Title: Volume 35—Home Builders
Category: Part B—Industry-based Guidance for IFRS S2
Source: IFRS Foundation (https://www.ifrs.org)
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Year: 2023
Type: Industry
Industry-based Guidance on implementing
Climate-related Disclosures
Volume 35—Home Builders
June 2023
IFRS S2
IFRS
® Sustainability Disclosure Standard
International Sustainability Standards Board
This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published
June 2023; see separate booklet) and is issued by the International Sustainability
Standards Board (ISSB).
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© IFRS Foundation 2023
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IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023
© IFRS Foundation
1
Introduction
This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related
Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in
IFRS S2 but does not create additional requirements.
This volume suggests possible ways to identify, measure and disclose information about
climate-related risks and opportunities that are associated with particular business
climate-related risks and opportunities that are associated with particular business
models, economic activities and other common features that characterise participation in
this industry.
This industry-based guidance has been derived from Sustainability Accounting Standards
Board (SASB) Standards, which are maintained by the International Sustainability
Standards Board (ISSB). The metric codes used in SASB Standards have been included for
Standards Board (ISSB). The metric codes used in SASB Standards have been included for
ease of reference. For additional context regarding the industry-based guidance contained
in this volume, including structure and terminology, application and illustrative
examples, refer to Section III of the Accompanying Guidance to IFRS S2.
IFRS S2 INDUSTRY-BASED GUIDANCE
2
© IFRS Foundation
Volume 35—Home Builders
Industry Description
Home Builders industry entities build new homes and develop residential communities.
Development efforts generally include land acquisition, site preparation, home
construction and home sales. The majority of the industry focuses on the development
and sale of single-family homes, which are typically part of entity-designed residential
communities. A smaller segment develops town homes, condominiums, multi-family
communities. A smaller segment develops town homes, condominiums, multi-family
housing and mixed-use development. Many entities in the industry offer financing
services to individual homebuyers. The industry is fragmented, since many developers of
all sizes exist, which vary in entity structure and geographical focus. Listed entities tend
to be significantly larger and more integrated than the numerous privately held home
builders.
Sustainability Disclosure Topics & Metrics
builders.
Sustainability Disclosure Topics & Metrics
Table 1. Sustainability Disclosure Topics & Metrics
TOPIC
METRIC
CATEGORY
UNIT OF
MEASURE
CODE
Land Use &
Ecological
Impacts
Number of (1) lots and (2) homes
delivered on redevelopment sites
Quantitative
Number
IF-HB-160a.1
Number of (1) lots and (2) homes
delivered in regions with High or
Extremely High Baseline Water Stress
Quantitative
Number
IF-HB-160a.2
Total amount of monetary losses as a
result of legal proceedings associated
Number
IF-HB-160a.2
Total amount of monetary losses as a
result of legal proceedings associated
with environmental regulations 45
Quantitative
Presentation
currency
IF-HB-160a.3
Discussion of process to integrate
environmental considerations into site
selection, site design and site
development and construction
Discussion
and Analysis
n/a
IF-HB-160a.4
Design for
Resource
Efficiency
(1) Number of homes that obtained a
certified residential energy efficiency rating and (2) average rating
certified residential energy efficiency rating and (2) average rating Quantitative Number,Rating IF-HB-410a.1 Percentage of installed water fixtures certified to a water efficiency standard Quantitative Percentage (%) IF-HB-410a.2 Number of homes delivered certified to a third-party multi-attribute green building standard Quantitative Number IF-HB-410a.3 Description of risks and opportunities related to incorporating resource efficiency into home design, and how benefits are communicated to
related to incorporating resource efficiency into home design, and how benefits are communicated to customers Discussion and Analysis n/a IF-HB-410a.4 continued...
45 Note to IF-HB-160a.3 – The entity shall briefly describe the nature, context, and any corrective actions taken as a result of the monetary losses.
IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 3
...continued
TOPIC
METRIC
CATEGORY
UNIT OF
MEASURE
CODE
Climate Change Adaptation Number of lots located in 100-year flood zones Quantitative Number IF-HB-420a.1 Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks Discussion and Analysis n/a IF-HB-420a.2 Table 2. Activity Metrics
ACTIVITY METRIC
CATEGORY
UNIT OF
MEASURE
CODE
Number of controlled lots 46 Quantitative Number IF-HB-000.A Number of homes delivered 47
CODE
Number of controlled lots 46 Quantitative Number IF-HB-000.A Number of homes delivered 47 Quantitative Number IF-HB-000.B Number of active selling communities 48 Quantitative Number IF-HB-000.C Land Use & Ecological Impacts Topic Summary Home builders face risks associated with the ecological impacts of development activities.
