Water Risk in Real Estate: An Introduction to the Climanomics Platform

The acceleration of climate change has impacted countless sectors, and real estate is no exception. Consequently, there is a growing demand for a better understanding of climate-related risks on the industry. Regulators’ expectations surrounding risk reporting and disclosure are putting pressure on investors and business leaders who, in turn, are looking for ways to measure their exposure and the related potential financial losses. Similarly, as the effects of climate change become more acute, companies are increasingly demanding the necessary instruments to identify and quantify water risks. Due to the significant increase in the number and severity of hurricanes, severe storms, floods, and droughts—all of which are related to the extreme climate volatility—water risk is at center stage. In response, The Climate Service, now a part of S&P Global, has developed the Climanomics platform specifically to address challenges in quantifying climate-related risks, including a variety of water risks (2022). This chapter addresses the implications of water risks for the real estate sector and its stakeholders and describes the Climanomics platform’s methodology. After this thorough review, we present a short case study to show the benefits of considering climate risks in real estate investments and how Climanomics helps facilitate this analysis. Addressing the implications of water risks for real estate provides essential insights into current and future risk exposure, Listallowing various stakeholders to make the right decisions to mitigate risk and protect asset values over the long run. As we make efforts worldwide toward a greener economy and society, having tools such as Climanomics that ease this transition will only encourage more market players to join this market trend.