Why L&I Needs a New Resilience Playbook

In this episode of The Pulse by GRESB, host Parag Cameron-Rastogi, Director of Real Asset Analytics at GRESB, speaks with Matt Clifford, Head of Sustainability & ESG, Asia Pacific at Cushman & Wakefield, about physical climate resilience in the global logistics and industrial sector. Together, they explore how climate hazards such as floods, heat stress, storms, and wildfires are reshaping risk profiles for assets worldwide. The conversation examines why logistics and industrial properties face unique exposure due to their location, scale, and operational criticality, and how investors and operators can integrate climate risk into capital planning and long-term value creation. Listen for insights on asset-level risk assessment, adaptation strategies, and the growing role of data in climate-informed investment decision-making.

Can’t listen? Read the full transcript below. Please note that edits have been made for readability.

Parag: Welcome to The Pulse by GRESB. Today, I’m your host, Parag Cameron-Rastogi, Director of Real Asset Analytics at GRESB. We’re going to be talking about physical climate resilience in the context of the global logistics and industrial sector. I’m very happy to be joined by Matt Clifford, all the way from Australia, where he is Head of Sustainability & ESG, Asia Pacific, at Cushman & Wakefield. Thank you for joining.

Matt: Thanks for hosting.

Parag: A lot of what you’re going to talk about today comes from this excellent report you’ve published around the global risk profile of logistics and industrial. Could you talk a little bit about what the report contains?

Matt: Absolutely.

So, the report is ‘Climate Risk Logistics and Industrial Global Outlook‘, and it pulls together 7,000 buildings around the world from 300 industrial sub-markets across 120 global cities—so it’s all of the biggest logistics and industrial investment locations. And what we’ve done is assess each and every one of those buildings through the lens of climate risk to understand: how does risk show up in a given location? How does it change around the world? What are the parameters to look at?

There are some general takeaways you can get around certain locations being particularly flood-prone or fire-prone, or heat-stressed. But really, the takeaway was that there’s no substitute for local data. Looking at an individual building, you might find quite different results from a similar building that’s literally on the other side of the road. So local data, when it comes to climate risk, is really critical.

Parag: So diving in, let’s talk about why we are talking about logistics and industrial today.

Matt: I think if there’s one asset class within real estate that’s shaped investment decisions and capital planning over the last several years, it’s logistics and industrial. You know, we’ve seen offices and retail and some other asset classes unfortunately go through a period of decline—that’ll come back at some point—but what’s filled that gap has been logistics and industrial. A lot of that’s driven by major trends like e-commerce, last-mile logistics, the real-time and near-time delivery lifestyle that we all live, sort of in the back of COVID. I think COVID was a huge influencer, but COVID has come and gone, and guess what—L&I is here to stay. I think in the last couple of years, we’ve seen an uptick, with around about 40% of investment dollars going into this asset sector alone.

Parag: Yeah. It’s interesting also that if you look at the GRESB submissions, we have always been dominated by office and retail, with residential usually coming in third, but logistics and industrial really climbed up in the last few years—and it now forms a substantial portion of assets submitted to GRESB.

Matt: It also probably bears mentioning that an individual industrial asset typically has a lower value by itself. So compared to an office building that might be several hundred million or a billion dollars in USD terms for a single asset, industrial facilities are often many, many times smaller than that. But there’s a lot of them. So when we look at the investment dollars that are shaping our world, and we’re seeing the scale of L&I growing, that’s a lot of assets—and there’s a lot of data that goes on with that. So for sure, GRESB should be paying attention. I’m sure you already are.

Parag: Absolutely. And I think what’s interesting is, since we wanted to talk today about physical climate risk—which is a growing subject in GRESB—it doesn’t have quite the quantitative treatment that energy and emissions do, but we know it’s a priority for us. We are talking about it, and we hosted a roundtable just last year at London Climate Action Week. So, physical climate risk in general—if you could tell me a little bit about how you advise clients, but specifically why that would be different for logistics and industrial?

Matt: Definitely. And just on that topic of quantification, I guess I’ve been in this industry long enough that I remember when carbon accounting was a new thing and people were still scratching their heads saying, “Hey, I’m not quite sure what that means,” or “I’m not really sure how to quantify other parameters of environmental performance.”

We’re still in its infancy around climate risk, but in four or five years’ time, I believe we’ll all have a far greater ability to quantify physical climate risks, as well as other factors. Just in terms of what it is, it might be a kind of tricky question to say: how could climate risk impact physical real estate? What are the things that are likely to occur? It could be things like storms, floods, fires, rain impacts—these are the kind of natural forces that unfortunately are getting more prevalent and sometimes more powerful around the world because of climate change, and they have a real impact.

We’ve seen many, many examples in recent years where cities have flooded, buildings have burned down, or have been at risk of being hit by some of those impacts. So that’s the first parameter: to understand what are those risks, how do they show up in real estate now, and how are they likely to show up over time? And the great thing is that a lot of this is data-driven. So you can actually model these impacts down to a very granular view on an individual building, an individual part of a city, an individual plot of land—leaning on the best climate science that’s available in the world—and then relate that back to the physical form, real estate form, or built form to say: how are those impacts likely to be felt?

How is that different when it comes to logistics and industrial? First part is to say that those impacts can happen in any asset class. What we’ve often found is logistics and industrial facilities tend to be built in slightly less favorable locations. It might be along the side of a motorway, or a river, or a canal. It could be next to train lines, next to a port. And that’s usually due to pricing and availability of land. Industrial tends to be built on the outskirts of cities, not in the downtown area. So what that means is that’s land that might be more exposed in some cases.

