European real estate investors not yet pricing in climate risks

AEW research highlights how investors are not yet pricing climate risks into asset acquisitions, including in the €130 billion ($149 billion) a year European office investment market.

The research applies new tools to quantify two sources of climate risk for real estate investors: immediate physical disasters and transition risk associated with climate change mitigation.

Recent media coverage has focused on the physical risks of disruption, damage and destruction of buildings as a result of storms, river flooding, rising sea levels, heat and droughts. The increased insurance and climate change adaptation costs related to these could result in “stranded” assets, i.e., impossible to rent or sell in the short term. Despite appearing less urgent, the research highlights how the industry could be facing an even bigger issue through the transition risk associated with climate change mitigation as it incorporates market perception, regulatory and technological obsolesce