Real estate investors will be able to measure the risk of climate change on their portfolios using a new indexing tool launched by MSCI.
The MSCI Real Estate Climate Value-at-Risk tool will enable forward-looking and return-based valuation assessments, to measure climate-related risks across real estate investment portfolios.
By calculating financial risks from changing legislation due to climate action and the extreme weather impacts caused by climate change, per real estate asset and per scenario, MSCI said the new tool would provides a framework for investors – including investment managers, asset owners, banks and insurers – to improve portfolio performance, risk management, regulatory reporting, and progress towards broader sustainability goals.
The framework is closely aligned with the G20’s Financial Stability Board’s Taskforce on Climate-Related Disclosures.
Jay McNamara, head of real estate at MSCI, said: “Private real estate, as a long-term asset class, is particularly vulnerable to climate-related events. Our research has shown that the potential impact for real estate investors from climate events is far reaching and spans assets and geographies. Investors could face increased operational costs including property repairs, higher insurance costs, property devaluation and even the complete loss of property.
“As more global investors are increasing allocations to real estate and other private assets, there is a growing need to identify and understand financial risks from climate change and take necessary action for risk management, portfolio performance optimisation and regulatory reporting purposes.”
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