2019 GRESB Real Estate Results | Rotterdam

Investors GRESB
Assessment
Managers
I N V E S T O R
P E R S P E C T I V E
E S G A N A L Y T I C S
E S G A N A L Y T I C S
E S G P E R F O R M A N C E
D A T A
GRESB – Real Asset Sustainability Data and
Benchmarking
Investor-led and mission-driven

Benchmark size & Assets Location

GRESB Overall Score Development

EUROPE
ENERGY
consumed
-0.50%
WATER
consumed
2.89%
GHG
emitted
-3.71%
WASTE
diverted
81%
GLOBAL
Energy Intensities & Environmental Impact

Country-level intensities - NL

Key Figures
Participants
Total property value (USD tn)
Properties covered
Institutional investors
Institutional capital (USD tn)
Industry associations
20
10
20
19
3 +100
+100,00018,000
0.9 4.1
1,005198
220.7
Partners1 +50
+403

Scores distribution
AVERAGE GRESB SCORE
40%
30%
20%
10%

Sustainability / ESG is a journey

10 years of impact
LIKE-FOR-LIKE REDUCTIONS EQUIVALENT

GRESB Universe
(Like-for-like)
GRESB Universe
(Targets)
UN SDG
(Target 7.3)
Sustainable Development Goals (SDGs)

- Strategy & Leadership
- Policies
- Reporting
- Risk Management
- Stakeholder Engagement
- Risks & Opportunities
- Monitoring
- Performance Indicators
- Energy
- GHG emissions
- Water
- Waste
Industry consolidation
- Targets
- Building Certifications
- Tenants
- Community Engagement

Asset level disclosure
+100,000
+66,000
+25,000
# assets
All assets
Assets
• Reported at asset-level
Assets
• Reported at asset-level
• With full data coverage
• Excluding outliers

Carbon Risk Real Estate Monitor
Property Investing in the Age of Climate Risk
CRREM
“CRREM is a framework for science based
decarbonization pathways and a toolkit to identify
stranded assets and promote sustainable investments
in the real estate industry.”
CRREM
EU funded H2020 research project: February 2018 – January 2021

NL – Decarbonization pathways (1.5°C)

IIGCC INVESTOR
EXPECTATIONS FOR LISTED
REAL ESTATE COMPANIES
For Professional Clients MiFID Directive
2014/65/EU Annex II) only. No distribution to
private/retail investors..
Murray Birt
DWS Senior ESG Strategist and
IIGCC Property Working Group Co-Chair
GRESB Rotterdam – 3 October 2019

RESPONSIBLE INVESTMENT RESEARCH OVERVIEW
“Highly Commended”
Sustainable Finance Report #2,
June 2017
Source: DWS 2016-2019; Savvy Investor June 2017; Investment Week 2018
https://dws.com/solutions/esg/research/
For illustrative purposes only.
Savvy Investor is the world’s leadingresource hub for institutional investors. They curate the best pensions and investment white papers from around the world. The Savvy Investor Awards are judged on the
basis of the qualityand readability of the paper and its appeal to their institutionalinvestor audience. No fee was paid to be considered for the award.
Investment Week Awards are designed to highlightinvestment research services that demonstrate knowledge, innovation, engagement, clarity and transparency. No fee was paid to be considered for the award.
The task of the ESG thematic research team is to support clients and investment teams to
understand and consider major sustainability risks and opportunities in their everyday business
DWS finalist for
Best ESG
Research Team
DWS finalist for Best ESG Fund
ManagementGroup,
Best ESG Research Team &
Best Thought Leadership Paper
(physical risk)
For Professional Clients (MiFID II Directive 2014/65/EU Annex II) only.
For Institutional investors only. Further distribution of this material is strictly prohibited.
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INSTITUTIONAL INVESTORS GROUP ON CLIMATE CHANGE
3
Source: IIGCC September 2019
 IIGCC is an investor-led network of 172 asset owners
and mangers. From 11 European countries, together we
represent over €24 Trillion in assets.
 Ten investors sit on IIGCC’s Board which sets IIGCC’s
strategic direction. Many active members lead or
participate in our programmes.
 The Board has set a simple vision for IIGCC to work
toward: Investors taking action for a prosperous, low
carbon future.
 IIGCC’s mission is to mobilise capital for the low carbon
future by amplifying the investor voice and collaborating
with business, policy makers and fellow investors.
 IIGCC does this by providing investors with the
collaborative platform to encourage public policies,
investment practices and corporate behaviour that
address long-term risks and opportunities
associated with climate change.

