United Nations Report Links Climate Change and Real Estate Values
Climate risks are becoming a fundamental and critical structural factor that investors need to consider in building resilient real estate portfolios, but there is a lack of information and understanding about how these complex risks could affect property values in coming years, a new report from the UN, Schulich School of Business and Henley Business School concludes.
The United Nations Environment Programme Finance Initiative (UNEP FI) has released a new report working with partners at the business schools titled, Climate Risk and Commercial Property Values: A review and analysis of the literature.
“Many institutional real estate investors have significant exposure to cities and regions that are economically important, but increasingly susceptible to climate change impacts,” said co-author, Schulich Professor and Timothy R. Price Chair, Jim Clayton, Director of the Master of Real Estate and Infrastructure (MREI) program and the School’s Brookfield Centre in Real Estate & Infrastructure. “Understanding how property values could be materially affected by the physical impacts of climate change is of paramount importance to investors, as well as lenders, insurers, regulators, city officials and other stakeholders.”
The report reviews and synthesizes a growing body of academic research that indicates climate risk is starting to have a more sustained impact on pricing and on investor decision-making, although the channels of impact are mostly unclear. The report concludes with a call for wider industry collaboration to drive better data and information flows to guide financial and valuation modelling practices, strategic initiatives for public and private investment planning in local area resilience, and research to further build the evidence base for climate risk analysis and disclosure.