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Framework launched for climate risk assessment

11th April 2024

The Urban Land Institute and LaSalle Investment Management have launched a new framework to help the real estate industry act on climate risk assessment and disclosure.

The joint report Physical Climate Risks and Underwriting Practices in Assets and Portfolios, is the second in a series by ULI and LaSalle. Building on the first report, which outlined how to source and interpret reliable climate risk data, the second provides a market overview, adaptable framework, and recommendations based on emerging best practices for incorporating physical climate risk in the underwriting process.

“Physical climate risk data collection and disclosure is the first step the real estate industry can take to further invest in and build resilient infrastructure,” said Lindsay Brugger, head of urban resilience at ULI. “Data drives action, and doing nothing incurs deeper costs — from higher insurance premiums to asset repair or replacement.” 

“This report helps provide guidance that investment managers can follow to factor the climate risk data they have available to them and improve outcomes at the asset and portfolio level,” said Julie Manning, global head of climate and carbon at LaSalle. 

The framework is broken down into three steps for decision making based on individual asset risks, local market risks, and ongoing risk mitigation efforts:

  • Evaluate exposure to physical climate risk and the financial implications
  • Identify hazard mitigation strategies and estimate associated costs
  • Determine risk-adjusted return and whether or not that return meets objectives

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