IIGCC PROGRAMMES – WHAT WE DO
4
Policy Corporate Investor Practices Property
Activities:
• Best practices: Workshops,
roundtables and guidance
development on the resilience of
different sectors to the transition to
a low carbon economy.
• Engagement: Collaborative
engagement with more than 40
companies across Europe.
Investors with over €8Tn
participate in this group. IIGCC is
also coordinating the global
Climate Action 100+ initiative.
• Resolutions: Coordinating
shareholder resolution activity in
Europe and helping investors
understand which US resolutions
to support (Aiming4A has been
incorporated into the group).
Activities:
• Governance: working with boards,
trustees and senior management to
understand and manage climate-
related risks and opportunities.
• Strategy: Developing strategic tools
and metrics to enable owners and
managers to address climate risk
and opportunity in their portfolios
• Disclosure: Providing guidance to
investors on implementation of the
TCFD recommendations
Activities:
• Best practices: Development of
strategies for implementing green
property investment practices
and engaging with real estate
companies.
• Building policy: Engagement with
policy makers on building-
related energy and climate policy.
• Collaboration: Close working with
global and European actors in
the property space
Activities:
• Global policy: Official observer of
the UNFCCC; regular dialogue at
G7 and G20 level; Chair of The
Investor Agenda policy stream
• Regional policy: Detailed EU policy
positions developed on key issues
from carbon pricing to renewables
and energy efficiency policy and a
sustainable financial system.
Communicated via strategic policy-
maker engagement plans.
• National policy: When requested,
deep dive into domestic policy
• Supporting corporate engagement:
policy expertise is channelled to
support investor engagements with
companies.

EU ENERGY EFFICIENCY FINANCIAL INSTITUTIONS GROUP (EEFIG)
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Source: DWS Jan 2018; PRI, 2014; IIGCC March 2016; EU Commission Feb 2015 and Nov 2016
“Act as an action-oriented platform, to collect, develop, implement and
disseminate innovative ideas to accelerate finance for energy efficiency in
Europe, with a particular focus on the buildings sector”
Timeline of investors contributing to EU energy efficiency policies
2013: DWS and IIGCC
Foundingmembers of
EEFIG: EU Commission
& UNEP FI
“Efficiency First can and
should be a
guiding principle for the
Energy Union”
-- Maroš Šefčovič,
European Commission Vice
President for Energy Union Feb
2015, commends EEFIG report
Nov 2016: EU Commission
proposes “Clean Energy for
All Europeans Package”
March 2016: DWS
Contributionto investor
group IIGCC policy
proposals to EU
Increase in investment?
(not yet)
EU agrees revision of EU
Energy Efficiency Directive
& EU Energy Performance
in Buildings Directive (May
and June 2018)
EU member state
implementation – improved
policies for energy efficiency
investment?
EU Commission financially
supports European Mortgage
Federation initiative for energy
efficient mortgages
EU Commission financially
supports initiatives such as
DEEP, Investor Confidence
Project, EuroPACE etc

MEASURING AND FINANCIALLY VALUING THE TRUE BENEFITS OF
ENERGY EFFICIENCY
― Investment in energy efficiency measures has not grown sufficiently due to a lack of revenue and reliance on cost savings
― Traditional ‘deemed’ monthly energy efficiency savings are not sufficiently robust to match energy market challenges of growing distributed
generation. Some recommended energy efficiency measures can even make grid challenges worse
― The time and location of energy use and energy savings matters!
― A new partnership/initiative is needed between governments smart grid/meter organisations, the energy industry and energy users, for adopt digital,
smart measurement of EE and actual GHG reduction
― California is leading the way in adopting open source standards for measuring energy efficiency and energy utilities writing ener gyefficiency
procurementcont ractsthat are only paid on success
― This represents new project revenue which can be used in financing structures
Stronger policies and practices needed
California electricity CO2 intensity (Tons/MWh) 2019-2030*
Source: www.recurve.com Picture for illustrative purposes only. Forecasts are based on assumptions, estimates, views and hypothetical models or analyses, which might prove inaccurate or incorrect.
* Brook, M. (2018). Building Decarbonization: 2018 Update Integrated Energy Policy Report . Presentation. https://efiling.energy.ca.gov/GetDocument.aspx?tn=223817&DocumentContentId=54026
What is the ‘1 kg’ standard
for energy efficiency?
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MEASURE
IMPACT
DWS’S ESG REAL ESTATE STRATEGY
Summary of the implementation process
 Tracking data for all assets across seven funds submitted to GRESB, plus others
 ESG Acquisition Checklist completed during all asset purchases
 Energy audits conducted upon acquisition and every four years thereafter
 Sustainability Action Plans created for all assets where an audit has been conducted
 Active Energy Management using Monitoring & Targeting Software
 Implementation of Capex opportunities identified by audits that achieve strong returns
 Include green lease clauses in all new leases
 Set 20% US energy reduction target (5m ft2) in 2010, met 3 years early (2016)
 First energy reduction target begun in the UK in 2017
 Additional targets in all other regions in Europe to be established during 2019
 Global target planned from 2020 onwards
 Participation of seven funds in the GRESB Real Estate Survey
 Analysis of performance on the asset and portfolio level
GATHER DATA
PRIORITIZE
AND
IMPLEMENT
SET
REDUCTION
TARGETS
Source: DWS Feb 2019. No assurance can be given that investment objectives will be achieved.
/ 7

