IFRS S2會計準則如何應用於B36 (IF-RE) 不動產資產管理業與B37 (IF-RS) 物業管理業？
How can the IFRS S2 accounting standards be applied to B36 (IF-RE) Real Estate Asset Management and B37 (IF-RS) Property Management?

How can the IFRS S2 accounting standards be applied to B36 (IF-RE) Real Estate Asset Management and B37 (IF-RS) Property Management?

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          IFRS (standing for The International Financial Reporting Standards) S2 Climate-related Disclosures was published by The International Sustainability Standards Board (ISSB) in June 2023. It is a key role to help businesses disclose financial risks and opportunities associated with climate. When sustainability becomes far more important in the global business landscape, the industries such as B36 (IF-RE) Real Estate Asset Management and B37 (IF-RS) Property Management are particularly affected due to their own vulnerability of real estate and property to climate change. In the zone of this research, we focus on exploring how to apply IFRS S2 Standards to these industries, and highlight its importance, pros and cons, implication, and the resilience in the future.

          IFRS S2 Standards Climate-related Disclosures provides a framework which is based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, which emphasizing the four-pillar framework of the Task Force on Climate-related Financial Disclosures (TCFD): Governance (How climate-related risks of a company are governed), Strategy (How climate-related risks and opportunities affect the business strategy and plan), Risk Management (Identifying and managing all climate-related risks), and Metrics and Targets (Key performance indicators and objectives for managing and declaring the climate-related risks). By providing the applicable and clear guidelines to identify and disclose the climate-related risks, IFRS S2 helps to maintain that the investors can have the consistent and comparable information to measure the differences in adapting to climate change that the companies among these industries including Construction Services and Homebuilders are doing.

          To understand how IFRS S2 can apply to B36 (IF-RE) Real Estate Asset Management and B37 (IF-RS) Property Management, first, let’s discover their identification. B36 (IF-RE) Real Estate Asset Management is the industry in which the companies manage the big portfolios of real estate assets, including commercial buildings, shopping malls, offices, and industrial properties. The climate risks in this industry are extremely significant due to the negative impacts of physical risks (such as floods, storms, and rising temperature) and the regulations related to energy efficiency and carbon footprints to the assets’ value and returns on investment.

Governance, while applying IFRS S2 to B36 (IF-RE) Real Estate Asset Management, plays an important role in the way real estate asset managers use climate-related risks for their process of making decisions. Following IFRS S2 Standard, the companies must disclose the role of Board of Managers and Board of Directors in supervising the climate-related risks. For instance, companies must report on how they assess the climate resilience of their real estate portfolios, especially those located in areas that frequently have floods or extreme weather. This governance structure ensures that almost all climate-related risks are significantly and carefully considered by the top managers while making any decisions.

          The other important sector is strategy. In terms of strategy, the real estate assets managers have to explain how the climate-related risks and opportunities impact their general business model. It includes the assessment about how the changes of regulations and rules, such as carbon taxes or stricter net-zero goals, can affect their assets in the long term. Besides, the real estate managers are encouraged to use the scenario analysis to create the potential climate challenges models in the future such as how rising temperature and sea levels affect their assets.

          Risk management under IFRS S2 can also be considered one of the vital sectors. It requires the real estate assets managers to disclose how they identify, measure, and control both the physical and transition risks. Physical risks include the damages and ruins of real estate assets due to extreme weather and natural disasters, while transition risks are from the changes in regulations and rules in order to reduce carbon emissions. For instance, companies need to renovate the old assets to meet the new standards of using energy or divest from assets that cannot adapt to a low-carbon economy. By reporting these risks, the asset managers can prove their abilities of adoptions to the economic changes and regulatory landscapes.

          Also, metrics and targets emphasize the requirement for real estate assets managers to disclose the performance indicators related to climate change. It includes the reports about the amount of GHG emissions, energy consumption, and the percentage of renewable energy being used in the whole portfolio. When setting and disclosing targets, such as achieving net-zero in 2025, they provide the investors a clear picture of companies’ sustainable development strategies.

          The next industry is B37 9IF-RS) Property management. This industry involves management of properties, including maintenance, relationship with leases, and ensuring the properties are well operating. The managers must balance operation costs with sustainability because the leases, nowadays, increasingly require the saving energy and environmental friendliness system inside the buildings they lease. This industry is also vulnerable to climate change, so applying IFRS S2 is necessary to ensure the transparency and consistency for investors to make decisions.

          For properties management companies, governance is the top important sector, because they are responsible for daily operation and maintenance of the buildings. Under IFRS S2, property managers must disclose the method climate-related risks are included in their operational and maintenance strategies. It includes the confirmation that the properties meet the sustainable standards, and the reports of how they communicate these risks to the properties owners or leases. The clear governance mechanism ensures that all climate-related risks are integrated into the management and operation of these buildings.

          About the sector “Strategy”, the property managers need to disclose how they plan to solve the climate-related risks in their operations. It might include investing in saving energy technology, such as smart thermostats or energy efficiency lighting, to reduce the energy consumption in the buildings that they are managing. Moreover, the managers have to adapt to the customer preferences, as more and more leases require environmentally friendly buildings. Applying sustainability certificates like LEED and BREEAM, as well as PCAF, help the managers to increase their properties’ competitiveness in the market.

          Risk management in this industry involves identifying climate-related risks affecting buildings’ operation, such as increasing energy cost, or maintenance requirements due to extreme weather. These companies have to disclose how they plan to solve these issues, ensuring that the buildings can be resilient with the effects of climate change in the future. For example, property managers can report how they enhance the HVAC system to handle the extreme temperature or renovate the buildings to eliminate the carbon footprint.

          The metrics and targets sector mainly concentrate on energy efficiency and sustainability. The property managers have to report the efficiency from using energy, and the GHG emissions from construction and infrastructure. When disclosing the goals of decreasing fossil energy and emissions, the property managers show the method they use to adjust their operation towards the wider goals, such as reducing fossil fuels energy consumption by a certain percent within the next decade.

          Adopting IFRS S2 has several advantages. First, it increases investor confidence by providing transparent, consistent and comparable information about climate-related risks. Companies that disclose how they are managing these risks are more likely to attract investment from stakeholders who prioritize environmental, social and governance (ESG) factors. Second, IFRS S2 helps companies stay ahead of regulatory requirements, ensuring they are ready to comply with new laws and standards aimed at reducing carbon emissions and improving energy efficiency. Third, the standard encourages companies to adopt more resilient business models, which will better position them to meet future climate challenges.

          Applying IFRS S2 Standards, on the other hand, has some disadvantages. Implementing IFRS S2 can be costly, especially for small and medium companies. Compliance costs include setting up new data collection systems, conducting climate risk assessments, and retrofitting properties to meet the new standards. In addition, the complexity of reporting poses a challenge, as companies must collect detailed data on energy use, GHG emissions, and physical risks from climate change. Finally, there is a risk of short-term market reactions, because disclosing significant climate-related risks can have a negative impact on share prices, potentially discouraging some companies from being fully transparent.

          In conclusion, IFRS S2 Standard is now one of the great tools for companies in B36 (IF-RE) Real Estate Asset Management and B37 (IF-RS) Property Management industries to perform their proactive reactions to climate change, which can help them meet the expectation of both ESG-considering investors and governments. However, widely applying it still has some challenges, which mainly relates to the significant financial burden and lack of internal resources from small and medium companies.