Financial backers of construction industry must anticipate risks from warmer planet and low-carbon regulations to protect asset value, say new guidelines
Flooding in Bangkok, Thailand in 2011. Rising sea levels and stronger storms could hit property values (Flickr/ Chrisgel Ryan Cruz)
By Alex Pashley
The perils that a changing climate poses to real estate should become “routine” thinking for investors, according to sustainable business groups and funds.
By 2070, coastal flooding as sea levels climb will hit large cities holding a tenth of global GDP in property, such as Miami, Mumbai and Shanghai.
And to meet international climate obligations, the building industry will have to radically shrink its energy use to cut carbon emissions.
That’s why a collective launched in London on Monday a framework for money managers to lower exposure to mounting risks this century.
Changing behaviour of the holders of real estate assets – valued globally at US$50 trillion – are central to implementing 2015’s UN climate change deal, it argues.
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“The property sector has a crucial role to play in reducing global emissions and increasing community resilience to climate impacts,” said Emma Herd, head of the Investor Group on Climate Change, which oversees AUD$1 trn (US$0.7bn) in Australia and New Zealand funds and insurers.
“Developing the investment tools to adapt existing property stock, along with ensuring new developments perform far better than current infrastructure, will help asset owners or managers secure investment returns and tackle climate change.”
The cost of doing nothing is more expensive than action, says the guide. Global losses recorded by re-insurance companies tripled on a decade earlier to US$150 billion a year between 2002-2012. While the precise contribution of global warming is hard to quantify, it is “impossible, now, to ignore,” it reads.
The building sector consumes 40% of world energy, accounting for 30% of global greenhouse gas emissions.
The framework gives guidelines to assess material risk and meet sustainability certifications. It wants investors to move from risk disclosure to reporting their performance in meeting these goals.