EMPIRE STATE REALTY TRUST: 2021 SUSTAINABILITY REPORT
Physical Risk ESRT evaluates exposure to physical climate risks for standing investments and new acquisitions during the due diligence process. ESRT works to identify climate related risks, implement mitigation strategies, and reduce the economic impacts of climate change across the portfolio. ESRT has developed a Climate Change Adaptation and Resilience Policy and Climate Change Risk Assessment Checklist to complete for every property during the due diligence process and for standing investments. This assessment includes physical risks such as power interruption, flooding, heatwaves, hurricanes, winter storms, and regulatory risks. Furthermore, via the Enterprise Risk Assessment performed by our internal auditor in conjunction with our Senior Management Team in 2021, Disaster Recovery and Business Continuity resulting from these events was identified as an inherent risk. Geographic Concentration Risk was also identified in that a natural disaster could make a large portion of the portfolio non-operational or inaccessible. The risk assessment program identified mitigation strategies which ESRT currently has in place, including a formal disaster recovery plan and business continuity plan that has been communicated to employees and tested, and disaster recovery, and business continuity through multiple insurers which diversifies the risk basis. These were activated in ESRT’s preparation and response to Super Storm Sandy. Transition Risk As part of the Board’s oversight of ESG, and in coordination with the ESRT Senior Management Team, ESRT regularly evaluates and prioritizes key transition risks including policy and legal issues, specifically regarding climate and energy legislation and carbon mandates, enhanced environmental reporting requirements, increasingly stringent building/ energy codes, technology, and market risks. Transition risks are identified through the Enterprise Risk Assessment performed on a quarterly basis, and ongoing review and evaluation of relevant policy, legal, technology, market and reputational risks that may affect the organization. We evaluate compliance status with legislation related to our carbon footprint and measurement of the financial impact of energy and climate legislation, including the New York City Climate Mobilization Act and Local Law 97. We evaluate abrupt or unexpected changes in energy costs and market perceptions by investors and tenants. We plan long-term contracts for certainty, predictability, and risk mitigation on utility pricing. We evaluate technology risks related to capital investments in low-carbon technology in conjunction with the evaluation of innovative technologies to help mitigate risks, such as advanced optimization and machine learning technologies, battery storage, renewable energy, lighting, and controls, building management systems, equipment, and tenant plug loads and controls. In addition, our Chairman, President, and CEO and SVP and Director of Energy, Sustainability, and ESG hold leadership positions on the NYC Climate Mobilization Act Working Group and other relevant working groups to define and understand the material transition risks related to energy/ carbon regulation that can impact the organization. Identification of the risks posed by climate change positions ESRT to better manage and mitigate risks and to provide a return on investment by reducing the economic impacts of climate change more effectively. Our Climate Change Adaptation and Resilience Policy applies to all existing assets as well as potential acquisitions.
Our climate change asset level requirements are the following: • Conduct comprehensive risk assessments to identify relevant climate change risks • Analyze climate change risks and potential impact • Develop operational plan with guidelines for • Flooding
• Windstorm/Hurricane • Freeze/Winter Storm
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