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Real estate and climate transition risk: A financial stability perspective

Author

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  • Francesco Caloia
  • David-Jan Jansen
  • Remco van der Molen
  • Lu Zhang
  • Helga Koo

Abstract

Real estate plays an important role in debates on the transition to a carbon-neutral economy. Based on detailed real-estate data and climate scenario analysis, this study analyzes climate transition risks in real estate and their impact on Dutch financial institutions. First, for a substantial part of the real estate exposure, transition risk may already materialize before 2030. Second, a significant share of homeowners may face financing constraints, which would increase credit risks. Third, stricter standards may impair asset values, which would mean significant financial losses for investors. Such climate financial risks underline the importance of an orderly and, therefore, timely transition to carbon neutrality.

Suggested Citation

  • Francesco Caloia & David-Jan Jansen & Remco van der Molen & Lu Zhang & Helga Koo, 2022. "Real estate and climate transition risk: A financial stability perspective," Occasional Studies 1904, DNB.
    • Handle: RePEc:dnb:dnbocs:1904
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    References listed on IDEAS

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    1. Faiella, Ivan & Lavecchia, Luciano & Michelangeli, Valentina & Mistretta, Alessandro, 2022. "A climate stress test on the financial vulnerability of Italian households and firms," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 396-417.
    2. Stefano Battiston & Antoine Mandel & Irene Monasterolo & Franziska Schütze & Gabriele Visentin, 2017. "A climate stress-test of the financial system," Nature Climate Change, Nature, vol. 7(4), pages 283-288, April.
    3. Francesco Caloia & David-Jan Jansen, 2021. "Flood risk and financial stability: Evidence from a stress test for the Netherlands," Working Papers 730, DNB.
    4. Vermeulen, Robert & Schets, Edo & Lohuis, Melanie & Kölbl, Barbara & Jansen, David-Jan & Heeringa, Willem, 2021. "The heat is on: A framework for measuring financial stress under disruptive energy transition scenarios," Ecological Economics, Elsevier, vol. 190(C).
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    1. Emambakhsh, Tina & Fuchs, Maximilian & Kördel, Simon & Kouratzoglou, Charalampos & Lelli, Chiara & Pizzeghello, Riccardo & Salleo, Carmelo & Spaggiari, Martina, 2023. "The Road to Paris: stress testing the transition towards a net-zero economy," Occasional Paper Series 328, European Central Bank.

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