Real Estate for a changing world

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Does climate change affect real estate investment?


Climate change is altering our world, as year-on-year we experience more adverse weather conditions and natural disasters. The real estate sector is increasingly considering climate risk factors when buying or investing in a new building. How then must the real estate sector adapt? Is there a more responsible way to use land and assets? And what exactly does this mean for how investors select their assets? Head of Sustainability and CSR at BNP Paribas Real Estate Investment Managament (REIM), Nehla Krir shares her views.

Does climate change or adverse weather mean some assets are seen as less attractive?

Not necessarily. As an asset management company, we strive to constantly mitigate risks and add value to assets. Our goal is to take assets that might be seen as less attractive and carry out work to improve and future proof them.

For an investor, a building’s attractiveness is mainly based on their asset strategy, taking into account ESG criteria. If for example the investor’s strategy is based purely on location, they might favour less risky assets but if it is purely a value-added strategy, more risks can be taken. 

Can responsible investment mitigate the effects of climate change in our cities? 

Whereas responsible investment is about adapting to climate change, impact investing, which contributes to a bigger positive environmental goal, is what’s going to help mitigate the effect of climate change. 
These kind of strategies are going to have an indirect effect on the future of our cities. Investors tend not to base their strategies on the city, but rather individual buildings. However, if their Investment Manager is driven by promoting resilience through responsible and well-targeted assets, this is going to respond to the social needs of the city. 

Nehla Krir

The real estate sector is beginning to better understand the risk that climate change might pose to investment on a long-term basis. This is something that will be done right from the acquisition stage and it is going to be essential in understanding how floods, extreme heat or earthquakes might impact a building.

Nehla Krir
Head of Sustainability and CSR at BNP Paribas REIM

Is climate risk being integrated into investors’ strategies?

Today, institutional investors are asking us to respond to the risks posed by climate change when we respond to calls for tenders, meaning we must position ourselves on the subject. This was certainly not the case even five years ago. This is really driven by new European regulations and the many discussions taking place concerning this subject, particularly by the younger generations. 

Are there notable difference between countries?   

The level of maturity for dealing with this risk can depend on if countries have experienced the effects of climate change. Droughts in Africa have meant that the continent has broken away from Europe or America in how well it manages and controls water.

On a European scale, the European Commission is pushing different members to be able to identify the climate change related risks to investment, management and reporting. This means that different industries are working to create new tools, which will tackle this problem head on.