Resilience: Confronting Climate Change and Adapting Your Real Estate Asset Management Accordingly

Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position. Please refer to official GRESB documents for assessment related guidance.

The real estate sector accounts for more than a third of CO₂ emissions in Europe, yet only 1% of building inventory is renovated each year. This reality has led to growing market awareness, with the emergence of new European and national environmental regulations. Stakeholders are increasingly demanding – investors in particular, who no longer look at financial data alone when evaluating assets. Neglecting the issue of environmental performance can cause a property’s value to decline steeply over time. In light of these new market standards and expectations, adopting a long-term ESG (Environmental, Social and Governance) strategy is now essential. But which risks are impacting the environmental performance of your assets? And how can you ensure the resilience of assets over time? Let’s shed some light on these concerns.

Risks related to expected climate change

It is now widely understood that energy overconsumption and greenhouse gas emissions are responsible for significant climate change. For example, Global warming, which impacts ocean temperatures, is disrupting water cycles and leading to natural disasters like floods, storms and tornadoes. These phenomena will become increasingly frequent as temperatures continue to rise, directly affecting the quality and maintenance of buildings and infrastructures. In turn, these environmental threats are likely to create social and economic risks. In facing these changes, it’s important to understand the associated risks and take appropriate measures to limit their impact.

By 2050, heating needs will have dropped for most buildings, while cooling needs will rise. But the dynamics of these changes will differ from one country to another and even vary within each country. Needs will be different depending on climate zones and building types. All office buildings will be impacted, but a recent structure in the South of France won’t be affected in the same way as a historic Haussmann building in Paris, for example. Climate change has led to a number of concrete challenges: Are we equipped for sufficient cooling? How does increased use affect the risk of equipment saturation?

Météo France recently published its new climate projections, which establish global warming impact scenarios for France between now and the end of the century.

Here we can see a significant rise in the incidence of heatwaves in southern Europe. This study also indicates that permanent frosts and snowfall in mid-mountain zones could all but disappear. 

Faced with the risks linked to global warming, Europe has introduced regulations like the EU taxonomy, which provides a Europe-wide reference system for sustainable activities. Member states are gradually supplementing these provisions with national laws, such as in the building sector:

• The Tertiary Decree in France
• The MEES law (Minimum Energy Efficiency Standard) in the United Kingdom 
• The Dutch Building Decree in the Netherlands, etc.

To meet these ambitious targets at all levels, it is crucial that actors across the real estate sector mobilize and commit to reducing consumption and greenhouse gas emissions.

What is resilience?

Resilience is an entity’s ability to survive and thrive in the face of shocks and constraints. In the real estate sector, this means taking account of climate variations (between now and 2050, for example) and analyzing their impact on different building types.

If the question a few years ago was how to prevent climate change, today the essential query is how best to face this change and mitigate its impact.

Climate risks: what impact on buildings?

In light of the new challenges facing the real estate sector, Deepki’s R&D team decided to conduct a study measuring a building’s exposure to climate risks based on its location and typology. The study pursues three objectives:

1. To analyze the impact of location, creating a Europe-wide environmental risk map at a 2050 horizon

2. To study the effect of building typology, determining the energy needs and most relevant measures for each type (ex: Haussmann buildings, 70’s offices, 90’s offices…)

3. To establish a scoring system that evaluates buildings’ resilience to the climate shocks that will affect Europe by 2050, based on the findings previously studied 

For actors in the real estate sector, this scoring system will allow them to anticipate the evolution of their building portfolio between now and 2050: 

• To which climate risks is each building exposed? To what degree?
• What are the best ways to safeguard against these environmental risks? And ultimately, how to guard against the risk of assets losing value or becoming obsolete?

As the study shows, all offices will see their energy consumption evolve, regardless of location and typology. Depending on the building, this will involve either a different breakdown by use, a change in overall consumption, or both. For most office types, we see a decline in heating needs and a rise in cooling consumption by 2050, with a relative increase in total energy needs for almost all building types. 

Meeting these new market challenges means taking stock of your real estate portfolio’s extra-financial performance and establishing a sustainable ESG strategy. 

This article was written by Giulia Caputo, R&D Manager, Deepki