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The Global Risks Report 2024 presents the findings of the Global Risks Perception Survey (GRPS), which captures insights from nearly 1,500 global experts. The report analyses global risks through three time frames to support decision-makers in balancing current crises and longer-term priorities.

Prepared by the World Economic Forum

A report released in 2019 by Urban Land Institute and Heitman details the potential risks and implications of climate change on the real estate sector. Furthermore, the report makes a call to investors and investment managers to come into action and work towards better solutions in the future, for which the report presents a number of thinking paths.

Firstly, the report aims to give property investors a better understanding of climate risk and its real estate investment implications. As such, types of climate risk and their potential impact on real estate are explained.

Secondly, the research addresses the state of current practice for assessing and mitigating climate risk in real estate as well as highlighting best practices across the industry. From the examples it becomes clear that, nowadays, climate risk insurance is used as the main protection for asset value.

Finally, it is acknowledged that climate risk insurance alone is insufficient to mitigate the risk of devaluation in the future. As such, investors and investment managers need to find effective solutions. The report touches upon a number of potential solutions:

• Mapping physical risk for current portfolios and potential acquisitions;
• Incorporating climate risk into due diligence and other investment decision-making processes;
• Incorporating additional physical adaptation and mitigation measures for assets at risk;
• Exploring a variety of strategies to mitigate risk, including portfolio diversification and investing directly in the mitigation measures for specific assets; and,
• Engaging with policymakers on city-level resilience strategies and supporting the investment by cities in mitigating the risk of all assets under their jurisdiction.

40 Holborn Viaduct is a prime example of how using technology can help to enhance occupier experience, drive energy savings and optimise maintenance – all in line with our goal of developing a sustainable portfolio where the customer comes first. The building has already made a 12% reduction in energy use and is on track to achieve a 20% saving over a four year period. Health, wellbeing and productivity has also improved in the building with better regulation of temperature. Nuveen is now in the process of rolling out similar solutions to its offices and retail centres across Europe.

Prepared by Nuveen

A report released in May 2019 by a consortium of real estate investors and academic groups called the Carbon Risk Real Estate Monitor (CRREM) details the potential implications of global and European climate policy on long-term risk in the European commercial real estate sector. The report was funded by the European Commission.

The report of the CRREM project applies findings from natural science, economics, and finance to conclude that the current rate of emissions from the European commercial real estate sector is too high given the carbon budget available for 2050 defined by EU climate targets. In fact, the available carbon budget would be consumed by 2036, suggesting the average energy-intensity of commercial real estate is 45 percent higher than an emission pathway aligned with long-term EU climate targets.

The report has several implications for real estate investors:

• That the long-term is getting closer. Targets set for 2050 may seem far off but are only a few renovation cycles away. Major retrofits planned and completed today will in effect lock in energy- and carbon-intensities for a decade or more, given the life span of major equipment and management systems. The report implicitly states that it may therefore be prudent to set sustainability ambitions for major retrofits that are aligned with the sector carbon budget at the end of the renovation cycle.
• Tighter carbon budgets will likely accelerate innovation. As the development of environmental technologies accelerates, the energy performance gap between new buildings and newly retrofitted buildings on the one hand, and existing stock on the other hand, will grow. This may increase the risk of obsolescence for individual assets (“stranding risk”) resulting from declining tenant demand and higher operating and compliance costs.
• Carbon budgets are emerging as potentials tools for assessing and managing long-term climate risk associated with the broader transition to a low-carbon economy. Governments are using carbon budgets to define the extent of the climate problem, set policy ambitions, and define targets for different economic activities and sectors. We can assume that funds or assets that generate more carbon emissions than what their respective carbon budgets allow carry more long-term risk than those that do not. For real estate investors and managers, risk can materialise in the form of higher expected capital, operating and compliance costs, and asset depreciation.

