A white paper series by CoreLogic® and BCG® investigating the need for collective efforts to construct a resilient future
Whether we are ready or not, climate change presents a formidable challenge to the property market. While the effects of climate change on real estate and the housing market are forecast to be numerous, this series by CoreLogic® and BCG® investigates how collective efforts from individuals, communities, businesses, and policymakers will help to navigate the evolving climate landscape and build a resilient future.
In reaction to the need for urgent climate response, the Intergovernmental Panel on Climate Change (IPCC) indicates adaptation and resilience as crucial strategies for coping with climate effects. The World Economic Forum similarly underscores the gravity of climate change adaptation failure, ranking it as the second-greatest risk for companies over the next decade. Regulatory entities like the Federal Housing Finance Agency (FHFA) are also responding to the need for risk reduction by proposing changes to mitigate financial and physical risks.
However, implementing such strategies requires private enterprises, financial institutions, and governmental bodies to collectively find a path forward. But there will challenges, such as limited funds, a lack of standardized assessments, unclear returns on investment, and delays in project licensing. Institutions and government-sponsored entities (GSEs) play a pivotal role in overcoming these challenges by educating homeowners, innovating financial products, fostering public-private partnerships, utilizing data and analytics, and advocating for policies.
In this co-authored white paper series, CoreLogic and BCG dive into the top 5 ways invested parties can prepare themselves for climate change and the resulting physical risk to property.
1. Find Empowerment Through Climate Knowledge
Climate change is a real threat to the property market. Staying informed about climate-related policies, local vulnerabilities, and government programs is the key to combatting uncertainty and understanding the risks climate change poses to communities, individual properties, and the insurance industry across the U.S.
2. Invest in Adaptation and Climate Resilience
Recognize the urgency of adapting to climate change. Explore solutions that enhance the climate change resilience of the properties in your portfolio. Be proactive in using data to identify exposure to climate risk, understand the impacts of exposure, and work with regulators to proactively shape regulatory approaches for the housing sector.
3. Advocate for Prioritizing Climate Action
The World Economic Forum identifies climate change adaptation failure as a top risk for companies. Those with investments in property portfolios should find opportunities to direct their actions on climate risk by engaging with other lenders and sharing climate risk management approaches to help support centralized standards. Advocating for an understanding of property exposure can help with informed decision-making when incorporating climate risk and mitigation into policies and decisioning models.
4. Collaborate for a Greener Future
GSEs, banks, and insurers possess valuable proprietary data and analytical capabilities that can support stakeholders in effectively planning and executing adaptation and resilience projects. Working closely with all stakeholders in the housing market ecosystem, identifying and understanding the risks they face now, and addressing these risks for the future will ensure that real estate markets remain stable and sustainable.
5. Engage With Financial Institutions
Financial institutions play a vital role in climate resilience. Engaging with these entities can help further the conversation around the exploration of “green” mortgage products and retrofitting programs that encourage sustainable practices. Plus, financial institutions are positioned to introduce products that support adaptation and resilience, such as retrofitting loans, to help customers make informed decisions that can enhance property resilience.
Dive deeper into the discussion on the opportunities that banks have for reducing their exposure to physical property risk in a three-part white paper on the subject.