Developments often take place on previously undeveloped land, and entities must
Developments often take place on previously undeveloped land, and entities must manage the ecosystem disruption of construction activities as well as the regulations and permitting processes that accompany 'greenfield' land development. Regardless of the siting decisions entities make, industry development activities generally carry risks related to land and water contamination, mismanagement of waste, and excessive strain
related to land and water contamination, mismanagement of waste, and excessive strain on water resources during the construction and use phases. Violation of environmental regulations can result in costly fines and delays that decrease financial returns while potentially harming brand value. Entities with repeated violations or a history of negative ecological impacts may find seeking permits and approvals from local communities for
ecological impacts may find seeking permits and approvals from local communities for new developments difficult, thereby decreasing future revenue and market share.
Entities that concentrate development efforts in water-stressed regions may witness challenges to permitting approvals and increased land or home value depreciation because of water shortage concerns. Environmental quality control procedures, 'smart
because of water shortage concerns. Environmental quality control procedures, 'smart growth' strategies (including a focus on redevelopment sites) and conservation strategies may help ensure compliance with environmental laws, and therefore mitigate financial risks, while improving future growth opportunities.
46 Note to IF-HB-000.A – The scope of controlled lots includes all lots owned or contractually
46 Note to IF-HB-000.A – The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts as of the last day of the reporting period.
47 Note to IF-HB-000.B – The scope of homes shall include single-family dwelling units whether detached, attached, or part of multi-family residential buildings.
48 Note to IF-HB-000.C – The scope of active selling communities includes those communities or
48 Note to IF-HB-000.C – The scope of active selling communities includes those communities or developments open for sales with at least five homes or lots remaining to sell as of the last day of the reporting period.
IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation
Metrics IF-HB-160a.1. Number of (1) lots and (2) homes delivered on redevelopment sites 1 The entity shall (1) disclose the number of controlled lots that are located on redevelopment sites.
1.1
The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts.
1.2
The scope of redevelopment sites shall include brownfield and greyfield
of contracts.
1.2
The scope of redevelopment sites shall include brownfield and greyfield sites, and shall include sites that meet jurisdictional designations for such terms. In the absence of jurisdictional definitions, the following definitions shall be used:
1.2.1
Redevelopment sites are defined as sites previously developed,
including the replacement, remodelling or reuse of existing structures to accommodate new development.
1.2.2
structures to accommodate new development.
1.2.2
Brownfield sites are defined as real property, the expansion,
redevelopment or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant.
1.2.3
Greyfield sites are defined as any site previously developed with at least 50% of the surface area covered with impervious material.
1.3
The scope of redevelopment sites excludes undeveloped infill sites but
1.3
The scope of redevelopment sites excludes undeveloped infill sites but includes infill sites to the extent that such sites meet the above definitions of redevelopment, brownfield or greyfield sites.
2 The entity shall disclose (2) the number of homes delivered that were constructed on redevelopment sites.
2.1
The scope of homes shall include single-family dwelling units, whether detached, attached or part of multi-family residential buildings.
detached, attached or part of multi-family residential buildings.
IF-HB-160a.2. Number of (1) lots and (2) homes delivered in regions with High or Extremely High Baseline Water Stress 1 The entity shall (1) disclose the number of controlled lots located in regions with High or Extremely High Baseline Water Stress.
1.1
The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts.
1.2
available for ownership through option contracts or other equivalent types of contracts.
1.2
The entity shall identify controlled lots in locations with High (40–80%) or Extremely High (>80%) Baseline Water Stress with the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct.
2 The entity shall disclose (2) the number of homes delivered in regions with High or Extremely High Baseline Water Stress.
2.1
The scope of homes shall include single-family dwelling units whether
2.1
The scope of homes shall include single-family dwelling units whether detached, attached or part of multi-family residential buildings.
IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5
IF-HB-160a.3. Total amount of monetary losses as a result of legal proceedings associated with environmental regulations 1 The entity shall disclose the total amount of monetary losses incurred during the reporting period resulting from legal proceedings associated with environmental regulations, such as those related to: enforcement of laws and regulations on ground-and surface-water contamination;
hazardous waste transport,
ground-and surface-water contamination;
hazardous waste transport,containment or disposal; air emissions; and public disclosure of contamination events.
