This chapter explains how climate-related risk assessment uses science and regulation to gain practical insights for real estate decision makers. It details the climate-related physical risk assessment of real assets using past and forward-looking hazard data and digital tools to produce market-useful information. It examines the roles of governments who supply reliable data and private actors that develop analytical tools. The chapter then examines how transition risks from new building standards and regulations are assessed, showing how disclosure rules and science-based pathways clarify compliance costs and potential losses from stranded assets. Finally, it describes the growing integration of physical and transition risk analysis, aided by international frameworks, digitalisation and scenario planning to test resilience across different futures.
Future‑Proofing Real Estate Investment
Abstract
The assessment of physical climate-related risks relies on granular, location-specific data on hazards, exposure and vulnerability. This is best supported by transparent, verifiable asset-level information, such as property damage history and hazard map disclosure, complemented by national datasets, open data initiatives and practical tools that make natural-hazards risks more actionable for real estate markets and insurers.
Transition risks, by contrast, arise from regulatory, technology and market shifts. They are best assessed using science-based decarbonisation pathways, such as Carbon Risk Real Estate Monitoring (CRREM), which align sector or asset-level trajectories with scientific evidence to limiting global warming. Place-based governance frameworks, such as zoning rules, building codes, planning approvals and enforcement practices, are also critical as they determine how and when assets may become stranded or markets disrupted.
Private sector initiatives are meeting market demand for risk assessment tools and methodologies, often supported by national datasets, while international organisations help harmonise fragmented practices. Digitalisation enables real-time monitoring of building performance and risk exposure, and scenario analysis provides a common language for testing both physical hazards and transition pathways under alternative futures.
Implications for action
Strengthen disclosure regulation for climate-related risks, mandate the use of hazard maps and damage histories and ensure that climate datasets are publicly available, interoperable and forward-looking.
Integrate net-zero transition pathways into regulatory frameworks and invest in digital infrastructure such as mandatory energy reporting platforms and open-access digital twins (virtual models of buildings that use real time data to test scenarios).
Embed both physical and transition risks into investment strategies for households, firms and banks, use transparent data and scenario analysis and avoid over-reliance on opaque proprietary models by promoting transparency and auditing where possible.
Knowledge gap and next steps
There is no clear picture of what share of global real estate assets are currently subject to climate-related risk evaluation. Future work should measure and report the volume of “climate-related risk evaluated” portfolios relative to the total asset base, with results disaggregated by country, market segment and asset type.
There is limited understanding of how to bridge climate-related physical and transition risks in practice. Future analysis is expected to explore practical methodologies that capture the combined and compounding effects of these risks and assess their implications for asset performance and value.
Identifying climate-related risks is a critical step in protecting property assets and maintaining investment stability. With the increasing frequency of extreme weather events, from major floods and wildfires to rising sea levels and prolonged heatwaves, investors, developers and financiers are now obliged to rigorously assess how climate change will affect physical assets, both through direct damage and financial performance. The effects of heat on energy costs or the impact of extreme weather and insurance pricing are examples of property-related risks that are complex to identify and manage. At the same time, the transition to a low-carbon economy is driving regulatory, technological and market changes that may render certain properties stranded or unaffordable for insurance coverage (Banks, 2008[1]).
A climate change risk assessment (CCRA) helps stakeholders understand and manage climate-related risks and opportunities. This structured process that typically covers governance, strategy and risk management as well as metrics and targets. In addition to assessing physical risk using tools and climate data, a CCRA also covers transition risks through an analysis of site-specific policies and legal frameworks for buildings through an analysis of frameworks, legal and mandatory disclosures. A thorough assessment will also leverage opportunities for business development, reputational, market and competitive advantages as well as potential cost savings. This process facilitates decision making and organisational strategy at an asset level and across portfolios (Smithers, Gardner and Dworak, 2023[2]). For households and communities, this process can highlight vulnerabilities in housing, energy use and insurance availability or affordability, while also identifying options for adaptation such as retrofitting, diversification of energy sources or community resilience planning. It enables individuals and local actors to make informed decisions that protect health, safety and household finances in the face of climate-related risks.
Climate-related risk assessment has evolved from a niche academic exercise to a critical business and investment function for companies, financial institutions, governments and households. Today’s climate-related risk assessment landscape is characterised by rapid innovation, methodological diversity and an increasingly sophisticated ecosystem of tools that are often unevenly applied and lack transparency (Condon, 2023[3]). A growing list of regional and international frameworks and standards guide this process for the private sector.
This chapter links disclosure frameworks and climate data to real-estate decision making. It outlines methods for assessing physical risks, including identifying hazards, estimating losses and informing adaptation decisions. It also gives an overview of the approaches to assess transition risks, from regulatory mapping through market and capacity lenses to impact on cash-flow and valuation. It then examines the scenarios, adherence timelines and financial levers to support compliance and the data infrastructure needed to support analysis. The chapter also maps instruments and methods for climate-related risk assessments including how digitalisation accelerates the process while drawing out implications for practice and policy.
