How climate risk and investment could change our cities

HOW CLIMATE RISK AND INVESTMENT COULD CHANGE OUR CITIES

With a number of recent regulations that have come into place, including the Sustainable Financial Disclosure Regulation, Investment Managers across the sector are now having to adjust real estate strategies in order to take into account climate risk.

As a long-term risk and as such commitment, many in the real estate sector are now making significant changes to their portfolio’s strategies, in order to better protect their assets from such environmental impacts as extreme heat waves, floods or droughts. As Head of Sustainability and CSR at BNP Paribas REIM, Nehla Krir points out that, “The real estate sector is beginning to better understand the risk that climate change might pose to investment on a long-term basis. This is something that will be done right from the acquisition stage and it is going to be essential in understanding how floods, extreme heat or earthquakes might impact a building.”

Making new green opportunities

With this new focus on sustainable investment, many new opportunities for green buildings have arisen. When it comes to building new buildings, emissions can be reduced through more conscious construction processes, the use of sustainable materials such a wood and the integration of renewable energy sources such as solar panels. What’s more, existing stock can be adapted to incorporate climate-focused options in order to reduce the emissions of the building. This is why BNP Paribas REIM has created the European Impact Property Fund (EIPF) dedicated to climate impact, which assesses existing stock and works to bring it up to date with energy efficient technology, equipment and regulations. As Nehla Krir explains, “As an asset management company, we strive to constantly mitigate risks and add value to assets. Our goal is to take assets that might be seen as less attractive and carry out work to improve and future proof them.”

Sustainable investment and the future of our cities

With stricter European regulations and global net-zero targets, the need for sustainable real estate stock is very much apparent. As investors become more focused on climate-orientated strategies and Investment Managers are then driven to promote resilience, the future of our cities could look quite different from what we currently know. As Nehla Krir says, “impact investing, which contributes to a bigger positive environmental goal, is what’s going to help mitigate the effect of climate change. These kind of strategies are going to have an indirect effect on the future of our cities. Investors tend not to base their strategies on the city, but rather individual buildings. However, if their Investment Manager is driven by promoting resilience through responsible and well-targeted assets, this is going to respond to the social needs of the city.”

In this way, cities should become more conscious of how each buildings feeds into their carbon emissions and the way buildings are built, managed and refurbished will have sustainable strategies at their very core.

To find out more about how sustainable investment is changing our cities, get the latest BNP Paribas Real Estate Trendbook, Cities of tomorrow: resilient and inclusive.