INVESTOR EXPECTATIONS:
/ 8
Source: https://www.iigcc.org/resources/?programme=Corporate+programme&sub_programme_policy=&sub_programme_corporate=&sub_programme_investor=&resource_topic=&document_type=Investor+guide
256 investors with USD30trn AuM are participating in Climate Action 100+, a five-year investor
initiative led by investors to engage the world’s largest corporate greenhouse gas
emitters to improve governance on climate change, curb emissions and strengthen climate-
related financial disclosures.
Investor groups have published several sector guides and members have used them to engage
carbon intensive companies.
The Investor Expectations series of guides are developed through IIGCC in partnership with
AIGCC, IGCC and Ceres, and input from a global network of investors and advisors
Due to the importance of energy efficiency in buildings, IIGCC has developed a similar investor
guide for publicly listed real estate companies and private real estate managers
Guides for investors & companies

INVESTOR EXPECTATIONS FOR LISTED REAL ESTATE SECTOR
/ 9
Source: IIGCC forthcoming October 2019
New Investor Expectations report planned for publication in mid/late October 2019. It seeks to establish key questions for allow for
constructive engagement, in order for investors to fully understand how companies in this sector are governing and managing the risks and
opportunities associated with a well below 2°C trajectory
Lead authors include: Murray Birt (DWS), Felipe Gordillo (BNP Paribas Asset Management), Emanuele Fanelli (Aegon Asset Management),
Derk Welling (APG Asset Management) and Ed Gabbitas (Evora Global), with input from Rachel Ward (IIGCC).
Contents
The property sector – a brief overview
Climate change pathways in the property sector
Property sector policy landscape
Climate and ESG disclosure in the listed property sector
Challenges and opportunities for the property sector
Investor expectations

INVESTOR EXPECTATIONS AND QUESTIONS FOR COMPANIES
/ 10
1. Governance:
Expectation:
Establish a strong and complete governance framework and process to support board’s oversight and accountability of climate change strategy.
The board should be in position to ensure that climate related risks (physical and transition) impacting property assets and portfolios are
properly managed and that the strategy, and to monitor the implementation of effective planning so the company is transitioning to a low carbon
economy
2. Strategy and scenario planning
Expectation:
Take action to reduce greenhouse gas emissions and make business operations consistent with the Paris agreement targets. Companies are
expected to implement their strategic decisions based on scientific climate scenarios.
After each expectation, the publication will set out a series of questions for board members and sustainability professionals

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3. Risk management:
Expectation:
Integrate climate related risks (including physical, regulatory/technology and changes in market preferences/behaviour) as part of the overall
risk management function aiming to monitor and control how these risks affect the company operations and the value of its property portfolios.
4. Metrics and targets
Expectation:
Develop a framework to track and reduce the most material emissions (scope 1, 2, 3)
Determine and disclose the property portfolio’s opportunities and risks from stronger building energy efficiency policies, technology changes and
shifts in tenant preferences for green buildings (climate transition risks).
Start to assess, develop, manage and disclose physical climate risk metrics and targets, drawing upon recent guidance that suggests using
Value at Risk from future extreme weather events*
• Advancing TCFD Guidance on Physical Climate Risks and Opportunities https://www.physicalclimaterisk.com/advancing-tcfd-guidance-physical-climate-risk

12
* IIGCC March 2016. “Transforming the sustainability of Europe’s building stock” http://www.iigcc.org/publications/publication/transforming-the-sustainability-of-europes-building-stock
5. Transparency and disclosure
Expectation:
Build a disclosure framework following the recommendations from the Task Force on Climate – related Financial Disclosures (TCFD), so the
company explains how climate risks and opportunities influence their business, strategy, financial planning and performance.
6. Public policy
Expectation:
The company’s public policy and lobbying positions and that of their trade associations should be aligned with the company’s own commitments
and implementation of the Paris agreement goals and should have some alignment with IIGCC’s views* on policies to support energy efficiency.

