ISA Briefing: Climate risk in practice: Regional, market and asset-level views

Recognition has grown substantially in recent years that climate
risk can shape real estate investment outcomes. This owes to an
increasing frequency and severity of loss events,1 surging
insurance premiums,2 improving data availability and a
mounting reporting burden driven by regulations.3 Investors
have had to move quickly from acquiring basic climate risk
literacy, to sourcing good quality climate risk data, to most
recently, leveraging that data into improved investment
decisions. There is a clear and rising likelihood that investors
on the lagging edge of this process may underperform.


At LaSalle, we have sought to share insights from our own climate
risk journey, combining that with broader analysis of our
industry’s climate risk challenges and opportunities. In 2022, we
partnered with the Urban Land Institute (ULI) on a
report, How to choose, use, and better understand
climate-risk analytics, which addressed the difficulties in
selecting and evaluating climate data from an ever-changing and
increasingly crowded—and sometimes contradictory—data provider
landscape. In April, we released a new report with
ULI, Physical Climate Risks and
Underwriting Practices in Assets in
Portfolios, which looks at how
investors are taking these data and seeking to make
better-informed buying, selling and portfolio construction
decisions based on them. 


While the joint ULI report takes an industry-wide view,
this ISA Briefing looks at the topic through the lens
of LaSalle’s own investment process. We present three case
studies of our evaluation of climate risk on a regional, market
and asset-level scale. These examples – one each from each of our
global investment regions – illuminate how we are taking account
of climate risk and lay out our views on issues investors should
be thinking about.





Contributors:


Brian Klinksiek


Global Head of Research and Strategy


Tobias Lindqvist


Strategist, Climate and Carbon Lead


Simone Caschili


Senior Analytics Strategist


Amanda Chiang


Senior Research Analyst