Climate Risk: Logistics & Industrial Global Outlook

RISK CLIMATE LOGISTICS& INDUSTRIAL

GLOBALOUTLOOK

REGULATORY COMPLIANCE

Case Study – EU Taxonomy Alignment

Ahead of the sale of a London asset, our client required a climate risk assessment and EU Taxonomy alignment to the ‘substantial contribution’ criteria of climate change mitigation. The client also wanted to understand the asset’s economic position with respect to climate change before going to market and to meet legislative requirements for EU purchasers. The assessment adopted a multi-faceted methodology including physical climate risk modelling, onsite vulnerability assessment, and stranding risk assessment (CRREM analysis and economic impact modelling). The results of the assessment determined: • Asset was confirmed to meet the EU Taxonomy’s substantial contribution criteria, strengthening its appeal to EU-based investors. • Asset stranding risk was identified, enabling prioritization of investment in mitigation and resilience measures • Resilience interventions were recommended, focusing on reducing vulnerability to both acute risks (e.g., flooding) and chronic risks (e.g., drought, heat stress). • The financial implications of climate risk were quantified, providing insight into future asset value and revenue implications under worsening climate conditions.

Ultimately, compliance is no longer a passive obligation but a strategic necessity. By proactively addressing climate risk through regulatory alignment, investors in logistics and industrial assets can enhance asset value, future-proof portfolios, and demonstrate leadership in a rapidly transforming market.

Regulation has continued to evolve and strengthen over recent years in relation to the identification, assessment, and management of climate related risks. The European Union has been a frontrunner in this space through the implementation of the EU Green Deal and supporting legislative frameworks such as the EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and the Corporate Sustainability Reporting Directive (CSRD). These frameworks aim to align financial and corporate reporting with sustainability goals, driving increased transparency and accountability. For investors in logistics and industrial real estate assets, compliance with these regulations requires not only an understanding of current and future climate risks, but also a structured and documented approach to assessing these risks at the asset and portfolio level.

Specifically, logistics and industrial properties—often exposed to location-based climate hazards such as flooding, extreme heat, and physical supply chain disruptions—must be subject to climate risk assessments that incorporate both physical and transition risk factors. This includes evaluating building resilience, energy efficiency, and alignment with net-zero pathways. Investors and asset managers are increasingly required to disclose how their assets align with EU Taxonomy criteria for environmental sustainability, justify classifications under SFDR categories, and provide detailed, auditable disclosures under CSRD. Failure to comply can impact access to green finance, reduce investor confidence, and pose reputational and financial risks.

CLIMATE RISK: LOGISTICS & INDUSTRIAL GLOBAL OUTLOOK 25

CUSHMAN & WAKEFIELD