Mastern Asset Management Establishes Climate Risk Management System... "Proactive Response to Climate Change"

Alternative investment specialist asset management company Masterton Investment Management announced on the 13th that it has established a climate risk management system to respond to asset impairment risks caused by climate change.

Climate risk refers to financial risks that may arise in credit, market, liquidity, and other areas due to climate change. It encompasses physical risks, which are direct economic costs resulting from abnormal weather and long-term climate changes, and transition risks, which are derivative financial losses that may occur due to a rapid shift to a low-carbon economy.

To address physical climate risks, Masterton Investment Management has introduced a risk monitoring system. The company built an in-house IT system that allows verification of whether real estate assets invested in by Masterton are located in natural disaster risk zones, categorized by type and grade. This system focuses on disaster risk management that can cause direct losses to real estate assets by enabling a comprehensive view of disaster risk zones designated and announced by local governments under the Natural Disaster Countermeasures Act.

Through this system, when reviewing new investments, it is now possible to effectively confirm whether assets are located in disaster risk zones using only domestic data without additional costs. If an asset under management is located within a disaster risk zone, the relevant management department is systematized to establish a physical risk response strategy.

Additionally, anticipating future building greenhouse gas regulations, Masterton Investment Management proposes targets to asset management departments to reduce greenhouse gas emissions. The company manages transition risks related to the shift to a low-carbon economy through the ’Net Zero Tracker,’ which monitors real-time greenhouse gas emissions of assets.

Masterton Investment Management has established a system to proactively respond to climate risks, including physical and transition risks. This is because voices demanding climate risk responses from domestic and international stakeholders are growing. Globally, ‘Zero Energy Building Certification’ and ‘Building Greenhouse Gas Cap’ are being introduced to reduce greenhouse gas emissions from buildings, and in Korea, supervisory agencies are requesting risk management through carbon reduction of investment assets.

There was also concern that climate risks could affect management performance. If assets are exposed to physical risks, not only actual damage from weather phenomena but also increased incidental costs such as rising insurance premiums and operating expenses may occur. Furthermore, unnecessary expenditures may arise due to transition risks such as Brown Discount (the phenomenon where non-environmentally friendly assets depreciate in value compared to environmentally friendly assets) and fines imposed by local governments’ environmental regulations.

Namgung Hoon, CEO of Masterton Investment Management, said, “As climate change poses a real threat to humanity, there is a consensus that alternative investment asset managers must also respond to climate change,” adding, “We will systematically carry out practical measures that can be implemented immediately for a sustainable future.”