PARIS ALIGNED INVESTMENT INITIATIVE
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Aim
The initiative aims to explore how investors can align their portfolios to the goals of the Paris Agreement across equities, corporate fixed income, sovereign bonds,
property and Strategic Asset Allocation
DWS and Brunel Pension Partnership will co-chair the property working group
Objectives
Develop working definition of key concepts, terms and pathways relevant to Paris alignment for asset owners in order to clarify, build understanding and
consensus around these concepts. This will consider different dimensions to alignment to Paris including:
_ alignment of assets with a decarbonisation pathway that would meet the Paris goals
_ increasing investment in assets which represent ‘climate solutions’ needed to meet Paris goals
Analyse potential methods that could be used to assess alignment of different asset classes, determine the make-up of an aligned portfolio, and assess
approaches for transitioning portfolios, in order to provide menu of practical options for transitioning and assessing alignment to Paris goals.
Test the approaches to transition and methodologies for assessing alignment using real world portfolios, to understand:
_ financial characteristics, risks, issues, and opportunities associated with transition of portfolios to a below 2 degree pathway, assuming global trajectory
(emissions, technology, economic) is BAU
_ financial characteristics, risks, issues and opportunities associated with transition of portfolios to a below 2 degree pathway, assuming global trajectory also aligns
to 2 degrees
_ financial characteristics, risks and issues associated with following a BAU portfolio, assuming global pathway aligns to 2 degrees
Asset owner steering committee: AP2, Brunel Pension Partnership, Church of England Pensions Board, LGPS Central, PKA, and TPT
Retirement Solutions.

FURTHER IDEAS FOR THE REAL ESTATE SECTOR:
Benchmarking efficiency of commercial building tenants
Source: Green Lease Leaders 2019
https://www.greenleaseleaders.com/about/
— Tenants’ energy use (plug load) is significant
— Real estate investors are working to support and encourage tenants but more could be done
— Is there a gap that needs filling in Europe?
— Are there existing European initiatives that could be augmented or expanded? Potential to partner with US ‘Green Lease Leaders’ awards, benchmark
building tenants?
Filling an action gap?
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FURTHER CHALLENGES AND OPPORTUNITIES
/ 15
Source: WorldGBC September 2019;
ULI/Coalition for Urban Transitions June 2018
 WorldGBC concludes ‘upfront carbon’, will be responsible for half of
the entire carbon footprint of new construction between now and
2050, threatening our remaining carbon budget.
 WorldGBC has issued a bold new vision that:
 By 2030, all new buildings, infrastructure and renovations will have
at least 40% less embodied carbon with significant upfront carbon
reduction, all new buildings are net zero operational carbon
 By 2050, new buildings, infrastructure and renovations will have
net zero embodied carbon, and all buildings, including existing
buildings must be net zero operational carbon.
 How can real estate investors support this vision?
Embodied carbon
Connected, compact cities
 ULI/CUT report shows that well-designed, compact cities are
better for investors as well as citizens and the environment.
 Bouwinvest Real Estate Investors, Capco, CBRE Global
Investors, Grosvenor, LaSalle Investment Management, M&G
Real Estate, PGGM, Redevco, and Union Investment
supported the report
 DWS ideas helped inspired creation of report and project
 These companies released a statement committing to
champion further understanding of the opportunities and
benefits of well-managed and well-serviced densification.
 How can real estate and infra investors follow up this report?
Forecasts are based on assumptions, estimates, views and hypothetical
models or analyses, which might prove inaccurate or incorrect.

