Disasters are increasing in frequency and severity over time, in Europe and around the globe.

Between 1980 and 2022, weather- and climate-related extremes caused economic losses of assets estimated at EUR 650 billion in the EU Member States, of which EUR 59.4 billion occurred in 2021 and EUR 52.3 billion occurred in 2022.​ A linear trendline through the 30-year averages represents a 41% increase over the 2009 to 2022 period, or 2.5% per year. [1]

As extreme weather events increase in frequency and severity, ULI Europe members from across the real estate value chain are exploring ways to manage physical climate risk to protect real estate value.

While C Change has largely focused on Transition Risk, the incorporation of Physical Climate Risk at the 2024 C Change Summit in Barcelona mirrors movement in the wider industry as transition risk management is increasingly paired with physical climate risk management in initiatives and regulations such as the UK Better Buildings Partnership’s Climate Commitment, the World Business Council for Sustainable Development’s Initiative on a Market Transformation Action Agenda and the EU Taxonomy to provide real estate with a holistic climate risk management strategy.

ULI has worked on resilience and physical climate risk for over a decade and launched the ULI-LaSalle publication Physical Climate Risk and Underwriting Practices in Assets and Portfolios just a few months before the C Change Summit. To kick off the C Change Summit workshop on climate resilience, attendees explored the ULI-LaSalle findings and dove into a framework for evaluating physical climate risk, identifying asset and market implications, and determining a risk adjusted return.

In a robust discussion with attendees, Max Walmsley, Senior Portfolio Manager at LaSalle Investment Management shared his experience of how LaSalle uses multiple sources of climate data and local insights to inform investment decisions and effectively manage physical climate risk.

During the workshop, attendees were polled and shared that currently 43 percent had a formal process they used to manage physical climate risk to protect real estate value, and 37 percent had an informal process that was planned to be formalised soon, with 7 percent having no plans to incorporate physical climate risk.

Building on Max’s insights, attendees shared their own experiences and brainstormed physical climate risk intervention points across the building lifecycle – from planning, design and development to acquisition, operations, and disposition. Attendees highlighted the challenge of obtaining reliable information for market scale physical climate risk analysis, the limited time available to conduct thorough asset-level physical climate risk analysis during due diligence, and the difficulty in aligning the timeframe of valuation today versus 20+ years into the future. The nuances of capturing cascading knock-on effects as well as the question of legal liability were also raised as concerns.

Get involved!

The conversations from this workshop will inform future ULI work on physical climate risk and resilience.

If you are a real estate practitioner that can contribute to this topic, then we would like to hear from you. Please contact Sophie Chick: [email protected]

C Change is a ULI-led programme to mobilise the European real estate industry to decarbonise. We’re a movement empowering everyone to work together for a sustainable future. We connect the brightest minds from across the value chain. We challenge barriers, share expertise, and champion innovation to move swiftly to accelerate solutions that will transform our industry and protect our planet. C Change means real change. C Change was formed in late 2021 by a group of leading real estate players that was united in its aim to focus on collaboration to ensure companies large and small have access to practical solutions and education on decarbonisation.

Visit: C Change: https://europe.uli.org/programmes/c-change/

C Change Summit: https://cchangesummit.uli.org/

[1] https://www.eea.europa.eu/en/analysis/indicators/economic-losses-from-climate-related