ULI presents assessment guide for climate risks

According to the Urban Land Institute (ULI), the industry has recognized the need to decarbonize the built environment, but needs a standardized valuation methodology. Indeed, climate risks are currently not sufficiently considered in real estate valuation. So-called transition risks in achieving decarbonization targets - for example, through regulatory change or an economic shock - could lead to declining values, warns Lisette van Doorn, CEO of ULI Europe. In particular, she warns of a bifurcated market, with ULI analysis showing that decarbonization activity is currently focused on higher-value assets where the cost-benefit ratio of retrofitting is lower. "But our goal is to maintain the long-term value of all buildings so that our cities remain attractive."

ULI has presented its assessment guidelines, the Transition Risk Assessment Consultation Guidelines, to achieve this goal. They are designed to help eliminate transition risks and close the knowledge gap for the benefit of all owners and managers. The ULI guidelines identify nine transition risks with significant impacts on property values that can be financially modeled, standardized and communicated. These risks include decarbonization costs, internal resources, energy costs, carbon price and embodied carbon, and the impact of decarbonization on depreciation, changes in rental income and transaction value. A consultation period to engage with the industry is expected to begin in the coming months. (aw)