Beating the odds
As real estate contributes nearly 40 percent of greenhouse gas (GHG) emissions globally, a deeper understanding with investors, managers, tenants and policy makers of climate risk for the commercial real estate sector is starting to develop.
Climate risks include both direct physical and indirect transitional risks. New tools are emerging to better manage climate risks. Among others, Munich Re’s new assessment addresses the direct physical impact of sea level rise and other climate-related hazards.
Also, the new Carbon Risk Real Estate Monitor (CRREM) measures regulatory transition risk. Non-compliance with EU determined future energy and GHG reduction targets is unlikely to trigger assets to become “stranded” in the short term, in other words being impossible to sell or requiring costly capital expenditure.
But, when GHG targets are not met at specified future dates, EU and local governments are likely to become stricter in enforcing their targets and pol