Now available in Knowledge Finder.

ULI and Heitman, in collaboration with Arup Group and consulting group Milliman, in newly published research find that real estate investors are starting to look beyond individual property vulnerability to climate change and to scrutinize the resilience of the broader market.

The report, Climate Risk and Real Estate: Emerging Practices for Market Assessment, concludes that investors are increasingly looking for information about climate risk at a market level, with some even beginning to make decisions about whether to invest, or continue investing, in markets particularly vulnerable to the impacts of climate change. The report also documents the factors that climate-focused investors are considering when evaluating markets. In response, a city’s resilience policies, financing strategies, and infrastructure investments are likely to become more important to real estate investor decision-making.

This report is available on ULI Knowledge Finder.

“The most climate-aware investors are increasingly taking a hard line on local climate risk. They are looking beyond the individual asset and assessing a city’s preparedness for climate change, but the models and metrics they need are still in their infancy,” says Ed Walter, ULI global chief executive officer. “Benchmarking cities for climate risk and resilience is a challenge, and I anticipate significant progress from the industry on obtaining this much-needed data.”

“Market-level risk assessment is a critical component of the investment and portfolio management decision-making process,” says Maury Tognarelli, Heitman chief executive officer. “Due-diligence screens must incorporate the accelerating risks posed by climate change, fiscal policy constraints, and critical infrastructure investment, repair, and replacement. The data management and business intelligence tools required to assist investors in making decisions about these factors continue to evolve. This evolution, combined with the depth of real estate experience and judgment found within the industry today, should result in improved portfolio construction and the proper management of these growing risks.”

ULI members interviewed for the report emphasize that evaluating climate risk at a market level requires an understanding of physical and transition risks as well as resilience strategies. Investors recognize that some local governments, including in areas particularly vulnerable to the impacts of climate change, are investing in resilience through infrastructure, policy, and science-based decision-making. However, investors are looking for better data and frameworks to more quantitatively understand and compare risk at a market level and understand whether local investment in resilience is sufficient to mitigate the level of physical risk faced.

Examples of pulling back from markets entirely because of climate risk are limited, but they do exist. The investors who are starting to make these types of decisions see climate risk as a “tiebreaker issue” that makes a difference if other market-level concerns exist.

These interviewee responses in the new report represent an increased appreciation of climate risk in comparison with the industry approach that ULI and Heitman documented in the 2019 report Climate Risk and Real Estate Investment Decision-Making. The catastrophic impacts of climate change and extreme weather events, the financial sector’s increased focus on climate risk, and potential changes in insurance are among the reasons the industry’s awareness of and responses to climate risk are changing.

Key considerations and next steps in order for the industry to improve awareness and understanding of market-level climate risk include the following:

  • Develop strategies to measure market resilience in relation to climate change, considering physical risk, resilient infrastructure, and public policy.
  • Link asset-level physical risk assessments with market-scale analysis.
  • Explore the role the real estate industry plays in supporting funding mechanisms for future infrastructure and resilience initiatives.
  • Facilitate collaboration among policymakers, chief resilience officers, and real estate investors and investment managers.
  • Work with the insurance industry and actuaries to refine tools to reflect current and future climate risks.
  • Partner with the valuation industry to accurately build climate change risk into appraisals.

The report concludes that the stakes are high for local governments to make sufficient infrastructure, policy, and governance investments to protect their residents, homes, and businesses, including the most vulnerable, and to continue attracting investment in this time of accelerating climate impacts. “What experts worry about is the lack of continued investment to upkeep the system,” said an environmental, social, and governance (ESG) lead at a real estate investment management firm who was interviewed for the report. “A city is safe today, but it will fail one day without more operations and maintenance funding and planning.”

As understanding of market risk accelerates, cities that proactively invest in resilience measures may become more economically attractive to real estate investors.

Climate Risk and Real Estate: Emerging Practices for Market Assessment was prepared through a collaborative effort among Heitman, Arup, Milliman, ULI Europe, and ULI’s Center for Sustainability and Economic Performance. ULI interviewed leading global real estate investment managers, institutional investors, and other public and private real estate and land use practitioners. Heitman, Arup, and Milliman contributed thought leadership and corresponding “deep dive” analysis to better understand how the industry’s view of climate risk is progressing and why climate-related risks have not yet been comprehensively priced into the market.

The ULI Center for Sustainability and Economic Performance provides leadership and support to real estate and land use professionals to invest in energy-efficient, healthy, resilient, and sustainable buildings and communities. For more information, visit