How to Manage Climate Risk

Get your organization on board.

Irrespective of data access and maturity, if a risk is identified and acting on it requires multiple stakeholders to be engaged, you need organizational endorsement to motivate everyone to follow through. That chain of accountability should extend across the real estate organization from investment decision-makers to teams responsible for leasing transactions or day-to-day asset management. After all, as stakeholders increasingly expect or demand climate risk reporting and action, an enterprise-wide framework or approach is no longer just ‘nice to have’.

As you translate physical risk to financial risk, much attention is given to the impact on asset valuations. While that can be significant, it’s worth remembering potential changes to operations and maintenance expenses. Once you’ve assessed and analyzed physical climate risks through sustainability teams or consultants, it’s about ensuring those insights aren’t siloed from other parts of your organization. For example, increased precipitation and flooding risk may require relocating your plant and equipment to higher ground. This may prompt you to revisit your asset lifecycle planning and replacement schedule.

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