International agreements help set the targets and methodology for signatories towards climate action and to guide standards and frameworks for climate-related risk assessment for companies and financial institutions. The Paris Agreement has established the temperature goals and national commitments of its signatory countries. Other initiatives, such as the United Nations Sustainable Development Goals (SDGs) and the Intergovernmental Panel on Climate Change (IPCC), provide broader sustainability context for participating countries as well as the private sector and other stakeholders, particularly through SDG Goal 13 on Climate Action. The Greenhouse Gas Protocol provides a technical framework, creating a measurement methodology that enables consistent emissions accounting across all subsequent initiatives for signatory countries. These agreements (Table 2.1) help create the fundamental framework upon which all other climate initiatives build.
Climate disclosure frameworks help create a structured ecosystem that enables systematic climate-related risk assessment while supporting the regulatory objectives of market transparency and financial stability. The major climate disclosure frameworks (Table 2.2) facilitate the building of more coherent foundations for climate reporting and continued support to improvements in practice across markets.
Note: The TCFD function was absorbed by IFRS S2 and ISSB in 2024.
Climate disclosure frameworks turn climate evidence into financial decisions. The Task Force on Climate-related Financial Disclosures (TCFD) supplied the organising blueprint, structured around: governance, strategy, risk management, metrics and targets and scenario analysis. Its disclosures are published at the entity (portfolio) level, with disaggregation by geography or segment where it improves understanding (TCFD, 2017[13]). The UK was the first country to mandate TCFD-aligned disclosure for all large companies and financial institutions (those with over 500 employees and GBP 500 million in turnover) by 2025. Originally voluntary, TCFD has since been embedded (fully or partially) into mandatory reporting regimes across jurisdictions including the EU, Japan, New Zealand, Brazil, Hong Kong, Singapore and Switzerland. (TCFD, 2021[14]; SGFIN, 2024[15]; Swiss Federal Council, 2022[16]).
The International Financial Reporting Standards (IFRS) S1 and S2 translate TCFD’s methodology into accounting standards. In 2023, the International Sustainability Standards Board (ISSB) issued its first two sustainability disclosure standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (IFRS, 2023[17]; IFRS, 2023[18]). IFRS S2 builds on S1 by focusing specifically on climate-related physical and transition risks, as well as climate-related opportunities. It fully integrates the recommendations of the TCFD and incorporates industry-specific metrics from the Sustainability Accounting Standards Board (SASB). S2 requires companies to disclose their methodologies, assumptions and analytical choices and to provide quantitative information wherever possible such as anticipated financial effects, their timing and greenhouse gas emissions (Scope 1, 2 and 3) (IFRS, 2023[17]). The IFRS S1 and S2 convert the TCFD architecture into accounting-grade disclosure inside the general-purpose financial report. The TCFD function was absorbed by IFRS (ISSB) in 2024 (IFRS, n.d.[19]).
The European Union’s Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) extend this baseline. All companies subject to the CSRD must use the ESRS. The hallmark is double materiality: firms report both on how climate affects them (financial materiality) and on their impacts on people and the environment (impact materiality) (European Commission, 2022[20]). The CSRD relies on Green investment EU taxonomy setting precise transparency criteria for climate change alignment concerning both construction, renovation and acquisition. The ESRS does not impose a requirement to disclose information for every single asset. However, if a company's materiality assessment determines that a specific site or asset is a significant source of material impacts, risks or opportunities, then disaggregation and disclosure at that level becomes a mandatory requirement (EFRAG, 2022[21]). The framework mandates third-party assurance, enhancing data reliability for regulatory supervision. CSRD’s scope covering approximately 50 000 entities creates systematic coverage of climate-related risks across the EU economy, enabling regulators to assess sectoral and systemic climate exposures (European Commission, 2025[22]).
The Sustainable Finance Disclosure Regulation (SFDR) applies to all financial market participants and advisers, with reporting requirements varying depending on firm size and product type (European Union, n.d.[23]). It pushes the same evidence into entity and product level templates, so investors can compare funds on common indicators. Under the SFDR, Article 8 and Article 9 product classifications require detailed disclosure of environmental risk integration, enabling supervisors to monitor the concentration of climate-related risks in financial products. The regulation’s principal adverse impact (PAI) requirements mandate the disclosure of 18 sustainability indicators, including greenhouse gas emissions and biodiversity impacts, creating standardised metrics for regulatory monitoring of climate-related risk exposures across the financial sector (European Union, 2022[24]).