Overall, the CRREM report highlights the need for new risk management tools to understand, assess, and monitor long-term risks in the real estate sector associated with the broader transition to a low-carbon economy. The report opens up the door to integrating commonly agreed, plausible, and scientifically-derived scenarios into the range of environmental KPIs used in the real estate industry to asses asset and fund performance. 

Prepared by Christopher Wright, chair of INREV’s ESG committee

New construction is a vital part of a balanced real estate strategy, but in many cases, there are equally compelling opportunities in improving the operations and management of existing assets. More than 75% of existing commercial buildings will continue to operate as is over the next 15 years. Thus, it is important tackling sustainability through improved operational efficiency rather than focusing solely in newly constructed properties. Many changes can be done at lower or no cost, with significant improvements to both operational efficiency and a property’s profitability, such as 2-degree Fahrenheit temperature adjustment or installing VFD pumps for water features. 

Furthermore, sustainability takes on even more important dimension when considering improved management and governance. By establishing a formalized sustainability program, property owners can then be better positioned to underwrite the skills and capabilities of the property managers needed to operate each property. Benchmarking properties will establish references which would make identification of sustainability success more apparent. Regular and open communication between all parties from asset manager to engineering team is also a key factor. 

Finally, it can be stated, that better operated buildings are more profitable. Next to lower operational costs there is evidence of garnering rental premiums, faster absorption as well es lower cap rates. Moreover, studies have shown that individuals working in green buildings are more comfortable and have fewer illness symptoms because of improved indoor air quality as well as natural lighting.

Prepared by Principal Real Estate Investors

This document is the final report for the DG Energy study ‘Preparation of common guidelines and recommendations to improve the consistency of the implementation of certain aspects of Article 8 and Annex VI of the Energy Efficiency Directive’.

Prepared by Ricardo Energy & Environment

One of the essential functions of financial markets is to price risk to support informed, efficient capital-allocation decisions and it is increasingly important to also understand the governance and risk management context in which financial results are achieved. One of the most significant, and perhaps most misunderstood, risks that organisations face today relates to climate change. While it is widely recognised that continued emission of greenhouse gases will cause further warming of the planet which could lead to damaging economic and social consequences, the exact timing and severity of physical effects are difficult to estimate. The large-scale and long-term nature of the problem makes it uniquely challenging, especially in the context of economic decision making.

To help identify the information needed by investors to appropriately assess and price climate related risks and opportunities, the Financial Stability Board recommends for consistent, comparable, reliable, clear and efficient climate related disclosures. The framework considers the impact of climate change on the following four elements: (1) governance, (2) strategy, (3) risk management and (4) metrics and targets. 

The Task Force on Climate-related Financial Disclosures (TCFD) was established to consider the financial stability risks associated with climate change. One of the most effective ways for addressing the financial stability risks that might emerge from climate change are effective disclosures to ensure that climate-related risks are effectively understood by financial markets. Effective disclosure of climate-related financial risks will help to avoid an abrupt repricing of risk and therefore will reduce risks to financial stability. The Task Force developed four widely adoptable recommendations on climate- related financial disclosures that are applicable to organisations across sectors and jurisdictions. Importantly, the Task Force’s recommendations apply to the financial sector, including banks, insurance companies, asset managers, and asset owners. Large asset owners and asset managers sit at the top of the investment chain and, therefore, have an important role to play in influencing the organisations in which they invest to provide better climate- related financial disclosures.

Prepared by the Task Force on Climate related Financial Disclosures

The ambition to create the most sustainable redeveloped shopping centre in the Netherlands has paid off.

The case study of Heuvel Eindhoven shows how the implementation of a sustainable strategy can turn an outdated asset into one of the top-rated shopping centres in the Netherlands with a double Outstanding score. 

This project has been approached first and foremost from the perspective of sustainability and provides details of technical and operational improvements. 

This resulted in a BREEAM-NL In-Use Outstanding score for the asset and an Outstanding score for the operations. The score of 90.82% is the highest score in the field of operations in the Netherlands, unique for a 25 year old shopping centre. 

Prepared by CBRE and CBRE Global Investors