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CLIMATE CHANGE: CHANGE THE INDUSTRY

How real estate investors can pre-empt risks to their portfolio

Climate change: change the industry – Climate change was long at the bottom of real estate investors’ priority list. In 2018, that all came to an end. Today, climate change and its risks are high on the executive agenda – as they should be.

Asked which top five risks would most probably materialize in 2019, Davos attendees all identified three of these five risks as climate-related issues. Four out of five attendees thought these issues would cause the most damage in the years to come. So how climate change will change the industry ?

A WIDE VARIETY OF RISKS AND HOW TO ADDRESS THEM

Climate change raises many challenges for society, presenting it with a wide variety of risks. Investors are required to provide more and more information on how they are addressing these risks, following ever stricter rules and regulations. With the growing risk of global climate change disasters, companies that have not yet taken necessary steps may be opening themselves up for unpleasant surprises.

Addressing climate change risks and improving asset sustainability are inextricably intertwined. To meet the Paris Climate Accord commitments, countries have set the goal of carbon neutral buildings by 2050, demanding vision and action from real estate investors and owners around the world.

DELAYING MEANS LOSING COMPETITIVE ADVANTAGE

The sense of urgency has intensified over the last couple of years. Governments continue to issue road maps and regulations to fight the dangers and consequences of climate change. The markets are also in transition, turning sustainable production and logistics into standard practice rather than exceptions. This all points to the fact that delaying necessary investments and adjustments to assets may put companies at a competitive disadvantage that will not be easy to overcome.

Climate change is seen as a challenge with a longer timeframe than investor holding periods. This, however, has only increased the pressure to act. Avoiding the inevitable may lead to liquidity concerns in the future. Future investors will take decisions based on calculations of possible climate risks, making poorly-adapted properties hard to sell.

HERE’S WHAT YOU NEED TO CONSIDER

Above all else: look to the future. Make climate risk a decisive factor in your investment decisions. Pre-empt climate risks to you portfolio by upholding an asset management strategy that takes into account this unparalleled challenge. In so doing, always consider:

  • Asset-level resilience to climate change-related threats
  • City-level resilience to climate change-related threats

Addressing climate change properly and adequately is the only way to preserve your portfolio from the intense transition the world will be facing for decades to come. Forward-looking investors should make this a crucial part of their investment approach.

Do you need help with your investment strategy? Get in touch via the form below!

Read more about it :

Kris Peetermans MRICS

Partner & Head of Valuation & Advisory Belgium & Luxembourg


kris.peetermans@cushwake.com

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