Physical climate hazards almost double the climate risk premium for prime European real estate when combined with energy transition costs, according to new research from AEW.
Calculations by the manager forecast the European climate-related annual risk premium to be 45 basis points between 2026 and 2030, when accounting for both the “greening” of assets and extreme weather risks such as floods, wildfires and wind stress, compared with 26 basis points for transition risk alone.
After studying a sample of 964 properties within the four main property sectors across 196 European market segments in 20 countries, AEW found Norway to be the most affected country in terms of physical hazards, with a projected risk premium of 41 basis points. When combining both transition and physical climate-related risks, central European and French markets are estimated to have the highest risk premium due to the amount of remote logistics assets. The combined transition and physical cl
