DURHAM – According to a new report co-authored by The Climate Service, real estate investments are especially prone to climate risk, as the impact of climate-related damage from rising seas and storms along coastlines is projected to cost cities as much as $1 trillion each year by the year 2050.
“As climate risk assessment and reporting become mandatory and mainstream, the ability to understand and assess climate risk accurately and comprehensively will be critical and will confer a significant strategic advantage,” the report from The Climate Service and partner Nuveen Real Estate reads.
One of the findings: protecting green spaces throughout urban municipalities can significantly reduce the risk of extreme heat.
There’s physical risk, find the authors of the report, or the risks that directly impact real estate assets and markets. There are also transition risks, notably shifts in policy or perception pertaining to climate that could affect investment decisions or valuations of real estate assets.
Measuring risk due to climate is important for real estate investors, the authors note, because the United Nations Framework Convention on Climate Change (UNFCCC) estimates that by 2070, $35 trillion in real estate assets could be at risk.
The Climate Service in Durham adds two scientists, develops climate risk assessment platform
The authors describe the potential impact on rental markets and multifamily commercial real estate, positing that based on prior research, climate-related gentrification may change the composition of many regions across the United States and the globe.
The theory is: as climate-related changes, whether that be changing sea levels or increased severe storms or otherwise, continue or accelerate, those changes are likely to trigger migration within low-lying regions to higher-elevation regions, which researchers refer to as climate-related gentrification.
A report from the Joint Center for Housing Studies of Harvard University estimated that nearly 11 million U.S. renters, or one in every four renter households, spent more than 50% of their income on housing in 2018.
Factoring climate risk, as it pertains to businesses, buildings, and real estate assets, could change how economic development work is conducted for municipalities and state governments, as well as the way that businesses approach their options, and think and plan for growth and expansion along coastal cities and regions.
Business leaders are taking note of climate risk, noted James McMahon, CEO of The Climate Service, in a recent interview with WRAL TechWire.
“From my point of view, the field is growing enormously, with regard to both demand and supply,” said McMahon.
The company raised a $3.8 million fundraising round earlier this year.
