20 Example Climate-related Financial Statement Notes for REITs

1. Decrease in fair value – effect of physical risk

During 2024, the fair value of two investment properties located in areas with increasing sea-level rise and flood risk was remeasured taking these risks into account, and a total decrease in value of TRY 6.2 million was recognised in profit or loss.

2. Carbon footprint and potential carbon costs

Our Company generated 9,800 tonnes of CO₂e emissions in 2024. The potential annual effect of carbon pricing expected to be introduced in the future is estimated at approximately TRY 4.5 million. As there was no present obligation at the reporting date, no provision was recognised under TAS 37; this amount is only disclosed in the notes.

3. Green-certified buildings – disclosure of financial benefits

Three commercial properties with BREEAM certification achieved total energy cost savings of 17% in 2024, which had a positive effect on rental income. As a result, total rental income increased by TRY 2.4 million.

4. Periodic deviations in rental income – extreme weather

In shopping centres and office buildings temporarily closed because of extreme heat and storms, rental income decreased by approximately TRY 1.9 million.

5. Use of green bonds and accounting for the proceeds

In 2024, the proceeds of the USD 20 million green bond issued to finance sustainable projects were presented in the balance sheet under "Other financial liabilities"; 80% of these funds were used for energy efficiency investments.

6. Revaluation assumptions – carbon risk

The discount rate and cash flow projections used in the revaluation of properties have been updated, consistently with the scenario analyses under TSRS 2, taking into account the assumption that carbon prices will reach USD 100 per tonne by 2030.

7. Effect of investments to reduce emissions

During 2024, a total investment of TRY 7.8 million was made in rooftop solar panels and insulation improvements to reduce energy consumption, of which TRY 3.2 million was capitalised as property, plant and equipment.

8. Carbon criteria in tenant contracts

Carbon emission commitments and environmental performance obligations have been included in long-term lease agreements with new tenants, which reduced the average risk score of the contract portfolio by 10%.

9. Higher insurance costs – physical climate risk

As of 2024, a 25% premium increase was applied to insurance policies covering flood, fire and storm risks, adding TRY 2.1 million to operating expenses.

10. Deferred tax effects – sustainable investments

As a result of tax benefits obtained from energy efficiency investments, the deferred tax asset increased by TRY 1.5 million, and this amount was reflected in the relevant line items of the financial statements.

11. Effect of sustainable building certificates on portfolio valuation

At year-end 2024, 7 of the 11 properties in our portfolio held LEED Gold or BREEAM Excellent certification. In the valuation of these properties, an increase in value of up to 8% was taken into account owing to energy efficiency and lower operating costs.

12. Potential losses on properties exposed to climate risk

For properties located in areas with high flood and fire risk, potential climate-related damage not covered by insurance is estimated at TRY 2.3 million in total. No provision has been recognised under TAS 37 for damage that has not yet occurred; this risk is disclosed in the notes.

13. Effect of solar energy investments on the depreciation plan

Solar panels installed on the roofs of 4 properties in 2024 were capitalised under property, plant and equipment assuming a useful life of 15 years, and depreciation expense of TRY 780,000 in total was recognised.

14. Disclosure on the carbon compliance of projects offered for sale

The 3 residential projects offered for sale have been designed to achieve a minimum energy class of A, and this has been assumed to have a positive effect on future sales revenue. An increase of TRY 1.2 million in project development revenue has been projected for this effect.

15. Effect of energy-saving incentives offered to tenants

Under the energy-saving incentive programme for tenants, rent discounts totalling TRY 380,000 were granted to tenants that met certain performance targets, and this amount was deducted from rental income.

16. Insurance compensation received during the period – climate-related damage

In 2024, insurance compensation of TRY 1.7 million received for structural damage to a property caused by heavy rainfall was recognised under "Other income".

17. Effect of tax incentives for climate-aligned projects on the financial statements

Under the investment incentive certificate obtained for our energy efficiency investments, a deferred tax asset and deferred tax income have been recognised for a tax reduction of TRY 540,000 to be used in the future.

18. Portfolio distribution by climate risk scenario

According to our annual scenario analysis, 28% of the properties in our portfolio are located in areas with medium or high climate risk. This is taken into account in forward-looking investment and sales planning (see Section 5.1 – Annual Report).

19. Profit margin calculation for climate-sensitive sales projects

Owing to the sustainable materials used in construction projects with a low carbon footprint, direct costs increased by 7%; however, taking into account the increase in market value, a 3% increase in net margin per project was achieved.

20. Sustainable infrastructure assets acquired through leases

In 2024, climate-adaptive infrastructure improvements (greywater recovery systems) at certain commercial properties were acquired through finance leases, and in this context a lease liability of TRY 2.6 million and a right-of-use asset of the same amount were recognised.

These notes focus in particular on the following areas: