Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This guest article contributes to that conversation and does not necessarily reflect GRESB’s views or position, nor does it represent an endorsement. The GRESB Insights blog is designed to share diverse industry perspectives and foster informed discussion on key topics for real assets investments.
Climate risks are increasingly influencing the value and performance of commercial real estate. Risk screening has become a standard part of due diligence, capital planning, and asset management. But once risks are identified, owners and operators are often left asking:
- What is the financial impact of these climate hazards?
- Which systems in my building are most vulnerable?
- What adaptation measures make sense—and at what cost?
- How do I evaluate resiliency investments against potential returns?
Beyond screens & simple risk curves
Answering these questions requires more than identifying hazards. It demands translating risk into financial terms and offering clear guidance for resiliency planning.
Some approaches use fragility curves to estimate how hazards might affect a building. While useful for broad projections, these models often provide a single figure for overall building risk. Without insight into specific systems or components, results may misrepresent actual exposure.
Building system-level insights for better decisions
A building-systems-level approach that applies credible Climate Value at Risk (CVaR) assessments and detailed resiliency planning offers greater transparency into how risk is modeled and how it translates into financial outcomes. By integrating building science with financial metrics, this method supports informed decision-making. It enables:
- Quantified financial risk, including avoided losses and return on adaptation investments.
- Asset-specific insights into vulnerabilities across critical systems and equipment.
- Coverage of both acute and chronic climate hazards.
- Forward-looking models that reflect evolving climate scenarios.
- Actionable outputs for capital planning, insurance discussions, and regulatory compliance.
Through integrating resilience into capital planning, owners, operators, and managers can translate this into a competitive advantage.
Integrating climate resilience into capital planning
A real estate investment trust (REIT) was facing pressure from investors who wanted evidence that the REIT was equipped to manage physical climate risks across the high-value portfolio. A risk exposure screen was performed, and chronic heat was a major risk that stood out. A ClimateFirst Climate Value at Risk (CVaR) assessment quantified an additional USD 1 million in additional risk over the next five years. The Resiliency Plan module recommended that the REIT incorporate the incremental costs of a larger-capacity cooling system into the property’s long-term capital plan, as opposed to more costly near-term retrofits. This strategic retrofit underscores how informed decisions enable climate-resilient investments to be aligned with long-term investment strategies.
Climate-informed due diligence
An acquisitions team evaluating a USD 36M retail property in Cape Coral, Florida, recognized the climate risks associated with the region but also recognized the unique opportunity to invest in one of the United States’ fastest-growing areas. A ClimateFirst CVaR assessment was used to quantify over USD 6M in potential flood-related losses. With USD 4.5M concentrated in key systems, the Resiliency Plan module recommended targeted flood protection. As such, the acquisitions team integrated this cost into their capital plan and negotiated a price that reflected the true cost of ownership, turning climate risk into a strategic advantage. The data-driven approach made integrating climate risk into their due diligence process seamless, enabling confident and strategic decision-making.
Conclusion
Identifying climate risk is only the first step. Once hazards are identified, owners and operators need to fully understand how they will impact long-term value and what steps are needed to reduce risk and protect investments. By utilizing credible CVaR assessments and detailed resiliency plans, CRE teams can integrate climate resilience into due diligence, capital planning, insurance discussions, and overall resiliency planning.
This article was written by Mike Williams, President & Co-Founder of ClimateFirst. Learn more about ClimateFirst here.