The past 10 years have been characterised by a trend of increased fires, hurricanes, floods and extreme weather, which has culminated in it being the hottest recorded decade in human history. As a consequence, we have seen significant physical damage to property and infrastructure, loss of power and major disruption. More pressing, perhaps, is that this is only set to continue, at least for the time being until we see the results of serious action against climate change.

With this in mind, how do we create resilient real estate and mitigate climate risk?

Having resilient property refers to the ability of four key infrastructure systems to function and meet users’ needs during and after a natural hazard. This relates to power, water and sanitation, transport, and telecommunications.

In the first instance, understanding the current and projected risks attributed to climate change has a huge part to play in business resilience decision-making. This is something the Taskforce on Climate-Related Financial Disclosure (TCFD) has provided a framework for. Through the TCFD, large organisations are required to assess the risk resulting from climate change and integrate plans to deal with these as part of their business strategies.

While it is already standard for all property purchases to include a survey checking for flooding and subsidence, this will now go further by exploring how the risk associated with physical hazards (such as an increase in temperature, fire risk and storms) might change under different climate scenarios. Findings will include current and likely future risks along with recommendations for specific technical assessments, or operational measures. This could include investing in flood and coastal defences, mitigating against heat gain in buildings, and reviewing emergency procedures.

Portfolio owners should also make sure that they understand the transitional risks, which allude to possible future scenarios. An assessment of transitional risks will look at the speed of reaction by the portfolio to adapt to climate change including policy, new regulation, technology and market drivers.

When it comes to new developments, it is crucial that we futureproof our buildings, ensuring that designs are adaptable to potential future climate-related risks. This might be by increasing insulation across roofs and walls, or even changing how buildings are positioned to capture winds and channel cooling breezes indoors, where possible leveraging nature-based solutions.

The reality is that the price of adaptation now makes business sense, despite increasing construction costs. Dr Surminki from the Grantham Research Institute at LSE put it perfectly: ‘every dollar invested today will be saving an estimated five dollars of loss and damage in the future.' Further to this, the World Bank estimates that investing in more resilient infrastructure could save humanity a staggering $4.2 trillion from climate-related change damages moving forward.

Ultimately, resilience is key if real estate is to remain standing whatever the weather.

Further information

Contact Elena Lutterkort or Andrea Reyes 

Savills Sustainability