Physical Climate Risks and Underwriting Practices in Assets and Portfolios

Report by ULI (2024) | Underwriting, Financing, Capital Stack

Curator: Alexandra Faciu

Westmount, Canada

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Why we recommend it: This publication provides a solid foundation in underwriting climate and sustainability risks. Physical risk assessment is no longer hindered by data scarcity; most major firms now have easy access to extensive climate risk data from commercial providers. The current challenge lies in effectively interpreting and applying this data in investment decisions. While earlier efforts concentrated on evaluating analytics tools, the emphasis has now shifted to integrating insights into global investment strategies.

₋ As climate change intensifies, real estate investors are focusing more on estimating future capital expenditures needed to harden assets against physical risks. At the same time, they are refining the way they apply risk-adjusted discount and capitalization rates to reflect climate exposure in financial models. This shift highlights a growing demand for robust, fo…