Climate resilience

At Vicinity, we understand the role we play in supporting more resilient cities and communities.

A changing climate presents both direct and indirect risks for Vicinity now and increasingly over the long-term.  As important community hubs, we strive to create resilient centres that are prepared for, and can recover quickly from extreme weather events such as cyclones, flooding and heatwaves, which can result in increased costs associated with maintenance and repairs and disruptions to operations.  By adequately preparing for such events and building our physical resilience, we can avoid such costs, remain open for trade for our retailers and consumers and offer support to local communities during times of need.

Assessing Vicinity’s climate resilience risks and opportunities

Analysis of physical climate risks

Since 2015 a program of work has been underway to improve our understanding of the potential risks and opportunities for our business, including at a corporate and asset level, relating to climate change.

In FY16, we conducted an initial high level assessment of the climate risks for each of our assets against projected long-term Australian climate variables under certain climate change scenarios (See table below). The physical risk to each of our centres was assessed against seven key climate variables, including flooding, heatwave, utility loss, bushfire, hail, cyclonic damage and strong winds to develop a risk rating for each centre, using Vicinity’s enterprise risk management framework. We also considered other characteristics, such as valuation and age of the centre when finalising the risk rating and prioritisation.  The results of this assessment were used to identify centres with the highest potential exposures, and prioritise the focus of our program moving forward.

Site-specific risk assessments

To get a more detailed understanding of the climate risk exposure of our centres and resilience measures already in place, we have conducted deeper dive assessments at our highest risk rated centres through our Site-specific Risk Assessment.  The Assessment was developed using the learnings gained from completion of a deep dive assessment on Whitsunday Plaza, which was significantly impacted by Cyclone Debbie in March 2017.  The newly created Assessment was then used to roll out further deep dive assessments across other priority centres to identify location and asset specific risks, resilience measures already in place and opportunities to further strengthen our approach through additional initiatives, including capital, operational and procedural related considerations.

 

Review of key business decision making processes

In FY17, we completed a review of our major business decision-making processes to understand how climate risk is currently considered, and identify how it might be further embedded into the business moving forward. Extensive internal stakeholder engagement was undertaken to review existing processes, including across group strategy, risk, emergency management, investment management, capital transactions, shopping centre operations, and developments and capital upgrades.  The review identified a number of initiatives to improve the integration of climate related risk and opportunity management in a consistent manner across the organisation and further strengthen our business processes, which have been prioritised in our Climate Resilience Implementation Plan which we continue to implement.

 

Scenario Analysis – Climate-related Physical Risks

In June 2018, we investigated at a high level the possible financial implications and sensitivities associated with climate-related physical risks on our business and asset portfolio under two climate scenarios (RCP 4.5 and RCP 8.5).

 

Table: climate change scenarios we consider in our risk assessments

IPCC1 climate

change scenario

Projected temperature rise

by 2100

Rationale

RCP2 4.5

2oC

Low emissions scenario - temperature levels that current global policy and targets (such as the Paris Agreement) would achieve

RCP2 8.5

5oC

High emissions scenario - Temperature levels that no real action towards mitigating climate change would achieve

  1. Intergovernmental Panel on Climate Change.
  2. Representative Concentration Pathway.

 

The analysis identified those climate aspects most likely to have the greatest impact (from both a negative and positive cost perspective) across our managed portfolio, building on earlier risk assessments and using historical data relating to expenses associated with past climate events, as well as future cashflow forecasts to model the potential financial impact to our portfolio over the next ten years.

The results of this assessment are being used to further strengthen our decision making across the business and will be built on as part of further investigations planned to better understand the potential financial impacts of climate change on our business.

