Climate risks

In the context of climate change, risks can arise from both the potential impacts of climate change and human responses to climate change. A distinction is made between two categories of climate risks:

– Transition risks arise from human responses and efforts to cope with climate change, such as: new regulations, changing investor and tenant preferences or new technological developments. In the case of real estate, there is a risk that a building will become a so-called stranded assets, i.e. that there will be a loss of value – e.g. because the building does not meet future standards and regulations and/or because a CO₂ tax will result in additional costs in the future. For the assessment of transition risks, the two metrics ITR and CVaR (Carbon Value at Risk) are often used for real estate.

– Physical risks arise from extreme weather events or changing climatic conditions. Physical risks for real estate are e.g. floods, which can lead to major property damage, or heat waves, which lead to overheating in buildings and thus health risks.



Back to know-how