The Carbon Disclosure Project (CDP)’s questionnaire system provides the operational infrastructure for standardised data collection. This supports comparative risk assessment across industries and geographies. The platform collects granular data on greenhouse gas emissions (Scopes 1, 2 and 3), water security risks, deforestation risks and climate transition plans. CDP’s scoring methodology creates incentives for improved risk management by benchmarking companies against sector peers. The database enables investors and regulators to identify systemic risks across portfolios and industries, supporting macroprudential oversight of climate-related financial risks (CDP, 2025[10]).
These frameworks represent a global convergence towards standardised and interconnected climate disclosure, creating the infrastructure needed to align financial systems with climate objectives in order to safeguard economic stability. The interconnected nature of these frameworks enables a layered climate-related risk assessment that supports both microprudential and macroprudential policy objectives. Corporate disclosure through TCFD/IFRS provides bottom-up risk identification, while CDP data enables cross-sectoral risk comparison and trend analysis. CSRD’s mandatory coverage ensures comprehensive risk mapping across the EU economy, while SFDR disclosures enable monitoring of climate-related risk transmission through financial intermediation. This framework ecosystem supports central banks and supervisors in conducting climate stress testing, assessing sectoral vulnerabilities and implementing climate-related prudential measures.
The OECD Future-proof Real Estate Investment Survey confirms the widespread adoption of this multi-layered framework approach. The survey data shows that EU ESRS/CSRD leads adoption, used by 25 organisations (58%), followed by GRESB and TCFD each adopted by 17 organisations (40%), with IFRS/ISSB standards used by 8 organisations (19%) (Figure 2.1).
Note: Question from the survey: “International frameworks and standards utilised”. The survey respondents could select all applicable options. The frameworks and standards that the survey refers to are the Climate Bonds Initiative (CBI), the prudential valuation criteria of the European Economic Area and the International Valuation Standards Council (EEA/IVSC), the International Sustainability Standards Board and International Financial Reporting Standards (ISSB & IFRS), the Carbon Disclosure Project (CDP), the Science Based Targets initiative for Buildings (SBTi), the Task Force on Climate-related Financial Disclosures (TCFD), the Global Real Estate Sustainability Benchmark (GRESB), as well as the European Sustainability Reporting Standards and the Corporate Sustainability Reporting Directive (EU ESRS & CSRD).
Source: OECD Future-proof Real Estate Investment Survey
Despite convergence, real estate actors face overlapping but inconsistent demands across voluntary and mandatory frameworks. Each framework has different definitions of materiality, emissions scope and data requirements, leading to duplication, higher compliance costs and reduced comparability for investors (IIGCC, 2024[25]; GRESB, 2025[26]). This fragmentation undermines data consistency and hinders capital flows into sustainable real estate, as investors struggle to assess risks and opportunities. While initiatives, such as the IIGCC’s Aligning Real Estate Sustainability Indicators (ARESI) project, seek to harmonise indicators and improve alignment, regulatory convergence and interoperable standards remain essential to overcome the inefficiencies of the current patchwork system (IIGCC, 2024[25]).
The real estate sector has significantly lower levels of disclosure than other major industries. Globally, only 78% of the real estate sector’s market capitalisation discloses sustainability information, compared with over 90% in sectors such as energy and technology. Disclosure rates are lowest in Emerging Asia and the Middle East and Africa, at 58% and 50% respectively. Emissions reporting is similarly limited, with 74% of firms disclosing scope 1 and 2 emissions and only 55% reporting any scope 3 emissions. Given the sector’s exposure to climate-related risks and high material-related emissions, these gaps reduce transparency and hinder effective risk assessment (OECD, 2025[27]).
The OECD Future-proof Real Estate Investment Survey results show that misalignment between frameworks represents the most significant barrier to consistent global disclosure requirements in the real estate sector, cited by 19 organisations (44% of respondents). Respondents also cited challenges related to a lack of data at appropriate scales, a lack of cost-efficient assessment methodology and a lack of adequate frameworks or scenarios, included in 15 responses each (Figure 2.2). These findings illustrate the complexity and resource-intensive nature of aligning with detailed disclosure requirements.
Note: Question from the survey: “Main challenges in aligning with global disclosure requirements”. The survey respondents could select all applicable options.
Source: OECD Future-proof Real Estate Investment Survey
Property-level risk assessment: historic and future risk to property damage disclosure
Physical risk assessment begins by understanding a property’s past damages and hazard exposure which are key to making informed decisions. For buyers and renters, knowledge of past flooding, fire or structural incidents can determine not only safety but also long-term financial costs. In the United States, over a typical 30-year mortgage, the buyer of a previously flooded house can expect to incur more than USD 55 000 in damages on average (Milliman, 2025[28]). Moreover, it is important for buyers to be aware if their property lies in a risk zone, making disclosure of future risks essential.
