How Can Surveyors Approach Climate Risk in Valuation?

Article by RICS Journal (2026) | Asset Management, Risk Mitigation, Valuation

Curator: Alexandra Faciu

Montréal, Canada

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Why we recommend it: This RICS Journal article addresses a question valuers are increasingly asked but have few established tools to answer: how far climate adaptation risk should influence valuation when transaction evidence does not yet reflect it. It sets out the professional dilemma this creates under the Red Book, where they must follow market evidence that may lag the scientific position, and proposes a practical route through: improved disclosure, sensitivity testing against alternative defence pathways, and closer attention to liquidity signals, rather than arbitrary discounts. Directly relevant to anyone advising on assets that depend on flood-defense infrastructure.

Key takeaways:

- This piece examines a fundamental blind spot in contemporary valuation practice: the weak integration of long‑term climate adaptation risk into property pricing across the Thames Estuary corridor. Conventional valuation of assets such as a modern office building at Canary Wharf relies on rental evidence, lease structures, covenant strength and yields derived from comparable Docklands transactions. Yet this approach largely treats major flood‑defense infrastructure, including the Thames Barrier and the adaptive pathways set out in the Thames Estuary 2100 Plan, as background context rather than a valuation variable. As the text notes, “the market treats this infrastructure as background context rather than a core valuation variable,” despite the fact that the long‑term resilience of these assets depends on future upgrades and policy delivery.

- The study analyzed thousands of residential transactions across the estuary, linking them to flood‑exposure data and TE2100 policy units. Using climate value‑at‑risk modelling, elastic net regression and machine‑learning techniques, it found a pronounced asymmetry in how environmental factors are priced. Energy‑efficiency indicators, including EPC‑related variables, are consistently capitalized into property values. Flood‑exposure indicators and adaptation‑zone variables, by contrast, show weak or insignificant relationships with pricing. This disconnect produces what the author terms the Canary Wharf paradox: some of Europe’s most valuable commercial assets depend on long‑term adaptation decisions, yet the market does not consistently reward properties located in defended zones. The credibility and durability of adaptation policy appear to be critical determinants of whether infrastructure protection is capitalized into value.

- The eastern Thames corridor illustrates this tension. Regeneration districts such as the Royal Docks, Greenwich Peninsula and Barking Riverside rely on tidal defenses designed for twentieth‑century conditions and expected to require major upgrades later this century. The empirical evidence suggests that current pricing reflects confidence in existing infrastructure rather than a fully articulated view of future defense pathways. Climate value‑at‑risk modelling underscores the financial significance of this gap: under moderate mid‑century scenarios, portfolio losses could reach 6 to 13 percent, rising to approximately 25 percent under more severe trajectories.

- This misalignment between scientific evidence and transaction‑led valuation practice raises a professional dilemma under the RICS Red Book Global Standards. Valuers must reflect market evidence, yet climate risk may be more visible in scientific modelling than in recent transactions. As climate‑related financial reporting becomes mainstream, chartered surveyors are increasingly required to interpret environmental exposure in valuation advice and due diligence.

- The article proposes several practical responses. Infrastructure‑dependency disclosure would clarify the assumptions underpinning current market confidence by treating major flood‑defense systems as valuation‑relevant factors. Defense‑pathway sensitivity analysis would allow valuers to test how asset values might behave under alternative adaptation trajectories. Attention to climate‑related liquidity risk would help identify early signals of market adjustment, which often manifest first through reduced buyer willingness rather than immediate price declines. Integrating climate‑risk evidence into valuation practice should not involve mechanistic discounts but rather strengthen assumptions governance, ensuring that rents, yields, insurance assumptions and terminal values remain credible under evolving climate and infrastructure conditions.

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