Managing our risks and opportunities

Vicinity’s Climate Resilience Implementation Plan details various actions to enhance and improve our resilience to climate change impacts at a corporate and at a centre level. This includes both short-term and long-term actions over a five year period (2018-2023). Initiatives implemented to date are outlined below:

 

Asset strategy

Climate risk objectives have been embedded into Vicinity’s long-term strategic asset plans to inform risk and opportunity considerations for each asset over the short and medium term. For centres that have higher exposure to physical climate risks, initiatives to enhance resilience are being considered alongside other capital projects.

 

Developments

Integrating climate risk considerations into the design process of our development projects is critical to improving climate resilience and provides a cost-effective opportunity to integrate such measures. As such, Climate resilience and adaptation assessments are now mandatory for all new developments. This requirement is integrated into the broader design and delivery process via the Sustainable Design Brief (launched in January 2018), which includes a Climate Resilience and Adaptation Plan template through which assessments are conducted and which is aligned to best practice Green Star requirements.

In FY20, we completed a Climate Resilience and Adaptation Plan for our development project at  Ellenbrook Central, WA. Ellenbrook Central (WA) was certified with a 5 Star Green Star Design & As Built V1.2 Design Review Rating, and developed a Climate Resilience and Adaptation Plan which included the following features:

  • Coating the roof in a material with high solar reflectivity to reflect heat away from the building;
  • Locating the majority of the mechanical, electrical and IT plant on the roof to reduce the risk from flooding;
  • Solar shading implemented in the carpark to reduce heat island impact and improve shopper comfort when returning to vehicles;
  • An 800KW solar system installed on the site, helping to manage peak electricity loads at the centre; and
  • Accommodation of increased rainfall events in the drainage system design.

 

Operations

Climate change management via our operations is a priority for Vicinity.  We have incorporated physical climate risk considerations into each assets’ risk register, and identified actions to increase resilience are included in strategic asset plans.  We also regularly engage and educate our operations teams to build their climate resilience knowledge and capacity.  Our asset risk registers are used to demonstrate how we have addressed climate risks at each centre and increased resilience and adaptive capacity over time.

Vicinity has additionally implemented scalable portfolio-wide improvements to how we manage climate risk at centres.  For example, we developed a stormwater management program to improve the resilience of onsite stormwater infrastructure and better prepare for heavy rainfall events. We piloted the program at Broadmeadows shopping centre, VIC which proved to be a success, avoiding $13,000 in flood damage costs. As a result, the program is now being implemented across all centres.  Vicinity’s landscaping standard has also been updated to specify native and drought tolerant plants to increase resilience during times of drought and extreme heat.

Our Crisis and Emergency Management System (CEMS)  focuses on consumer, retailer and community safety at our centres during extreme weather events. The CEMS includes procedures outlining our response to heat waves, flooding and power outages.   Our existing cyclone emergency procedure has been expanded to include high wind event responses, and a procedure for Extreme Weather Warnings has been implemented to assist local operations teams to effectively prepare centres and retailers in advance when extreme weather events have been forecasted.

 

Capital upgrades

Climate resilience continues to be a key consideration for Vicinity during plant and equipment upgrades and replacements. For example, in 2019 during an air conditioning unit upgrade at Nepean Village, NSW higher capacity units were installed to ensure the centre could remain cool during heatwaves, improving the centres’ resilience to increasing higher outdoor air temperatures.  This improvement was made in response to the existing air conditioning units’ inability to run effectively during heatwave events, an increasingly regular event in Penrith, NSW.

In 2018, Vicinity committed $73m to an onsite solar rollout program across 20 centres, protecting against power outages, insulating roofs, decreasing air conditioning loads, and reducing the heat island effect through the installation of solar carpark shading – see Low Carbon Smart Assets for more details. Our industry-leading solar program continued throughout FY20. We installed 25.2MW of solar across our managed portfolio by the end of FY20, completing installations at Castle Plaza, Elizabeth City Centre, Altona Gate, Victoria Gardens, DFO Homebush, Ellenbrook Central and Livingston Marketplace during the year

Solar installation at Gympie Central Shopping Centre (QLD)

Future objectives