Requirements to disclose previous damage to properties vary considerably, creating uneven protections and leaving many households exposed to hidden risks. For example, in the US, all disclosure laws differ by state. Over half of US states currently lack disclosure legislation, meaning millions of homebuyers are in danger of making their largest investment a risky one (Milliman, 2025[28]). In the case of flooding events, advocacy organisations such as the Natural Resources Defence Council (NRDC) work to address these gaps by making the lack of flood disclosure laws apparent through state scorecards and advocating for legislative reform to better protect homeowners and renters. Recent progress includes New York State’s repeal of a loophole that allowed sellers to pay a USD 500 fee to avoid disclosing past flooding events to potential buyers. The repeal of this intentional concealment of property history is an important step towards a more cohesive legislation across the US (NYSAPLS, 2023[29]). Similar legislation in North Carolina to implement mandatory standardised flood disclosure forms for home sellers has improved the NRDC rating of the state from D in 2022 to A in 2025 (NRDC, 2023[30]). In 2023, the Federal Emergency Management Agency (FEMA) proposed the Disclosure of Flood Risk Information Prior to Real Estate Transactions (Proposal 5) legislation, which would mandate full disclosure of past flood damage and previous flood insurance claims before real estate transactions as a precondition to participating in the National Flood Insurance Programme (NFIP) (FEMA, n.d.[31]). The proposal has faced strong opposition from the National Association of Realtors which argues that it would increase administrative burdens and duplicate state-level initiatives (NAR, 2025[32]).
Many countries rely on “buyer beware” or caveat emptor policies, where disclosure depends on purchaser diligence rather than seller obligation. In England and Wales (United Kingdom), buyers must seek the history of past damages through local authorities or lawyers/solicitors to ensure their property has not faced previous flooding or made insurance claims. Sellers are bound by misrepresentation laws and must answer transparently if asked directly by the buyer or their representatives (Higgs, 2024[33])
In contrast to caveat emptor policies that place the responsibility of disclosure on the buyer, national governments can choose to shift that responsibility to sellers. For example, France has a strict Civil Code legislation that places the burden of disclosure on sellers who are legally obligated to disclose any material information that could influence the buyer’s consent. This includes all past damages such as floods, fires or structural defects that may affect a property’s safety or value. Since 2016, sellers have also been required to detail prior insured hazard events in a written declaration called an “état des risques et pollutions” (state of risk and pollutions) annexed to the sales contract. These measures, grounded in Ordinance No. 2016-131 and subsequent decrees, aim to rectify information asymmetries, empower buyers to make informed decisions and reduce litigation risks (LegiFrance, 2016[34]). By mandating proactive disclosure, France’s legal framework ensures accountability in real estate markets while mitigating the long-term financial and safety risks posed by non-transparent transactions.
Governments can also provide structured systems to access property damage records, but effectiveness depends on implementation. In Korea, Article 4-8 of the Natural Disaster Countermeasures Act Enforcement Rules (in Korean: 자연재해대책법 시행규) establishes a flood damage certificate system implemented in February 2013. Under this system, any citizen can request property flood damage records from local governments. However, implementation depends on local governments’ initiative as disclosure is not mandatory (The Korean Law Information Center, 2024[35]). The city of Siheung provides an exemplary case of effective implementation. After severe flooding in August 2022 damaged 231 semi-basement households, it partnered with the Korea Association of Realtors Gyeonggi Southern Branch to streamline the request process. A simplified phone-based system allows real estate agents to request flood history information directly from the city housing department, which co‑ordinates with the citizen safety department to issue certificates via text message. Agents then share this information with their clients. In the first eight months of the new system, 44 certificates were issued, compared to minimal usage previously (Yonhap, 2023[36]).
Hazard maps are another critical disclosure instrument that makes risk visible at the transaction stage. Japan requires real estate agents to disclose the property’s location on a flood hazard map created pursuant to the Flood Control Act and reinforced by a 2020 amendment to the Real Estate Transaction Business Act Enforcement Regulations. This effectively makes flood-risk disclosure mandatory in real estate transactions, including coastal and inundation areas (MLIT, 2020[37]; MLIT, n.d.[38]). The materials must be drawn from official municipal sources, either printed or online, and must be the most up-to-date version available. Agents are expected to avoid implying that a property is zero risk simply because it does not fall within a designated flood zone on the map. It is also recommended that the map indicates evacuation shelters. Empirical research focusing on Osaka demonstrates that this disclosure policy has had a significant impact on property prices in high-flood-risk zones, confirming the law’s practical application and market force. However, this requirement only covers flood hazard map location; it does not require disclosure of past flooding incidents, floodplain history, insurance claims or compensation records in real estate transactions. Buyers therefore remain reliant on official flood maps and their own due diligence, leaving potential gaps in risk understanding (Aiba, Hasegawa and Shirai, 2025[39]).
