Issue link: https://maltatoday.uberflip.com/i/1506016
LAST week, the MHRA along with Deloitte displayed the mid- year results of the number of tourists visiting the Maltese is- lands. The results are obviously encouraging. However, beyond statistics, Bank of Valletta was invited to deliver a presentation on the challenges that the hos- pitality industry ought to face in terms of climate and environ- mental-related risks, primarily emanating from the acceleration of climate change. Climate change physical risks are split between chronic and acute. The former cannot be remedied, and it includes sea level rises and increase in mean temperatures, while the latter in- cludes frequent torrential rains accompanied by pluvial flooding which can be partially mitigated. The Climate Paris Agreement targets, that of limiting global warming to 2°Celsius relative to preindustrial levels is clear. However, without proper dis- closures in place and sustaina- bility reporting the deceleration of global warming cannot be achieved. Clearly, the physical risks of climate change are becoming more pronounced. Therefore, the EU is pressing the banking and financial industry to assess what is material when financing private investments, including their accompanying direct or in- direct impact on climate change and the environment. In simple words, banks are re- quired to monitor and assess investments against the physi- cal risks as well as the transition risks associated with climate change. The set climate objectives, in- cluding those of climate mitiga- tion and climate adaptation are currently the most pressing ones that require special attention. The hospitality industry must assess new ways on how to mit- igate climate change including the installation of renewable en- ergy systems, retrofit the build- ings with proper insulation and double-glazing systems and low energy consumption lightings to optimes the use of energy. It would help in cutting CO2 emissions and reducing energy bills. The absence of such meas- ures would only accelerate glob- al warming, and in turn exert additional pressure on the envi- ronment. Simply put, if low lying areas are affected by sea level rises, then certain investments of im- movable properties along the coast might be affected and de- value the bank's collateral value. And this depends on how many metres the level of the sea ought to rise. In this regard, banks are required to map their immov- able collateral financing to sea and pluvial flood-risk prone are- as. Indeed, the data to map such information can also be found in some chapters of the 'River Ba- sin' management plan for Malta. Surely, it aids in getting granular information by street level to map it to the immovable collat- eral financing of banks. If measures to mitigate the acceleration of climate change are not enforced, such chronic physical risks would affect im- movable property investments especially those along the coast within the hospitality industry. Hence, banks are being urged to either start excluding such immovable private investments or provide credit at a higher interest rate to capture climate and environmental related risks. Conversely, when designing new hotel building, architects must factor in climate change adapt- ability including the transition risks of providing a proper En- ergy Performace Certificate. Lit- erature review, including data form Think Hazard, which uses world bank data, shows that heat stress and water stress problems will be the norm for the south- ern Mediterranean region. New practices in the southern European region are urging ho- teliers to start capturing pluvial water, which can eventually be used as a secondary water sys- tem to reduce demand from government water, which most of it, at least here in Malta, is also coming from desalination tech- nologies. Climate change adap- tation is crucial, as global warm- ing certainly exerts additional pressure on the tourism industry due to excessive and more fre- quent heatwaves. Some tourists might be choosing cooler desti- nations in the future. Also, Mal- ta is facing significant land-use constraints, which could jeop- ardize future real estate's devel- opments. Beyond climate and environ- mental-related risks, sustaina- bility dictates that the environ- ment, social and governance cannot exclude one another. Their coexistence is crucial to transit to a more sustainable economy. In the not-so-distant future, economic operators, in- cluding those in the hospitality industry will also be screened for their respect towards human rights and working conditions offered to the employees that are engaged on their books. ESG must be viewed as a pro- cess of creative expansion rather than a burden on the industry. And the level of due diligence is certainly, at par, if not bigger, than the AML Directive. Clint Flores is head ESG Department, Bank of Valletta 12 maltatoday | SUNDAY • 20 AUGUST 2023 OPINION The impact of climate and environmental related risks on the hospitality industry OPINION Clint Flores Banks are required to monitor and assess investments against the physical risks as well as the transition risks associated with climate change Beyond climate and environmental-related risks, sustainability dictates that the environment, social and governance cannot exclude one another