Logistics and industrial also covers a much broader area. I’m based here in Sydney, as you mentioned—the downtown area of Sydney is 20 blocks in any direction, give or take, versus the logistics and industrial catchment is probably 50 or 100 kilometers in any direction. So we’re talking about much, much larger areas for logistics and industrial, and it means that that data-driven view is so important.

Parag: That’s right. I think it’s important to remember also that when we site these warehouses and logistics and industrial facilities sort of out of sight, that’s a deliberate choice, right? We don’t necessarily want industrial facilities in our backyard. That doesn’t make them any less critical to our functioning as an economy, as a society.

Matt: Yeah, that’s right. Logistics and industrial is a useful umbrella term, but you could break that down further. It could be anything from a warehouse filled with boxes that’s somebody’s Amazon delivery, to cold storage for food, last-mile delivery, high-tech manufacturing or robotics facilities, even data centers.

These are critical assets—critical functions go on in them. So the ability to operate safely and effectively, and for people to go to work and come home safely, not be impacted by these physical risks, that’s really important. And the great thing is that this is information you can model. You can get quite granular views, and there’s a lot that can be done—often cost-effectively—to improve resiliency and adaptation. Not just to be aware of risk, but to take meaningful action to improve the risk profile.

Parag: I’m glad you brought up resiliency because let’s talk about the actual hazards and how they affect logistics. We sometimes think about buildings as homes and offices, and they have certain resilience features almost by design. Like work from home—your office goes down, you work from home. But if your house floods, there’s no resilience backup. Could you talk about the hazards these assets face and how logistics and industrial is particularly impacted?

Matt: During COVID, many office workers discovered they could work from home effectively. But that’s not possible for all sectors—doctors, nurses, manufacturing workers, trucking operations, food storage. They have to be there in person.

If a big storm cuts off road access, that facility—and that business—will suffer. On the other hand, if you’ve planned and protected yourself against those impacts, you might be the business that continues to operate while others cannot. So there’s a real risk in logistics and industrial. If you’re not prepared, you might suffer more extreme downturns or operational disruption. The UK is a good example. It’s traditionally cold and rainy. But it’s getting hotter at certain times of year, and facilities might struggle if equipment wasn’t designed for higher temperatures. Were those buildings built with insulation in mind? With adequate cooling? Has equipment been specified to deal with changing climate conditions? Heat stress may not have historically seemed relevant in certain regions—but going forward, it may be.

Parag: That’s right. One of my professional activities is publishing design temperatures around the world with ASHRAE—in Australia, it’s AIRAH. Something called “climate zones” gives us an indicator of general climate conditions. What we’ve noticed is that climate zones are shifting—not only due to urbanization, but because warmer zones are expanding away from the equator into temperate regions.

Buildings designed for heating-dominated climates may suddenly face cooling demands. That’s the irony. In Australia, you expect heat, so you plan for it. In Britain, you don’t expect heat, so you don’t plan for it—and systems fail at a much lower threshold.

Matt: Exactly. There’s no substitute for local data. Take Singapore. It’s hot and wet year-round. Climate modeling suggests it will continue to be hot and wet. So design tweaks may be needed, but probably not fundamental changes. What surprises clients is when conditions change in unexpected ways. A hot climate becoming much wetter. Storms intensifying or shifting. Heat waves lasting longer. Even deeper winters in parts of the US with significant snowstorms. That means capital planning and operational planning must evolve accordingly.

Parag: Climate is something we experience—you don’t change it. But when a weather event becomes a disaster, the economy is involved. So beyond good climate data, we need to understand how hazards interact with specific assets. What should owners and operators think about when assessing hazards on a per-asset basis? And how should they approach design decisions? Should they allow some failure tolerance, or design against every possible risk?

Matt: First, risk is never zero. That’s true for climate risk and for any investment risk. Investing is about balancing risk and return. Climate risk shouldn’t be treated fundamentally differently from other risks. Does it fit your risk profile? Your strategy? Your holding period? If you’re buying an asset in Sydney, flood and rainfall risk might be key considerations. Technology can now model those exposures quickly. Then the question becomes: what’s your investment horizon? A core fund holding long term may think differently from a value-add strategy with a three-to-five-year hold. If risks escalate significantly 100 years from now, that’s less relevant for short-hold investors. Often, it comes down to practical decisions. Does the roof need earlier replacement? Are drainage systems adequate? If a flood occurs, where does the water go?

There’s also risk transfer. In industrial leases, risk often shifts to tenants. Landlords may structure leases to protect themselves. In most cases—99 out of 100—clients proceed with deals. They understand the risk better, price it in, and incorporate it into capital planning. For institutional investors, climate risk becomes one more decision-making factor.

Parag: There’s sometimes a perception that physical climate risk is something entirely new. But climate has always been there. Risk has always existed. What’s new is the data to inform better decisions. To close—logistics and industrial may be out of sight, but it’s the backbone of global commerce. What role does resilience play in investment decision-making for logistics and industrial? Will it create winners and losers?

Matt: You can put your head in the sand—or you can use the data that’s available to make better decisions. Where it gets interesting is when people interpret the data creatively. Planning regimes often look backward—designing based on the last 20 or 30 years instead of the next 20 or 30. Forward-thinking investors might over-insulate in heat-prone areas, install firefighting systems in wildfire zones, improve drainage in flood-prone areas. If done early, these upgrades may not be major cost factors. At first, people might question whether they’re necessary. Ten years from now, those decisions may look very smart. That’s where resilience becomes a long-term value creation strategy.

Parag: And with that, that’s about all the time we have for today’s episode of The Pulse. Thank you, Matt.

Matt: Thank you very much for having me.