DISCLAIMERS (1/2)
/ 16
Issued in the UK by DWS Investments UK Limited. DWS Investments UK Limited is authorised and regulated by the Financial Conduct Authority.
Any reference to “DWS”, “Deutsche Asset Management” or “Deutsche AM” shall, unless otherwise required by the context, be understood as a reference to DWS Investments UK Limited including
any of its parent companies, any of its or its parents affiliates or subsidiaries and, as the case may be, any investment companies promotedor managedby any of those entities.
This document is a “non-retail communication” within the meaningof the FCA's Rules and is directed only at persons satisfying the FCA’s client categorisationcriteria for an eligible counterparty or
a professional client. This document is not intended for and should not be relied upon by a retail client.
This document is intendedfor discussion purposes only and does not create any legally binding obligationson the part of DWS Group GmbH & Co. KGaA and/or its affiliates(DWS). Without
limitation,this document does not constitute an offer, an invitationto offer or a recommendationto enter into any transaction. When making an investment decision, you should rely solely on the
final documentationrelating to the transaction and not the summary contained herein. DWS is not acting as your financial adviser or in any other fiduciary capacity in relation to this transaction. The
transaction(s) or products(s) mentionedherein may not be appropriatefor all investors and before entering into any transaction you should take steps to ensure that you fully understand the
transaction and have made an independentassessment of the appropriatenessof the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of
entering into such transaction. For general informationregarding the nature and risks of the proposed transaction and types of financial instruments please go to
https://www.db.com/company/en/risk-disclosures.htm.You should also consider seeking advice from your own advisers in making this assessment. If you decide to enter into a transaction with
DWS, you do so in reliance on your own judgment.
Although informationin this document has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness, and it should not be relied upon as such.
All opinionsand estimates herein, including forecast returns, reflect our judgment on the date of this document and are subject to change without notice and involve a number of assumptions which
may not prove valid.
Any opinionsexpressed herein may differ from the opinionsexpressed by Deutsche Bank AG and/or any other of its affiliates(DB). DB may engage in transactions in a manner inconsistent with the
views discussed herein. DB trades or may trade as principal in the instruments (or related derivatives), and may have proprietary positions in the instruments (or related derivatives) discussed
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YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF.
This document has been prepared without consideration of the investment needs, objectives or financial circumstances of any investor. Before making an investment decision, investors need to
consider, with or without the assistance of an investment adviser, whether the investments and strategies described or provided by DWS, are appropriate,in light of their particular investment
needs, objectives and financial circumstances. Furthermore, this document is for information/discussionpurposes only and does not constitute an offer, recommendationor solicitation to conclude
a transaction and should not be treated as giving investment advice.
DWS does not give tax or legal advice. Investors should seek advice from their own tax experts and lawyers, in considering investments and strategies suggested by DWS. Investments with DWS
are not guaranteed,unless specified.
FOR PROFESSIONAL CLIENTS ONLY

DISCLAIMERS (2/2)
/ 17
Investments are subject to various risks, including market fluctuations, regulatory change, counterparty risk, possible delays in repayment and loss of income and principal invested. The value of
investments can fall as well as rise and you may not recover the amount originally invested at any point in time. Furthermore, substantial fluctuations of the value of the investment are possible
even over short periods of time.
This document contains forward looking statements. Forward looking statements include, but are not limited to assumptions, estimates, projections, opinions, models and hypothetical performance
analysis. The forward looking statements expressed constitute the author’s judgment as of the date of this material.Forward looking statements involve significant elementsof subjective judgments
and analyses and changes thereto and/or consideration of different or additional factors could have a material impact on the results indicated.Therefore, actual results may vary, perhaps materially,
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contained herein. The terms of any investment will be exclusively subject to the detailed provisions, including risk considerations, contained in the offering documents.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
© DWS Investments UK LimitedSeptember 2019.
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DWS Investment InternationalGmbH. As of: September 2019
CRC:070873

Durability Risk
Assessing and quantifying the physical impact of long-
term climate change for real estate
Job Hogewoning

Durability Risk – Physical Impact of Long-Term Climate Change2
Climate change awareness is growing
Regulatory push
Climate change poses an ever increasing threat to the financial industry. An increase in extreme weather events will physically damage financial assets.
New extremes will likely be reached, which have significantly impacted financial assets. Apart from direct financial impact on the long term, a regulatory push and increased
public awareness are already seen.
Public awarenessFinancial impact
At EY, we believe that the key in addressing climate change,
is to first understand how climate change works and how it
effects us in a bottom up way.

Already now it is evident from
insurers data that the impact of
climate change through extreme
weather events has tripled over the
past three decades.
Global insured catastrophe losses (left panel) and number of relevant natural loss events worldwide (right panel)
(1985—2018: left panel: left hand scale: USD billions; right hand scale: percentages: right panel: left hand scale: number of events: right hand scale: percentages)
0
100
200
300
400
500
600
700
800
900
85
86
87
88
89
90
91
92
93
94
95
19851987198919911993199519971999200120032005200720092011201320152017
0
20
40
60
80
100
120
140
160
0
10
20
30
40
50
60
70
80
90
100
19851987198919911993199519971999200120032005200720092011201320152017
Global economic losses from extreme weather events
have increased
Source: Swiss Re Institute, Munich Re NatCatService and ECB calculations.
Earthquake/tsunami Weather-related catastrophes
Man-made disasters
% of weather-related catastrophes losses –
5-years moving average (right-hand scale)
Hydrological events Meteorological events
Geophysical events
% of weather-related events – 5-years moving
average (right-hand scale)
Climatological events
This trend is not likely to slowdown
or decrease for the coming decades,
but instead will grow.
Especially the weather related events
are likely to occur more often and
more severe.