Data infrastructure for physical risk assessment
Credible physical risk assessment depends on high-quality climate data, and governments serve as the primary providers of such datasets. Public agencies such as the National Oceanic and Atmospheric Administration (NOAA) and National Aeronautics and Space Administration (NASA) in the United States, the European Space Agency (ESA), the Japan Meteorological Agency (JMA) and national meteorological services, fund and operate extensive networks of surface stations, ocean buoys and satellites as well as on the ground physical observations that collect vital climate information. The scope and costs of this infrastructure often requires intergovernmental co‑ordination and sovereign negotiation which makes replication by the private sector infeasible (Büntgen et al., 2025[40]).
Climate datasets are exceptionally large, often reaching petabytes or even exabytes, making them too costly for private actors to replicate. For example, NASA's EarthData archive contains over 80 petabytes of satellite observations, with missions such as the Moderate Resolution Imaging Spectroradiometer (MODIS) adding terabytes of new data every day (NASA, 2025[41]). Similarly, the European Centre for Medium-Range Weather Forecasts (ECMWF) ERA5 global atmospheric reanalysis dataset exceeds 500 terabytes for a single product (Hersbach, H. et al., 2023[42]). These volumes necessitate government-funded infrastructure, as commercial solutions remain cost-prohibitive without institutional partnerships (Büntgen et al., 2025[40]).
The European Centre for Medium-Range Weather Forecasts (ECMWF) is an independent intergovernmental organisation supported and funded by 35 states. The data it produces is available to the meteorological services of its member states. ECMWF also sells commercial licences and offers a selection of forecast data that can be purchased for commercial use worldwide. In 2023, these commercial activities generated GBP 13.7 million in revenue (ECMWF, 2024[43]). The organisation is one of 6 Co-ordinated Organisations, alongside the OECD, and partners with the European Space Agency (ESA) and the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT) to deliver the EU's Destination Earth initiative. It also implements the Copernicus Atmosphere Monitoring Service (CAMS) and the Copernicus Climate Change Service (C3S) on behalf of the European Commission (ECMWF, 2025[44]).
These public datasets undergo rigorous processing and quality control by government research organisations and affiliated academic institutions (Büntgen et al., 2025[40]). These agencies have the capacity to fund mass raw data collection and manage complex processes like metadata cleaning and standardisation. They also conduct reanalysis which assimilates past weather and satellite data with current weather forecasting models. These “maps without gaps” help actors understand climate change and extreme weather events while minimising any false signals of change (ECMWF 50, 2023[45]).
No single climate dataset is universally optimal for all applications. Each case requires specific data points and stakeholders are tasked with determining which data product is suitable for their specific research, policy or operational needs. Weather and climate datasets vary in spatial and temporal resolution based on satellite or station data sources, timeframes and baseline datasets. Significant gaps and asymmetries in climate-related risk data hinder the ability to effectively identify, mitigate and manage climate-related risks. Existing climate-related data is varied regarding quality, availability and equivalence (NGFS, 2022[46]). Third party sourced data is not standardised, making comparisons difficult. Contrasting methodologies, assumptions and data sources used by financial institutions and data vendors, as well as inconsistent practices in estimating emissions and reporting periods hamper comparability (UNEP, 2024[47]). These shortcomings manifest in multiple data-related challenges that undermine the accuracy and efficacy of climate-related risk assessments and strategies.
Translating physical climate-related risks into monetary value motivates change for private investors and helps to justify the use of taxpayer funds for governments. The Columbia Climate School, supported by the Rockefeller Foundation, has developed the Climate Finance Vulnerability Index (CliF-VI) to assess countries’ exposure to climate and other hazards alongside their ability to access finance for adaptation and recovery. The index covers 188 countries and identifies 65 “red zone” nations most at risk, two-thirds of which are in Africa. It moves beyond traditional measures like GDP by incorporating debt levels, financial access and governance to give a fuller picture of vulnerability (Columbia Climate School, 2025[48]). CliF-VI aims to improve risk assessment, guide climate finance and help target support to the most vulnerable. With climate impacts projected to cause an additional 14.5 million deaths and cost USD 12.5 trillion in losses by 2050, as well as many high-risk nations facing limited borrowing capacity, the index highlights where investment is most urgent (WEF, 2024[49]). Its interactive dashboard models four future scenarios to 2080. In all scenarios, 47 countries remain in the “red zone,” underscoring persistent risk (The Rockefeller Foundation, 2025[50]). Policymakers and donors can use the index to prioritise funding for countries facing both severe climate threats and limited financial access, helping close the gap between vulnerability and investment.