2 The legal proceedings shall include any adjudicative proceeding involving the entity, whether before a court, a regulator, an arbitrator or otherwise.
3 The losses shall include all monetary liabilities to the opposing party or to others (whether as the result of settlement or verdict after trial or otherwise), including
(whether as the result of settlement or verdict after trial or otherwise), including fines and other monetary liabilities incurred during the reporting period as a result of civil actions (for example, civil judgment or settlements), regulatory proceedings (for example, penalties, disgorgement or restitution) and criminal actions (for example, criminal judgement, penalties or restitution) brought by any entity (for example, governmental, business or individual).
4
entity (for example, governmental, business or individual).
4 The scope of monetary losses shall exclude legal and other fees and expenses incurred by the entity in its defence.
5 The scope of disclosure shall include relevant enforcements related to activities adjudicated by applicable jurisdictional legal or regulatory authorities with an enforcement mandate broader than the home builders industry.
Note to IF-HB-160a.3 1
enforcement mandate broader than the home builders industry.
Note to IF-HB-160a.3 1 The entity shall briefly describe the nature (for example, judgement or order issued after trial, settlement, guilty plea, deferred prosecution agreement, non-
prosecution agreement) and context (for example, permitting violation) of all monetary losses resulting from legal proceedings.
2 The entity shall describe any corrective actions implemented in response to the
2 The entity shall describe any corrective actions implemented in response to the legal proceedings. This may include specific changes in operations, processes,
products, business partners, training or technology.
IF-HB-160a.4. Discussion of process to integrate environmental considerations into site selection, site design and site development and construction 1 The entity shall provide a discussion of the process used to integrate
1 The entity shall provide a discussion of the process used to integrate environmental considerations into site selection, design and development and construction.
1.1
Environmental considerations may include ecological impacts, biodiversity impacts, emissions to air, discharges to water, slope disturbance, soil disturbance and erosion, storm water management, waste management,
natural resource consumption and hazardous chemical usage.
2
natural resource consumption and hazardous chemical usage.
2 The entity shall describe how it manages the following aspects of site selection:IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation
2.1
The process used to assess the level of ecological sensitivity of sites under consideration for acquisition or development, and how such assessments are incorporated into acquisition and development decisions.
2.2
The use of site classifications (for example, greenfield, greyfield,
brownfield or infill sites) in decision-making processes.
3 The entity shall describe how it manages the following aspects of site design:
3.1
3 The entity shall describe how it manages the following aspects of site design:
3.1
The process used to design sites to minimise ecological impacts, including management of slope disturbance, soil disturbance and erosion, storm water, waste and wildlife habitat impacts.
4 The entity shall describe how it manages the following aspects of site development and construction:
4.1
The process used to minimise ecological impacts during construction,
4.1
The process used to minimise ecological impacts during construction,
including management of construction and demolition waste, runoff, soil disturbance and erosion and hazardous materials.
5 The entity shall describe how it assesses risks associated with environmental considerations and related internal policies, practices and procedures for managing those risks.
6 The entity shall describe its use of codes, guidelines and standards that address
6 The entity shall describe its use of codes, guidelines and standards that address site selection, design and development and construction, if applicable.
Design for Resource Efficiency Topic Summary Residential buildings, when occupied, consume significant amounts of energy and water.
Entities in the Home Builders industry can improve home resource efficiency through sustainable design practices and choice of materials. Energy-saving products and
sustainable design practices and choice of materials. Energy-saving products and techniques such as designing homes for efficient heating and cooling may reduce energy dependence, whether it comes from the electric grid or onsite fuel combustion. Intended to improve home resource efficiency, these measures may decrease home ownership costs through lower utility bills. Water-saving features such as low-flow faucets alleviate
costs through lower utility bills. Water-saving features such as low-flow faucets alleviate stress in water-scarce communities, while likely also reducing homeowner costs.
Homebuyer awareness of energy and water efficiency creates an opportunity for entities to increase target market demand, thereby increasing revenue or margins. Effectively applying resource efficiency design principles in a cost-effective manner may be a
applying resource efficiency design principles in a cost-effective manner may be a competitive advantage, especially when entities are successful in systematically educating customers on the long-term benefits of these homes.
Metrics IF-HB-410a.1. (1) Number of homes that obtained a certified residential energy efficiency rating and (2) average rating 1 The entity shall disclose (1) the number of homes that obtained a certified,
1 The entity shall disclose (1) the number of homes that obtained a certified,
standardised residential energy efficiency rating recognised by relevant industry associations or jurisdictional legal or regulatory authorities during the reporting period.
IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7
1.1
The scope of homes shall include single-family dwelling units, whether detached, attached or part of multi-family residential buildings.
1.2
The entity shall disclose the energy efficiency rating system used to calculate this metric.
2 The entity shall (2) disclose the simple average rating of all homes that obtained a certified, standardised residential energy efficiency rating during the reporting period.
2.1
The simple average shall be calculated as the sum of all ratings associated
period.
2.1
The simple average shall be calculated as the sum of all ratings associated with homes that obtained a rating during the reporting period divided by the number of homes that obtained a rating during the reporting period.
3 An entity operating in multiple jurisdictions shall disclose separately the number of homes and the average ratings by individual jurisdiction in which they operate.
4 The scope of disclosure includes all homes that are or were controlled by the
4 The scope of disclosure includes all homes that are or were controlled by the entity, regardless of the stage of construction and the stage within the sales cycle.
IF-HB-410a.2. Percentage of installed water fixtures certified to a water efficiency standard 1 The entity shall disclose the percentage of installed water fixtures certified to the jurisdictional water efficiency standard.
1.1
A water fixture is defined as a device used for the distribution of water or
1.1
A water fixture is defined as a device used for the distribution of water or a device that consumes water.
1.2
The percentage shall be calculated as the number of water fixtures installed during the reporting period that were certified to the applicable jurisdictional water efficiency standard divided by the total number of water fixtures installed.
1.2.1
The scope of water fixtures includes those that are within an eligible jurisdictional water efficiency standard product category.
eligible jurisdictional water efficiency standard product category.
Examples of product categories may include bathroom sink faucets and accessories, showerheads, toilets, urinals, irrigation controllers and pre-rinse spray valves.
2 The scope of disclosure includes all water fixtures installed in homes that are or were controlled by the entity, regardless of the stage of construction, the stage within the sales cycle or the entity that performed such installations.
3
within the sales cycle or the entity that performed such installations.
3 The entity shall disclose the jurisdictional standard, guideline or regulation used for its calculation.
IF-HB-410a.3. Number of homes delivered certified to a third-party multi-attribute green building standard 1 The entity shall disclose the number of homes delivered certified to a third-party multi-attribute green building standard designed for homes.
1.1
multi-attribute green building standard designed for homes.
1.1
The scope of third-party multi-attribute green building standards is limited to home standards or certifications that, at a minimum, judge important aspects of new home design and construction:IFRS S2 INDUSTRY-BASED GUIDANCE 8© IFRS Foundation
1.1.1
Energy efficiency
1.1.2
Water conservation
1.1.3
Material and resource efficiency
1.1.4
Indoor environmental quality
1.1.5
Owner education
1.2
Examples of third-party multi-attribute green building standards include:
1.2.1
Environments For Living Certified Green®
1.2.2
ICC 700 National Green Building Standard
1.2.3
LEED® for Homes.
2 The entity shall disclose the third-party multi-attribute green building standard(s) to which its homes are certified.
3
to which its homes are certified.
3 The scope of disclosure includes all homes delivered during the reporting period.
4 The entity may discuss other green building or sustainability standards or guidelines it implements in its home design and construction processes that are not third-party verified.
IF-HB-410a.4. Description of risks and opportunities related to incorporating resource efficiency into home design, and how benefits are communicated to customers 1
resource efficiency into home design, and how benefits are communicated to customers 1 The entity shall describe the risks or opportunities associated with its approach to integrating environmental considerations into home design, including, where relevant:
1.1
Risks of failing to achieve adequate returns on technology investments and sufficient market demand to improve home sustainability performance or earn sustainability certifications
1.2
earn sustainability certifications
1.2
Risks to market demand associated with the entity’s potential failure to advance its design approach at the same pace as its peers, resulting in the production of less sustainable and less energy- and water-efficient homes
1.3
Risks associated with cost-effectively building homes that meet evolving building codes
1.4
Opportunities to achieve sales price premiums, capture target market demand and create competitive advantages by producing homes with
demand and create competitive advantages by producing homes with market-leading energy efficiency and water efficiency 2 The entity shall discuss its strategy to measure and communicate energy efficiency and water efficiency performance improvements to homes, including:
2.1
Measurement of homeowner benefits related to energy and water efficiency, including performance audits, certifications, standards,
guidelines and use of projected energy and water costs and savings relative to a baseline
guidelines and use of projected energy and water costs and savings relative to a baseline IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 9
2.2
Communication of the benefits of resource efficiency to prospective home buyers, including the benefits of resource efficiency performance and certifications, projected energy and water costs and savings, and the integration of resource efficiency into sales and marketing 3 The entity may provide an analysis of such price increases relative to the cost of improvements in, and third-party certifications of, energy efficiency, water
improvements in, and third-party certifications of, energy efficiency, water efficiency and indoor environmental quality. Analysis additionally may include target return rates compared to realised return rates of improvements.