Climate change is the top risk identified by the
World Economic Forum 2019
Source: The Global Risk Report 2019
4.0
3.46Average
2.5 3.0 3.5 4.0 4.5
3.41 Average
3.5
3.0
Likelihood
Impact
Failure of
national
governance
Asset bubbles in
a major economy
Data fraud or theft
Profound social
instability
Failure of urban planning
Failure of regional or
global governance
Illicit trade
Deflation
Adverse consequence of
technological advancesUnmanageable inflation
Energy price shock
Failure of critical
infrastructure
State collapse
or crisis
Unemployment or
underemployment
Terrorist attacks
Failure of financial
mechanism or institution
Food crises
Fiscal crises
Spread of infectious
diseases
Critical information
infrastructure
breakdown
Weapons of mass destruction
Large-scale
involuntary
migration
Man-made environmental
disasters
Cyber-attacks
Natural disasters
Interstate
conflict
Biodiversity loss
and ecosystem
collapse
Water crises
Extreme weather
events
Failure of
climate-change
mitigation and
adaptation
Extreme weather
events
Failure of
climate-change
mitigation and
adaptation
Water crises
Natural disasters
Cyber-attacks
Man-made environmental
disasters
Large-scale
involuntary
migration
Interstate
conflict
Biodiversity loss
and ecosystem
collapse
At the World Economic Form 2019 the Top 10 risks that were identified, both in
likelihood as in impact. With five entries, the Top 10 for the coming 10 years was
dominated by climate change related risk.

Climate Change is finding its way into the regulatory framework for
banks and insurers
EU NFDR - Table 4 – Disclosure on Principal Risks and their Management
Type 2
Describe the linkages between major climate-related risks and financial KPIs
Disclose any significant assumptions that have been used to assess climate-related risks.
When relevant, disclose how scenarios and/or internal carbon pricing are used for risk management
actions such as mitigation, transfer or adaptation.
Identify the locations that are critical to value chains, including operations, suppliers and markets.
Disclose financial impacts of extreme weather events, including possible indicators on days of business interruptions and associated
costs, cost of repairs, fixed-asset impairment, value chain disruptions and lost revenues.
Describe how the company's performance is affected by weather variability, in particular for companies sensitive to variability in
temperature and precipitation.
Regulators have also identified climate change and the related risks as one of the most important topics going forward for financial
companies to make insightful and report on. Upcoming and existing regulation requires financial companies to disclose the
financial effects of the physical risk associated with climate change. Including an assessment of the whole value chain. A difficult
part is that the regulation ask for reporting, but do not specify how financial impact should be calculated.
The following guidelines are
currently in place:
• EIOPA 2 (Insurers)
• TCFD (Voluntary)
• EC Guidelines on
reporting climate-
related information
(Banks)
• PRA (UK) to include
climate stress testing

Climate: the nuts and bolts
A story of energy and water in the atmosphere
Thewatercycle Ocean
Lake
Infiltration
Precipitation
Deposition
Transportation
Sun
Condensation
Evaporation
River Discharge
Transpiration
Snowmelt
Surface flow
Percolation
Climate change is more than just the warming up
of the earth. All climate systems are
interconnected and the impact of more energy in
this system will also have long lasting effects on
precipitation, droughts, wind and general increase
of temperature.
Extreme weather events are increasingly likely to
occur, and with the ongoing industrialisation and
increasing population, these will have a greater
physical impact.

The increase in energy creates a shift in probabilities of
extreme weather, making extreme the new normal
Source: Economics of extreme weather events: Terminology and regional impact models, Weather and Climate Extremes
Increase in mean and variance
Probabilityofoccurrence
Cold Average Hot
C
Previous
climate
Less
cold
weather
New
Climate
More hot
weather
More
record hot
weather
Climate change is best explained in
terms of probability. The probability
of a severe tail event occurring will
increase as the distribution of events
becomes flatter. It also means that
what is considered extreme and
unlikely now, will become normal
and more likely in the future. These
increases in probabilities can be
calculated.
It is the vision of EY that assessing
physical risk is an exercise driven
bottom-up. It starts with data
sufficiently granular on climate. Then,
climate scenarios from the KNMI and
the IPCC need to be taken into
account to assess the range of future
probabilities of extreme events.