To make these global climate-related risks relevant for private investors at the property or portfolio scale, companies are encouraged to conduct a quantitative risk assessment. A critical metric for quantifying climate-related physical risk at a portfolio level is the Average Annual Loss (AAL), expressing the average financial losses from a property damage experienced by a portfolio per year. Physical climate-related risk can translate directly into projected increase in AAL. For example, under a 4°C warming scenario, UK residential mortgage portfolios could see their AAL almost double due to floods from GBP 122 million, GBP 279 million in the 2050s, a 128% increase under this scenario. Additionally, the number of properties at high flood risk could increase by 40%. Under a 2°C warming scenario, the impacts are smaller: with increases of 61% and the number of properties exposed to high flood risk could increase by 25%. Quantifying these expected losses allows investors and lenders to convert the predicted changes in AAL into potential impacts on asset values (CISL, 2019[51]).
Tools and instruments for measuring climate-related risks
Real estate climate-related risk assessment methodologies, datasets and tools are continuously evolving. Climate-related risk assessment tools have expanded rapidly in scope and sophistication, moving beyond simple hazard maps to integrated platforms that combine climate science, socio-economic data and financial modelling using data sources discussed above. This proliferation reflects not only scientific and technological advances but also regulatory and investor demand for granular, forward-looking assessments that can inform disclosure, adaptation and resilience planning in real estate. This section provides a non-exhaustive overview of the types of tools, instruments and methodologies provided by and utilised by various actors in the real estate market.
Government-provided risk instruments
Governments are increasingly providing open-source tools and datasets to support local authorities, individual property owners and enterprises. This data is essential for land planning and management. For example, in March 2025, France launched its third National Climate Adaptation Plan (PNACC‑3), marking a strategic shift by explicitly planning for a potential +4°C warming scenario by 2100 (French Ministry of Territorial Development, 2025[52]). Developed through national consultations in late 2024 and validated by the National Council on Ecological Transition in January 2025, PNACC‑3 sets out 52 strategic measures and nearly 200 actions across five priorities: protecting populations, adapting infrastructure and services, supporting economic resilience, preserving natural and cultural heritage and mobilising society (French Ministry of Territorial Development, 2025[52]). A major innovation is the creation of the Reference Warming Pathway for Adaptation (Trajectoire de Réchauffement de Référence pour l’Adaptation, TRACC), a +4°C reference scenario now legally embedded into national planning. By 2027, all local and territorial planning documents must incorporate TRACC under forthcoming environmental code reforms (Ministry of Ecological Transition, 2025[53]). The plan allocates approximately EUR 1.5 billion in funding, including EUR 300 million for the Barnier Fund (major natural risk prevention in 2025), EUR 260 million via the Green Fund, EUR 1 billion for water agencies and EUR 30 million for prevention against ground subsidence due to shrinking clays (CITEGO, 2025[54]). This last budget allocation was designed as an experiment to support households affected by this phenomenon in eleven departments, providing subsidies for diagnostic services and preventive measures (Ministère de l’Aménagement du Territoire et de la Décentralisation & Ministère de la Transition Écologique., 2025[55]).
Publicly available spatial analysis tools and applications, combining satellite imagery, GIS mapping, hazard models and long-term exposure records, make it possible for governments to pinpoint high-risk areas and monitor how climate-related risks shift over time. This evidence base allows authorities to adapt zoning regulations, direct infrastructure investment more efficiently and act early to reduce exposure and vulnerability (WB, 2025[56]). Future scenario mapping for flood and heat risk are being made publicly available to guide real estate and city planning decisions. France has incorporated the provision of toolboxes and guidance for addressing climate-related risks in its national strategy (see Table 2.3). For example, the Plus Fraiche Ma Ville (My Cooler City) platform geo-localises areas prone to urban heat islands and offers best practices for nature-based cooling solutions as well as measurable impacts of intervention. These tools are open source and rely on European Copernicus datasets to give public sector planners and decision makers the capacity to visualise their region under a 4°C warming scenario and plan accordingly (ADEME, 2025[57]).