Climate Change Adaptation Topic Summary The impacts of climate change, including extreme weather events and changing climate patterns, may affect the markets entities select to develop homes and residential
patterns, may affect the markets entities select to develop homes and residential communities. Entities with business models that incorporate ongoing assessments of climate change risks, and adapt to such risks, are likely to grow entity value more effectively over the long term, partially through reductions in risk. More specifically,
strategies focused on home development activities in floodplains and coastal regions
strategies focused on home development activities in floodplains and coastal regions exposed to extreme weather events, such as flooding, have increased the need to adapt to climate change, especially considering long-term challenges like flood insurance rates,
the financial stability of government-subsidised flood insurance programs, permitting approvals and financing stipulations. Rising climate risks may translate into reduced
approvals and financing stipulations. Rising climate risks may translate into reduced long-term demand, land value depreciation and concerns over understated long-term costs of home ownership. Additionally, entities that build developments in water-stressed regions risk losing land value and may have problems getting permitting approvals. The active assessment of climate change risks and a holistic view of long-term homebuyer demand may enable entities to successfully adapt to such risks.
demand may enable entities to successfully adapt to such risks.
Metrics IF-HB-420a.1. Number of lots located in 100-year flood zones 1 The entity shall disclose the number of controlled lots in 100-year flood zones.
1.1
100-year flood zones are defined as land areas subject to a 1% or greater chance of flooding in any given year. Such areas also may be referenced as being subject to the 1% annual chance flood, the 1% annual exceedance probability flood, or the 100-year flood.
1.1.1
probability flood, or the 100-year flood.
1.1.1
Examples of 100-year flood zones may include coastal flood plains,
flood plains along major rivers and areas subject to flooding from ponding in low-lying areas.
1.2
The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts.
2 The scope of disclosure shall include all entity-controlled lots located in 100-year
2 The scope of disclosure shall include all entity-controlled lots located in 100-year flood zones, regardless of the jurisdiction in which they are located.
IFRS S2 INDUSTRY-BASED GUIDANCE 10© IFRS Foundation
3 The entity may disclose its risks, opportunities and potential impacts resulting from reclassifications of 100-year flood zones, including the risk of expansion of such areas into lots controlled by the entity or its active selling communities.
IF-HB-420a.2. Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks 1 The entity shall describe the significant risks and opportunities presented to its
1 The entity shall describe the significant risks and opportunities presented to its business by climate change scenarios.
1.1
The entity shall identify each significant risk and opportunity.
1.1.1
Risks and opportunities may include water availability, extreme weather events, evolving regulation and legislation, home permitting processes, time lines and approvals and impacts to local economies and infrastructure.
1.2
The entity shall discuss the time line over which such risks and
economies and infrastructure.
1.2
The entity shall discuss the time line over which such risks and opportunities are expected to manifest.
1.3
The entity shall disclose the climate change scenarios used to determine the risks and opportunities presented by climate change, where scenarios may include the New Policies Scenario, Sustainable Development Scenario,
and Current Policies Scenario, as established by the International Energy Agency in its annual World Energy Outlook.
2
Agency in its annual World Energy Outlook.
2 The entity shall describe how it assesses and monitors climate change impacts and related strategies to alleviate or adapt to any risks or use any opportunities,where:
2.1
Alleviation strategies may include: site selection and the incorporation of climate or weather models into such analysis; site selection as it pertains to water scarcity; the strategy and timing of lot acquisitions, permitting,
to water scarcity; the strategy and timing of lot acquisitions, permitting,
construction and sales; the use of sales and purchase agreement clauses addressing risks to the entity; and insurance.
2.2
Adaptation strategies may include: lot design; home design for physical resiliency; contingency plans; and maximising energy and water efficiency of homes.
3 The entity shall discuss its strategies related to the use of physical measures to
of homes.
3 The entity shall discuss its strategies related to the use of physical measures to manage climate change risk (for example, floodplain avoidance or home design for physical resiliency) or financial mechanisms to manage these risks (for example, the use of insurance or option contracts on lots).
IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 11
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