Real Estate Sector Grapples with Physical Climate Risk Assessment Challenges
The finance industry faces significant challenges in assessing physical climate risks for real estate assets, which are increasingly exposed to severe storms and floods. According to the European Environment Agency, climate extremes caused €822 billion in losses between 1980 and 2024, with a quarter occurring recently. Beyond direct physical damage, banks and asset managers must also account for indirect losses from business disruptions affecting infrastructure and supply chains. Although risk assessment tools have advanced, financial professionals remain wary of inconsistent results across different providers. To address these issues, Responsible Investor and Climate X hosted a roundtable with experts from firms like DWS, PIMCO, and Athora. Panelists highlighted that while physical risk is now seen as a material investment factor, discrepancies in third-party models create uncertainty. Experts emphasized the need for both top-down systemic views and granular bottom-up data to accurately price risks, determine operational expenditure impacts, and ensure asset resilience. The discussion underscored the difficulty of integrating varied data sources into uniform decision-making processes globally, particularly outside regions with standardized government data like the UK.
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Real Estate Sector Grapples with Physical Climate Risk Assessment Challenges
The finance industry faces significant challenges in assessing physical climate risks for real estate assets, which are increasingly exposed to severe storms and floods. According to the European Environment Agency, climate extremes caused €822 billion in losses between 1980 and 2024, with a quarter occurring recently. Beyond direct physical damage, banks and asset managers must also account for indirect losses from business disruptions affecting infrastructure and supply chains. Although risk assessment tools have advanced, financial professionals remain wary of inconsistent results across different providers. To address these issues, Responsible Investor and Climate X hosted a roundtable with experts from firms like DWS, PIMCO, and Athora. Panelists highlighted that while physical risk is now seen as a material investment factor, discrepancies in third-party models create uncertainty. Experts emphasized the need for both top-down systemic views and granular bottom-up data to accurately price risks, determine operational expenditure impacts, and ensure asset resilience. The discussion underscored the difficulty of integrating varied data sources into uniform decision-making processes globally, particularly outside regions with standardized government data like the UK.
Responsible Investor