WASHINGTON (September 15, 2022) — A new report from the Urban Land Institute (ULI) and LaSalle Investment Management (LaSalle), a leading real estate investment management firm, outlines steps that real estate practitioners can take to better manage climate risk in their portfolios and suggests ways in which climate risk providers can better serve the real estate industry.

Based on the insights of real estate managers and climate data providers across the globe, How to Choose, Use, and Better Understand Climate-Risk Analytics comes as real estate investors are recognizing the need to incorporate the physical risks associated with climate change – including wildfires, hurricanes, and excessive heat – into their business models. Accordingly, having reliable data and analytics tools to assist in this process is becoming an increasingly important consideration.

“Over the past few years, climate analytics tools have transformed how investors can assess, price, and mitigate climate risk,” said Billy Grayson, Executive Vice President for Centers and Initiatives at ULI. “As with all new tools, it will take some time for real estate developers and investors to identify the best ways to apply these tools to real estate decision-making. Learning from the successes and challenges of early adopters will help the real estate community as a whole, and we hope this report can serve as a roadmap for those looking to better leverage these tools to manage climate risk in their assets and portfolios.”

“Dealing with climate risk is a collective effort – we all benefit from consistency and transparency,” said LaSalle’s Americas Head of Sustainability Elena Alschuler. “Alignment on key terms and methodologies is critical to the industry’s effort to assess and address climate risk, which should ultimately benefit investors through improved returns.”

How to Choose, Use, and Better Understand Climate-Risk Analytics provides a climate assessment roadmap for practitioners seeking to optimize their risk-mitigation practices. The roadmap will help the real estate industry:

• Assess key areas of variation among climate risk providers in terms of the strength of their approach and ability to meet strategic objectives, such as business needs and regulatory compliance.
• Interpret physical climate risk results including value-at-risk, or the potential financial impact of a property experiencing climate-related damage.
• Integrate risk-assessment strategy with acquisition, development, financial reporting, and asset and portfolio management teams.

Additionally, the report provides four key takeaways on the state of climate risk assessment in real estate:

• Current risk metrics are inconsistent. Often, different climate risk analytics produce widely disparate risk scores for the same property, sometimes by orders of magnitude.
• Bridging the science-business gap. Translating the complexity of climate science into applied real estate industry practices is still in its early stages, with firms trying different approaches to integrating climate risk across investment, asset management, and disposition strategies.
• Rapid acceleration of market value impacts. While the impact of climate risk on current asset prices is not yet apparent in the market, institutional real estate managers are starting to incorporate it, therefore many believe the impacts will become increasingly visible.
• Transparency is key. Improved understanding and increased public discourse on physical risk in pricing will push the industry closer to uniform practice and standards.

“Investors today face numerous challenges factoring climate risk into their portfolios,” said Lindsay Brugger, Vice President of Resilience at ULI. “The industry lacks clear guidance around how climate risk data providers should be selected and how to integrate that information into business strategy. This report provides a series of guidelines so real estate practitioners can simultaneously mitigate the effects of climate change while remaining competitive in a rapidly evolving marketplace.”

“We strongly believe that the impacts of climate risk are material to our investment performance, and need to be proactively taken into consideration to ensure our investments are prepared for future risks, legislation and client demand,” said Brian Klinksiek, LaSalle Head of European Research & Global Portfolio Strategies. “While there is still uncertainty in the market around data transparency, which tools to use and what policy impacts might be, one thing remains clear: now is the time to be having these conversations and taking action.”

The full How to Choose, Use, and Better Understand Climate-Risk Analytics report is available on ULI’s Knowledge Finder platform.

For more information, email [email protected].

NOTE TO REPORTERS AND EDITORS: Members of the media and public are invited to the following webinars:

• For audiences in Europe and Asia-Pacific: Tuesday, September 20 from 9:00 am to 10:00 am UK / 4:00 pm to 5:00 pm HK. Click here to join.
• For audiences in Europe and North America: Friday, September 23 from 1:00 pm to 2:00 pm ET / 6:00 pm to 7:00 pm UK. Click here to join.

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 About the Urban Land Institute

The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the institute has more than 45,000 members worldwide representing all aspects of land use and development disciplines. For more information on ULI, please visit uli.org, or follow us on Twitter, Facebook, LinkedIn, and Instagram.

About LaSalle Investment Management

LaSalle Investment Management is one of the world’s leading real estate investment managers. On a global basis, LaSalle manages approximately $80 billion of assets in private and public real estate property and debt investments as of Q1 2022. LaSalle’s diverse client base includes public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including separate accounts, open- and closed-end funds, public securities and entity-level investments. For more information, please visit www.lasalle.com, and LinkedIn.