Climate extremes cause major financial damages and are
increasing in frequency
0
10
20
30
40
50
60
70
80
90
Jul/80 Jul/83 Jul/86 Jul/89 Jul/92 Jul/95 Jul/98 Jul/01 Jul/04 Jul/07 Jul/10 Jul/13 Jul/16
Rainmm/hour
Time
Cloudburst & Damage
Cloudburst Damage > 8 mln Damage > 25 mln
More events and high damages in
the past 18 years
When the increases in probabilities
have been determined, it is key to
assess what impact an extreme
event will have. A probability in itself
will not provide answers on the
financial consequences.
The best guide for this are past
damage events, linked to the specific
circumstances of the occurrences.
When taking a cloudburst (more than
25mm of rain in an hour) and
reported damages by insurance
companies, it can be seen that large
events occur more frequently
nowadays and have a higher impact.

Connecting the dots: combine the increase in probability
with the damage the events costs
0
0,0002
0,0004
0,0006
0,0008
0,001
0,0012
0 500 1000 1500 2000 2500 3000
ProbabilityDensity
30 day summed Rainfall in mm
Rainfall near Schiphol
1906-1925
1926-1945
1946-1965
1966-1985
1986-2005
2006-2019
Damage event C
Damage event B
Damage event A
The final step is then to connect the
probabilities with impact. Combining
this with geographic data will lead to
an assessment of current and future
exposure to physical risks due to long
term climate change.

A way forward: going from insights, to actions, to
progress
Insights
► Impact on Risk
Governence
► Portfolio concentration
► Industry concentration
► Portfolio versus climate
triggers
Action
► Transparent climate
reporting towards
stakeholders
► Active modelling of
climate triggers
► Integration of climate
risk into daily business
Progress
► Climate integrated into
strategic framework
► Climate integrated into
operational framework
► Proactive role for the
financial industry
The journey starts with insight. Without
clear and concise information on how
climate change will affect your portfolio it is
not possible to make an assessment on how
you will be impacted.
The next step is the regular reporting and
monitoring of physical risk.
By embedding it in your processes with the
proper modelling tools, it is possible to
provide insight for all required stakeholders
and the possibility to steer.
The final step will be to fully embrace the
topic of climate change and include this at
the strategic level. True progress is gained
by helping your clients with specific
products or product features to facilitate a
more robust and durable future. Climate Scan
Model Framework

The impact of climate change is not limited to one
department
Risk Management Framework Components
Overall governance arrangements
Risk strategy and appetite
Policies and standards
Risk
identification
Risk assessment
and measurement
Risk monitoring
and management
Risk reporting and management information
Risk data
3 54
6
7
8
2
1
The impact of climate change on credit risk should be incorporated in the overall risk management framework
1. As an identified risk in the overall governance and arrangements of the financial institutions
2. As a potential metrics for the risk appetite framework
3. As a risk identified by the institution
4. As a risk measured and assessed in the Strategic Framework
5. As a risk monitor and manage in the Operational framework
6. As a risk fully part of the Sustainability report
7. With specific data collected
8. As a risk fully integrated in the policies

Average damage due to pole rot per
house 50k – 100k
Climate Scan Example:
making complex information easily accessible
Source: Klimaateffectatlas, CAS
Leeuwarden
Amsterdam
Rotterdam
Den Haag
Present 2050

Amsterdam highlight:
creating a detailed view to generate the right insights
Present 2050
Average damage due to pole rot per
house 50k – 100k
With our Climate scan service, we will support and help you to identify and quantify the physical climate risk in a selected asset portfolios. The Climate scan combines
the most recent technical and regulatory knowledge, visualization and your portfolio information to assess your climate exposure. The Climate Scans are tailormade
and personalized, to reflect your wants and needs concerning insights. By providing these insights, you will gain better awareness into the positioning of your
company with regard to policies and regulations, technical capacities, and risk appetite.
Climate Scan

