Physical Risk Type Primary Risk Driver Potential Impacts Timeline Potential Mitigation Measures Chronic Risks Cold Stress Extreme cold weather • Reduce employee and tenant productivity (e.g. cold-related health illnesses) • Increase in operation costs (e.g. business interruptions) Short- to long- term • Regular risk assessments focused on cold weather vulnerabilities • On-site backup power generators • Emergency management planning Sea Level Rise Melting ice and the expansion of seawater as it warms • Increase in asset structural damage • Increase in insurance premiums and deductibles • Increase in operations (e.g. business interruption) and repair costs (e.g. saltwater intrusion) • Increase in the risk of failed development approvals and “stranded” assets in vulnerable areas Longterm • Invest in preventative infrastructure and consider underwriting, where applicable • Regular site inspections completed by the insurer, and/or building condition assessment • Where applicable, to implement recommendations for protection measures The same portfolio-wide climate risk study conducted in 2020 evaluated the Manager’s exposure to climate-related transition risks using a third-party tool. This assessment identified potential risks and associated business implications arising from future climate impacts while evaluating current and potential preparedness strategies for climate risk management. Study findings were presented to senior leadership and subsequently integrated into internal process development. Regular assessments of the portfolio’s climate-related risk exposure enable the identification of future risks through projections based on IPCC and IEA NZE scenarios. Beyond risk identification, these studies also highlight climaterelated opportunities, supporting strategic planning to enhance property resilience. Looking ahead, the Manager is exploring scenario-based financial approaches to assess both climate-related risks and opportunities, ensuring robust integration into longterm planning and decision-making. Transition Risk Description Timeline Mitigation and Opportunity Regulation Increasing climate-related regulations, including jurisdictional carbon pricing, regional efficiency, or emissions standards, and increasing disclosure requirements. Regulation changes could lead to increasing operation and compliance costs. Short- to long-term Continuous monitoring of emerging regulations and integration of building performance and efficiency assessments into due diligence help maintain readiness for carbon pricing and minimum efficiency requirements. Market Shift in capital away from high-emitting products and services, potentially affecting tenant demand, asset value, and fundraising. Short- to long-term Improving portfolio efficiency could create new avenues for financing and increase investor and tenant demand. Properties continue to be certified under leading standards such as LEED™, ENERGY STAR, WiredScore, SmartScore, Fitwel®, BOMA 360, and UL Solutions, alongside implementation of energy and emissions reduction programmes and collaboration with tenants and clients on shared climate objectives. / 17 / MANULIFE US REIT
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