2024 Summer Issue of Urban Land - 21

How Real Estate
Professionals Are
Using Climate
Risk Data to Make
Business Decisions
The implications of climate
change are becoming hard
to ignore. The frequency
of natural disasters has
increased significantly in
recent years, with the United
States experiencing an average
cost of $18 billion-plus
from climate disasters per
year. As these kinds of
events have grown more
common, calculating climate
risk has become a hugely
important task for commercial
property owners.
The topic was the main
theme during a panel discussion
at the April 2024 Resilience
Summit in New York
City. Panelists from Tishman
Speyer, LaSalle Investment
Management, RCLCO, and
Evora Global delved the
challenges that real estate
professionals are facing right
now in understanding climate
risk analytics and how
best to use the data when
making decisions around
their real estate assets.
At the moment, the commercial
real estate industry
is still grappling with the
best ways to incorporate
climate risk data into its various
business strategies. " It's
kind of like an experiment.
A lot of the industry is still
figuring this out, and there's
a lot of learning to do. "
said Spenser Robinson, the
entrepreneurship chairperson
and director of real estate at
Central Michigan University
and moderator of the panel
" Integrating Climate Risk
Data into Real Estate Investment
Decision-Making. " No
established industry norm
exists yet for how companies
are weighing climate
risks, and firms are using different
maps and
various worst-case scenarios
of global temperature rise.
At LaSalle Investment
Management-a company
that works globally in office,
retail, residential, and industrial
asset classes-every
asset is evaluated before
it goes to the investment
committee, said Julie Manning,
global head of climate
and carbon for the firm. She
said she tells professionals
that no matter what kind of
assessment metric is being
applied, the data is not precise,
but that as long as a
good data provider is used,
it should be pointing companies
in the right direction.
" It usually gives you
an idea of where to look
deeper, " Manning said. " We
are using data almost as
a flagging system. " For
instance, if a secondary
source supports LaSalle's
own estimation that a risk is
high, Manning encourages
her teams to investigate
further. " We need a human
element [in] the evaluation
of that data, " she said. " The
[overall] data is a great starting
point but won't give you
all the answers you need in
[the] underwriting data. "
At New York-based Tishman
Speyer, a real estate
investment and development
firm, company leaders
measure climate risk a little
differently on its value-add
properties than they do on
its core properties, and they
try to take data beyond
the basics, said Jonathan
Flaherty, managing director,
global head of sustainability
and building technologies
at Tishman Speyer. " As you
talk to portfolio managers
and asset managers, it's
easy to get lost in alphabet
soup [amid] the complexity
of sustainability, " Flaherty
said. " How do you translate
the science of sustainability
into something relevant and
actionable to managers and
the investment community? "
Investors are undertaking
their own studies and
reports, and as they seek
to understand the risk landscape,
they recognize how
much of a fact-finding mission
they face these days
in determining the ways
that company leaders are
thinking about climate risk
and assessing that risk, said
Cyndi Thomas, managing
director at the consulting
firm RCLCO Fund Advisors.
" One important factor
is [that] they want to know
who is having that conversation,
who is a part of [it], "
Thomas said. " It's not just
sustainability leaders at organizations;
they want to know
everyone working on it. I
think there's a real air of collaboration
and info sharing
going on today. "
Yetsuh Frank is executive
vice president at Evora
Global, an environmental
consulting firm that works
with real estate companies
on their ESG data by using
proprietary data management
software. His company
works mainly at the fund
level and screens a portfolio
by using the physical
risk tools as selected by
the client. The firm then
examines each asset that
is flagged and investigates
both the issues with the
asset and how the issues
could be mitigated. In some
cases, the firm helps clients
integrate physical risk
into investment committee
memos. Frank has found
that real estate companies
have a lot more learning to
do in this space, and that it's
more than just checking a
box. " It's really important to
always be learning and educating
people, " Frank said.
Looking ahead, the market
disruption that climate
change is causing, and will
continue to cause in the real
estate industry, is something
that creates not only risk but
also potential opportunities.
Although there may be certain
submarkets that investors
will migrate away from,
" It's kind of like
an experiment. A
lot of the industry
is still figuring this
out, and there's a
lot of learning to
do. "
- Spenser
Robinson, the
entrepreneurship
chairperson
and director of
real estate at
Central Michigan
University
SUMMER 2 024
URBAN LAND
21
DEVELOPMENTS
2024 Summer Issue of Urban Land

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