Retail exposure: Flood risk as climate change risk driver
for collateral valuation
► Both in the Netherlands as in Belgium, maps are created that show regions which are
sensitive to flooding
► In the Netherlands 26% of the surface is below see level and 29% is susceptible for
river flooding. Note however that significant investments are planned to protect
against flooding*
► Rabobank is among the 16 participants that contributed to a pilot project to assess risk and
opportunities from the impact of climate change on their loan portfolios (UNEP finance
initiative)
► Rabobank performed an assessment of flood risk on their retail real estate loan book. They
find a mild impact and rationalize this impact via the protection of the Dutch flood
protection network and planned future upgrades
► Some of the challenges: linking external & internal data, frequency of future extreme
events crucial drivers but very hard to assess, granularity of available data
* Rabobank contributed to “Assessing credit risk and opportunity in a changing climate: Outputs of a working group of 16 banks piloting the TCFD Recommendations (Task Force on Climate-related Financial Disclosure,2018) “
Flood risk will impact collateral valuation
Flood maps Rabobank case study*
§ Flood risk data is available. Linking this data with the bank’s portfolio is an important challenge. Future predictions around changes to the
sensitivity of the different regions are subject to considerable uncertainty.

Model Framework: using the data and climate scenarios
and regulations to understand the future
Weather data Data analysis Current situation
mapping
Client data
Damage data Law and regulations
Future Hot Spot
mapping
Climate scenarios
Working together with academic
parties to understand the impact of
climate change on the weather
Working together with financial
parties to recognize the way climate
change will impact financial
companies
Creating awareness and insight on
how climate change will impact your
company, and show you a way forward
Using the state of the art Climate
Scenarios to assess the effect of
climate change in the future
Monitoring laws and regulations,
proactively integrating and anticipating
the impact on portfolios
Probability Assessment
Climate Exposure Future Predictions
Damage mechanisms Monitoring Laws

Our reporting service will help you to set up a reporting framework to effectively communicate physical climate risk exposure to internal and external stakeholders.
The reporting will be highly personalized and can be internally provided in the form of updates with regulations and technical development, or externally for
communicating TCFD and EC disclosures. We will help you to write and adjust reports to include climate risk in a relevant and understandable way for different
stakeholders.
Our model development service helps to you to develop risk models and modelling competencies to have ongoing insight into climate risk exposures. The goal of
model development is to actively integrate climate data and scenarios into models such as AIRB or IFRS9 models. We will help you to generate understandable
climate risk metrics and enable you to communicate them to both internal and external stakeholders on a regular basis.
Our operation models service helps you to integrate climate risk into (existing) acceptance and pricing models, both in quantitative and qualitative way. In a
quantitative way, we will help you adjust the models to optimize risk-adjusted earnings and to mitigate the amount of risk exposure taken on in line with risk
appetite. In a qualitative matter, we will support you with integrating climate change into the governance framework, completing the total coverage of the
operational framework
Our strategic support service helps you to consider climate change in your long term strategy development. We will help you adjust your operations to climate change
scenarios, and give you the technical insights to improve long-term positioning and new product/service development. We will help you set up KPIs to facilitate
strategy execution and monitor performance.
Model Framework:
How we will support you in this journey
Reporting
Model Development
Operational Support
Strategic Support

Are you in for the journey?
EY is convinced long term climate change is one of the
top topics facing the financial sector now. The possible
impact is far reaching and will affect this and future
generations in an unprecedented manner. New problems
require new insights and solutions. EY is highly committed
to addressing this risk with our clients and through
collaborating with regulators, academics and the financial
sector we strive for creating robust solutions.
Are you in for the journey with us?

Contact Details
Wimjan Bos
Partner
Tel.: 088 407 1719
E-mail: wimjan.bos@nl.ey.com
Job Hogewoning
Senior Advisor
Tel.: 06 – 2908 4062
E-mail: job.hogewoning@nl.ey.com
Gerd-Jan van Wiggen
Partner
Tel.: 06 – 2908 3990
E-mail: gerd-jan.van.wiggen@nl.ey.com
Wybren Brouwer
Senior Advisor
Tel.: 06 – 21252069
E-mail: wybren.brouwer@nl.ey.com

About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build
trust and confidence in the capital markets and in economies the
world over. We develop outstanding leaders who team to deliver
on our promises to all of our stakeholders. In so doing, we play a
critical role in building a better working world for our people, for our
clients and for our communities.
EY refers to the global organization, and may refer to one or more,
of the member firms of Ernst & Young Global Limited, each of
which is a separate legal entity. Ernst & Young Global Limited, a
UK company limited by guarantee, does not provide services to
clients. For more information about our organization, please visit
ey.com.
© 2019 EYGM Limited.
All Rights Reserved.
ED None
This material has been prepared for general informational purposes only
and is not intended to be relied upon as accounting, tax, or other
professional advice. Please refer to your advisors for specific advice.
ey.com
EY | Assurance | Tax | Transactions | Advisory

2019 GRESB Real Estate Results | Rotterdam

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