Source: (Meteo France, n.d.[58]; Meteo France, n.d.[59]; French Ministry of Ecological Transition and Territorial Cohesion, n.d.[60]; French Ministry of Ecological Transition and Territorial Cohesion, n.d.[61]; ADEME, n.d.[62]; ADEME, 2025[57]; ACTE, 2025[63]; French Ministry of Ecological Transititon and Territorial Cohesion, 2019[64]; Meteo France, n.d.[65]; MTECT, 2020[66]) (MTECT, 2016[67]; ADEME, n.d.[68]) (MTECT, 2016[67]; ADEME, n.d.[68])
National climate scenarios help guide adaptation policies and risk management. In Switzerland, the Climate Change and Switzerland 2050 (CH2007) beginning in the early 2000s, was followed by updated scenarios in 2011 (CH2011) and 2018 (CH2018). The latest version, Climate CH2025, is currently under development and will be published in late 2025. Produced under the Federal Office of Meteorology and Climatology (MeteoSwiss) in collaboration with ETH Zurich, the University of Bern and other institutions, these scenarios provide the scientific foundation for understanding Switzerland’s climate futures (NCCS, 2024[69]). The CH2018 scenarios, developed within the framework of the National Centre for Climate Services (NCCS), represent a major methodological advance. They use the latest generation of climate model simulations and improved statistical methods to provide concrete values for risks such as heatwaves, droughts and extreme precipitation events. For the first time, the results were translated into user-oriented products, including a brochure, technical report, datasets and the interactive CH2018 Web Atlas. The Web Atlas enables users to visualise localised climate projections for different indicators such as summer days, tropical nights or heatwave length under alternative emission scenarios and timeframes. For example, projections for Aadorf/Tänikon (Switzerland) indicate an increase in summer days from about 40 per year in 1995 to more than 80 by 2085 under a high-emissions scenario (RCP 8.5). Results are displayed in clear graphics with uncertainty ranges and can be shared or downloaded (Figure 2.3) (NCCS, 2024[70]). The forthcoming CH2025 scenarios will further update the scientific basis and integrate new user requirements to strengthen long-term climate-related risk management (MeteoSwiss, n.d.[71]).
In parallel, MeteoSwiss has launched an Open Data initiative. Since May 2025, weather and climate datasets are being progressively released as Open Government Data (OGD), in machine-readable formats and free of charge. The first releases include ground-based measurements of temperature, precipitation, wind, sunshine, humidity, radiation and pressure, with records ranging from 10-minute intervals to annual averages. Other available datasets cover pollen concentrations, phenological observations, homogeneous climate series and high-resolution numerical weather forecasts. Planned extensions for 2025-2026 include satellite- and radar-based climate data, hail radar products, spatial climate normals and the forthcoming CH2025 scenarios, with selected datasets expected to be accessible via API queries from 2026 (MeteoSwiss, n.d.[72]).
By combining forward-looking national climate scenarios with open and continuously updated datasets, Switzerland provides a transparent evidence base for public authorities, researchers and private stakeholders. These resources enable municipalities to design adaptation strategies, support the real estate sector in assessing long-term exposure to climate hazards and strengthen resilience planning across sectors.
Source: https://service.meteoswiss.ch/productbrowser/productDisplay/climate-ch2018 columns?lang=en&cg1.emissionScenario=RCP8.5&cg1.language=en&cg1.location=TAE&cg1.indicatorScenario=SD&cg1.productName=climate-ch2018-columns
Open-source flood data helps to ensure transparency of hazards and foster a cohesive understanding of risks across all stakeholders. In the Netherlands, more than half the population live in an area at risk of flooding which makes limiting the damage caused to residents and their properties a national priority. Overstroom ik? (Will I be Flooded?) is a free government website and app that shows the probability of flooding for every postcode in the Netherlands. The app is a useful communication tool about flood risks, particularly for households. For more granular property level data, the government has created the Klimaateffctsatlas platform which shows every map in the Netherlands with scenario overlays for flooding, heat and precipitation. The Climate Adaptation Services foundation behind the Klimaateffctsatlas platform is funded by the government in collaboration with knowledge institutions, universities and engineering companies. The platform is aimed at international professional users, including the financial sector. These tools demonstrate a clear risk preparation mentality. The user-friendly data and communication tools help the Dutch population understand flood-risks to their properties and prepare for potential extreme weather events (Rijkswaterstaat, 2025[73]; CAS, 2025[74]).
Private sector risk assessment instruments
The global market for climate-related risk assessment tools and consulting firms is growing rapidly due to increasing regulatory pressures, investor demands and corporate awareness of climate-related risks. While governments provide open-source tools, these are often hazard-specific and incapable of synthesising comprehensive, asset-level analysis across diverse regulatory frameworks and geographies. Consequently, the private sector has stepped in to offer tailored solutions, leveraging modern climate analytics technologies that ingest massive datasets and environmental observations to compute dynamic risk relationships. Many insurance and brokerage firms have created in-house tools for risk assessment and valuation. This complexity has created a market for translating intricate data and code into legible, client-specific insights. Major firms now help businesses, financial institutions and governments evaluate both physical and transition risks, with some organisations developing in-house tools or new market opportunities in data analytics and consulting. Driven by regulatory compliance, ESG reporting and client needs, the climate analytics industry is rapidly evolving, valued at USD 1.61 billion in 2025 and projected to reach USD 5.65 billion by 2030 (MI, 2025[75]). Providers specialise in areas such as physical or transition risks, predictive modelling combining climate projections with socio-economic trends, and user-friendly digital dashboards, all requiring high technical capacity to merge, interpret and communicate risks effectively.
