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European investors “not yet pricing in” real estate climate risk

Hurricane_ElenaReal estate assets are facing significant climate change-related risks which investors are not yet pricing in, according to research by AEW.

The study by the real estate specialist highlights that immediate physical disasters and transition risk associated with climate-change mitigation pose a threat to investors.

Properties are in danger of becoming stranded, according to the firm, meaning they would be rendered impossible to rent or sell in the short-term due to climate risks such as river flooding, rising sea levels, heat and droughts.

Thierry Laquitaine, head of socially responsible investment at the firm, said: “Climate risk is one of the most important risks that the industry will have to face, as the recent Davos forum stated.”

Current building certifications lack the focus investors will need to meet greenhouse gas emissions targets, the report stated.

According to Hans Vrensen, AEW managing director and head of research and strategy, non-compliance with future energy targets and greenhouse gas intensity might be an even bigger game changer over the long-term – “even if we expect delayed application and enforcement of these targets in local markets”.

“Since investors are not currently fully considering these risks in acquisitions, it could have interesting pricing implications in the future,” he said.

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