Today, the real estate industry is increasingly having to address the causes of climate change, of which it is a main contributor, through an evolving range of requirements that include regulatory controls on CO2 emissions, environmental and sustainability strategies; and the ‘greening’ of property investment portfolios and developments.

However, to a large degree, a major consequence of climate change – extreme weather events – has yet to be seriously addressed by the industry. Many real estate investors and associated players are simply not aware that these events – the escalation in their occurrence and magnitude of which is all too evident – pose a rising, compelling and more immediate threat to property value, and are therefore overlooking the related risks within their investment decision-making.

In this report, the threat of extreme weather events and their impact on real estate and property value is analysed, and a new tool is introduced to show how expected losses can be calculated. In also giving an outlook on the future development of events, this paper highlights why weather risks should be considered as a key emerging driver to future investment strategies. It looks to stimulate debate by presenting new valuation-related methodologies and by making clear recommendations for market participants that range from the future-proofing of portfolios to the re-thinking of asset allocation.

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