Reit Magazine - March/April 2021 - 20

s the climate crisis becomes ever more
urgent, assessing the potential risk it presents to REIT portfolios has become a top
issue for the industry-one that is being
met with improved data and analytics, as
well as board-level scrutiny.
It is a move that also reflects the growing calls from
outside stakeholders for accurate information on how
companies are positioning themselves in response to
the threat.
In his 2021 annual letter to CEOs, BlackRock CEO
Larry Fink noted that " no issue ranks higher than climate change on our clients' lists of priorities. They ask
us about it nearly every day. " Fink is one of a growing
number of stakeholders highlighting the critical need
for companies to address climate change, and the
message is resonating across the REIT industry.
REITs are leveraging forward-looking physical climate risk data to understand their portfolios' baseline
and changing exposure to climate hazards, identify
risk hotspots and portfolio trends, screen investments
during due diligence processes, and benchmark
against their peers, says Yoon Hui Kim, managing
director, global client services, at Four Twenty Seven, a
California-based climate risk data firm.
Laura Craft, senior vice president, head of global
ESG strategy at real estate investment firm Heitman,
says the focus on climate-related risks is rapidly
accelerating.
" Five years ago, there wasn't much conversation
on the impacts of climate risk. Fast forward to now
and there is a tremendous amount of dialogue, "
Craft says.
A rapidly increasing number of REITs are reporting around climate change risks and opportunities
following Task Force on Climate-Related Disclosures
(TCFD) on assessing physical and transitional risk,
as well as mapping and scoring climate risk within
portfolios for reporting purposes such as in GRESB's
real estate assessment resiliency module.
" If you're looking at climate change and climate
risk, the number of events is increasing every year and
the damages are massive, " Craft says.

GREATER SCRUTINY
Increased uptake of the TCFD guidelines has further
highlighted the growing concern from investors and
business leaders regarding the potential impacts of
climate change on the economy and financial markets.
" When you have people like Larry Fink going out
and saying that climate risk is investment risk, I think

20 |

reit

a lot more people are going to start listening, " says
Uma Pattarkine, global ESG coordinator and investment strategy analyst at CenterSquare Investment
Management.
At the same time, there is a meaningful demographic shift underway with aging millennials and
women becoming more involved in investment
decisions, she adds. Both of those groups tend to
view investments more through an ESG lens, which
could result in an estimated $15 trillion to $20 trillion
flowing into the ESG space over the next two decades,
she says.
Investors, meanwhile, are digging into corporate
reports, GRESB assessments, and having conversations with REIT management teams to better
understand climate risk and strategies for mitigating
risks. Investors also are tapping third party data
sources. " A lot of it has to do with getting our hands on
as much data as we can, " Pattarkine says.

THE TWO 'C'S'
Mark Delisi, vice president of corporate responsibility and energy management at AvalonBay
Communities, Inc. (NYSE: AVB), says that for the
multifamily REIT's ESG focus, " the next decade is



Reit Magazine - March/April 2021

Table of Contents for the Digital Edition of Reit Magazine - March/April 2021

Contents
Reit Magazine - March/April 2021 - Cover1
Reit Magazine - March/April 2021 - Contents
Reit Magazine - March/April 2021 - 1
Reit Magazine - March/April 2021 - 2
Reit Magazine - March/April 2021 - 3
Reit Magazine - March/April 2021 - 4
Reit Magazine - March/April 2021 - 5
Reit Magazine - March/April 2021 - 6
Reit Magazine - March/April 2021 - 7
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