New Climate Benchmark For CRE

Last month the world turned its attention to Glasgow, Scotland, as leaders from hundreds of nations attended the 2021 United Nations Climate Change Conference, more commonly referred to as COP26 – as the 26th edition of the conference.

The conference is all about getting nations to agree to standards and commitments linked to curbing or slowing the rising global temperatures, through tactics like limiting greenhouse gas emissions by moving from fossil fuels to greener energy sources, or pledging to end deforestation.

Migration and climate

It’s not just a matter of how we live, but climate change will have direct consequences for where we live. The climate crisis facts emerging from high-level organizations and respected researchers are alarming, including the World Bank’s latest research which indicates that climate change could drive 216 million people to migrate within their own countries by 2050.

Island nations and areas that are reliant on their coasts for business and tourism are feeling the effects first. For nations like Seychelles, climate change is very real and visible to everyone: coastal erosion, superstorms, bleached coral, reduced fishing stock, drought, flooding, and more.

That makes climate change a key emerging issue for commercial real estate (CRE), as much as virtually every other industry.

Climate risk metrics

This is one of the reasons that data and research firm Moody’s has branched out of the typical or traditional financial metrics, and now has environmental, social, and governance (ESG) targeted solutions. In October 2021, they launched the latest under that umbrella, climate risk scores on their CRE analytics platform, REIS.

“The CRE sector faces some of the most direct and tangible risks from physical climate hazards,” according to Moody’s. These include acute physical risks (eg floods and wildfires), and chronic physical risks (sea-level rise or heat stress). Additionally, they argue, “climate change exacerbates existing risks in several ways… Understanding the likelihood and severity of these risks can help CRE market participants make better decisions over both near and longer-term time horizons.”

Other tools

Having a strong basis for a climate risk score, such as the Moody’s tool, is one of a growing stock of informational tools CRE professionals can use when assessing and marketing properties and developments – much like we use “walkability” scores and green building certifications.

We can also expect climate change-related assessments to increasingly crop up in law and regulation in all geographies and sectors – such as New Zealand’s Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill (CRD Bill).

Lee Rosner

A veteran of the commercial real estate industry, Lee’s career spans more than 35 years gaining him hands on experience in nearly every facet of the business including sales, leasing, investment strategies, property management and ownership. In 1997, Lee launched a commercial real estate brokerage firm that is now NAI Long Island, building on his exceptional depth of industry knowledge and pairing it with his natural leadership style to set a path of growth for the company. He currently is the Managing Principal of NAI Long Island. He is actively involved, daily, with business development, coaching, transaction management, recruiting, operations and long-term visioning for the firm. Under Lee’s leadership and management, NAI Long Island has grown into one of the leading Long Island -based full service commercial real estate firms completing over $1B in transaction values and thousands of transactions over the years. The firm manages more than 1.5M square feet of commercial real estate. Lee completed two terms as a Trustee of the Incorporated Village of Port Jefferson and is the former Chairman of the Zoning Board of Appeals. From 2010 to 2016 he was an Adjunct Professor at Stony Brook University’s College of Business teaching an MBA level course (traditional and online) in commercial real estate fundamentals, user decision-making and investment analysis through a case study approach to learning.