Looking to the future

A listed German commercial real estate company focused on office and retail properties engaged us to enhance the sustainability performance and future resilience of the overall portfolio. The company tasked JLL with a comprehensive climate risk analysis and the integration of ESG criteria into risk management.

In view of the increasing importance of ESG risks, especially climate-related risks, the first step was to identify those properties exposed to increased physical climate risks. This analysis is necessary to subsequently derive concrete measures to minimise these risks.

As part of the climate risk analysis, we initially conducted extensive analyses for our client to specifically identify and quantify the physical climate risks in the real estate portfolio. This assessment considered both acute risks such as floods, storms, hail, wildfires, and avalanches, as well as chronic risks such as changes in average temperature, precipitation patterns, and sea level rise. Such events can affect the building structure, infrastructure, or operation of real estate and lead to devaluation.

For determining the probability of risk at the respective portfolio locations, the JLL team relied on leading climate and hazard databases, which align their future projections with the latest findings of the Intergovernmental Panel on Climate Change.

The portfolio was accordingly categorised into risk classes, from negligible to high. Increased risk potentials at individual assets were more closely identified and documented. Based on this extensive analysis, JLL derived specific action recommendations for risk minimisation.

Through the close collaboration of the company, our team, and our research department, the complex assessment of physical climate risks and the assurance of reliable data were successfully implemented.

Additionally, after the analysis, a workshop on integrating ESG criteria into risk management was conducted. Together with the client, regulatory conditions were assessed, assets prioritised, and specific next action recommendations discussed. The climate risk analysis and the workshop provided a solid foundation to achieve a risk assessment of the entire portfolio, proactively manage potential risks, and thus strengthen the company's future resilience.

As a result of the climate risk analysis, a detailed identification of assets with increased risk potential in our client's overall portfolio was achieved. These insights and assessments were successfully integrated into risk management. The essence of this project is an increased resilience of the portfolio to physical climate risks and the implementation of targeted measures for risk minimisation. This enabled our client to further enhance their sustainability performance and future resilience.