stress and drought, improving our approach and making it more realistic."
A property and environmental score
The Climate Risk & Management tool provides a climate risk assessment for each property based on a score for an individual property and its environment. The property score provides insights into how vulnerable the building is based on features that have a positive or negative impact during flooding, heat stress or drought.
An efficient plan
After an internal analysis of the possible effects of climate change on Bouwinvest’s portfolio, it was time to call in an external expert, Korenberg explained: "We invited two parties, including Sweco, to conduct a pilot with the same complex with a view to selecting one partner and one methodology to help us roll out the programme across our entire Dutch portfolio. Sweco’s approach is not a black box but forms a clear bridge between financial assumptions and climate risks with practical spatial-technical considerations. Both are of crucial importance for us. Sweco subsdquently developed an efficient plan for mapping property-level risks for ourentire portfolio."
Understanding all the ins and the outs
That Bouwinvest first did its own analysis based on data from the Climate Impact Atlas and Geographic Information System (GIS) technology is ‘unique’, Van Eekelen said. “The same is true of Bouwinvest’s desire to understand all the ins and outs of our approach to identifying and classifying climate risks. Members of the sustainability department as well as data analysts, risk and portfolio managers all took part in the process. That allowed us to set up the data mapping tool in such a way that Bouwinvest can also use it later for updates and monitoring. Otherwise you only really get a snapshot of the current situation."
The analysis is of strategic importance to Bouwinvest, Korenberg agreed. “We will be working on this for at least another 10 to 20 years!"
Both parties see Bouwinvest’s pilot with its residential portfolio as the first step towards a broader partnership: a scaled-up approach for the entire real estate portfolio including the hotel, office, retail and healthcare properties is now ready, Van Eekelen said: "We are now establishing the methodology for these 'new' building types and starting the data mapping." Korenberg: "We want to know where the biggest risks of flooding and heat stress are in the portfolio and what measures we can take to reduce them. Such choices affect both social and financial returns, thus determining the long-term returns for our investor clients."
A differentiated portfolio requires different assessment criteria. Classifying risks for healthcare real estate should be based on more stringent criteria as the users of these properties are more vulnerable. For example, extreme heat poses a greater risk for seniors and people whose health is more fragile, Korenberg said: "We need to figure that one out together."
Tips and tricks
For companies like Bouwinvest that operate both nationally and internationally, it’s useful to build up expertise first on the climate resilience of properties in their home market before scaling up or critically questioning local international managers on the topic, Korenberg said. "We thus had a better understanding of the nuances our managers in New York and Hong Kong brought to the table from their own data, models and climate measures. Or take Japan: you really don't need to tell people there how dangerous an earthquake is and what mitigation measures you can take against them."
Van Eekelen has another practical tip for investment managers like Bouwinvest who need to comply with quite a lot of laws and regulations. " The output of a climate risk analysis with our CIM tool and the recommendations that stem from it can be used to meet the requirements of European regulations (EU Taxonomy). You can also use it to (re)certify the sustainability of your buildings through benchmarks such as BREEAM. That’s an efficient way of using the climate expertise you have obtained."
Climate Adaptive Buildings initiative
Sweco and Bouwinvest have both joined the Climate Adaptive Buildings initiative of the Dutch Green Building Council (DGBC) as knowledge partners to work together with DGBC, financial institutions, research centres, advisers and government authorities to develop a "framework for climate adaptive buildings" based on a uniform methodology for identifiying physical climate risks at building level.