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Act now. Climate change is already happening. We must act now to avoid its most detrimental effects and mitigate costly damages. All buildings will be affected, even in temperate climates.

Intensify collaboration. The climate resilience of assets and urban infrastructure is inextricably linked; resilient buildings require resilient cities. Collaboration between governments, owners, developers, occupiers, architects, and insurers is essential.

Be radical. Developing climate resilience will require radical hard engineering, nature-based and AI-powered solutions. 

Public investment in resilient infrastructure can mitigate physical climate risk. Some city administrations – such as Amsterdam and Paris – have been pioneers in developing resilience. Other cities, like New York were shocked into action through events like Hurricane Sandy. Likewise, in response to recent wildfires and associated smoke haze, Australia’s state and local governments are leading the charge to protect their urban areas from climate change through a series of planning and associated legislation relating to the built form and vegetation management.

Around the world, cities will have to prepare and adapt to climate change in different ways.

Permeable pavements to reduce the risk of flooding, misting stations to help residents cope with more frequent and intense heat waves, buried power lines and reinforced foundations to mitigate storm damage are just some of the solutions that can make cities more resilient.

Although some cities are feeling the effects more acutely than others, all will face long-term challenges to existing buildings, infrastructure, and supply chains. For example, while European cities rank among the world’s lowest climate hazard scores, temperatures across the continent are increasing at a rate that is about twice as fast as the global average.

Climate resilience of a specific asset is determined as much by the resilience of its supporting infrastructure – transport, power, water and sanitation – as by the resilience of the asset itself. For this reason, investors will place a higher risk premium on properties in a city affected by climate events, regardless of whether individual properties are vulnerable.

Global studies find the benefits of investing in climate-resilient infrastructure outweigh the costs. Resilient infrastructure includes hard defenses, such as sea walls and flood barriers, as well as natural infrastructure, such as wetlands. Nature-based approaches are often cheaper.

Extreme climate events are already affecting asset pricing and liquidity. Prices typically decline after climate events, particularly in locations not used to extreme weather. Overtime, repeated events can lead to significant price discounts and a drop in demand. In Hong Kong, for example, following a typhoon in October 2018, a multifamily residential building saw unit prices fall by 14% and not recover to pre-typhoon levels still four years later.

Even today’s prime buildings will need to adapt to a rapidly changing climate to maintain their appeal. More than 90% of the world’s largest companies will have at least one real estate asset financially exposed to climate risks by the 2050s, according to S&P Global.

• Only one in five companies has a plan in place to adapt to the physical risks of climate change, according to the latest data from S&P Global. Real estate performs slightly better, with 26.5% adapting for physical risk.
• According to the World Economic Forum’s Global Risks Report 2023 ‘the failure of climate change adaptation ranks as the second-greatest risk for companies over the next decade’.
• While JLL's Decarbonizing the Built Environment report found 78% of investors and 83% of occupiers identify climate risk as a financial risk, a 2023 study from PwC found only 23% of executives are planning for disruptions in the next 12 to 18 months.

Companies often cite cost and lack of data as barriers to climate risk strategies. Additionally, absence of adequate policies, lack of standardization and limited education are barriers to the creation and implementation of climate risk mitigation and adaptation strategies. Collaboration involving government at all levels, asset owners, lenders, insurers and credit rating agencies is vital in driving investment into resilience.