The OECD Future-proof Real Estate Investment Survey (2025) results offer a snapshot of the instruments used by 44 key real estate stakeholders to analyse historical events and forecast future challenges. The instruments adopted by the survey respondents differ by the type of risk they want to assess and their stakeholder role. The instruments are both private and public sector and, in most cases, respondents listed more than one instrument. They are open source and free for use, paid through services or in some cases available only through subscription. Table 2.4 categorises the instruments listed by the Task Force respondents by instrument and risk type, cost and instrument developer.
Note: The instruments have been listed alphabetically
Source: The OECD Future-proof Real Estate Investment Survey (2025)
Insurers, reinsurers and brokers rely on advanced risk-modelling tools to underwrite insurance coverage. Many tools developed by specialised modelling firms, insurance, reinsurance and brokerage firms are increasingly being incorporated into applications used across the broader real estate sector. These models provide granular, location-specific risk insights, improving underwriting precision and portfolio management. For example, the credit rating agency Moody’s acquired RMS, an insurance sector modeler to develop Europe Windstorm High-Definition (HD) models. Integrated within Moody’s Intelligent Risk Platform, these models enable risk evaluation across multiple hazards to support risk transfer and emergency response co-ordination (Moody's, 2025[76]). Moody’s HWind, a real-time tropical cyclone platform, integrates satellite, aircraft and buoy data to generate high-resolution wind field maps. Unlike traditional hurricane categories, HWind delivers spatially precise wind-exposure assessments to improve the accuracy of loss estimates and claims responses. The platform combines a 25-year historical dataset, refined with post-event observations for retrospective risk analysis, with real-time analysis, including six-hourly wind field snapshots, forecast scenarios and hazard analytics for active storms (AOML NOAA, n.d.[77]; Moody's, n.d.[78]).
A growing number of catastrophe risk models are available within the insurance and reinsurance sector, helping stakeholders quantify and map exposure. The CatRisk Tools platform, developed by the Insurance Development Forum, provides an open catalogue of catastrophe models covering multiple hazards, regions and data types, improving transparency and access to risk information for governments, insurers and investors (Insurance Development Forum, 2025[79]).
The emerging economy of climate-related risk intelligence operates on an uneven playing field. Financial institutions, insurers and nonprofits increasingly depend on hyperlocal projections of floods, wildfires and hurricanes to guide trillion-dollar decisions from infrastructure investments to community relocations. However, the same data that reshapes regions and markets remains inaccessible to under-resourced SMEs, municipalities (who may face prohibitive costs to challenge disputed insurance premiums or bond ratings) and to individual homeowners and renters. For home buyers, in-depth tool analysis is often unavailable, not up-to-date or unaffordable for their properties (Condon, 2023[3]). Commercial data providers can offer more reliable and comprehensive datasets for those who can afford services. However, access to these high-quality data sources typically comes at a premium, fostering long-term dependency on a limited number of vendors. This semi-monopolistic market structure reduces transparency around data methodologies and the quality of services provided by these commercial entities (UNEP, 2024[80]).
Proprietary and opaque modelling practices obscure the reliability of private climate-risk assessments. Many proprietary algorithms function as black boxes, masking methodological flaws and amplifying uncertainties that could mislead adaptation efforts. Meanwhile, some corporations withhold critical vulnerability forecasts despite their profound public implications, including predictions that signal existential threats to entire regions (Condon, 2023[3]). Many climate-related datasets are based on estimates or proxies and lack transparent methodologies, undermining their credibility (NGFS, 2022[46]). Data provided by firms or third-party sources often rely on differing assumptions and unclear sources, making it difficult to verify or audit (UNEP, 2024[80]). As a result, data quality be problematic due to gaps, limited auditing and unclear or inconsistent methodologies (UNEP, 2024[80]).
A lack of data standardisation from clients and third-party sources may hinder comparisons. Financial institutions and data vendors often apply different methodologies, rely on varying assumptions and data sources and follow incompatible methods, such as in the ways emissions are estimated or which reporting periods are used (UNEP, 2024[80]). In addition, climate-related data often lacks relevant benchmarks, making it difficult to assess exposures or conduct meaningful peer comparisons (NGFS, 2022[46]). Similarly, disclosure of climate-related risks is inconsistent across firms, sectors and jurisdictions, further complicating risk assessment efforts (FSB, 2021[81]).
The time lag in climate-related data significantly undermines the ability of financial institutions, regulators and investors to respond promptly to emerging climate-related risks. The built-in delay is created as firms typically only report climate-related information annually and often several months after the close of their financial year. Third-party data providers then require additional time to collect, verify and process the information before it becomes usable (UNEP, 2024[80]). This lag means that by the time climate data is available to make risk assessments and capital allocation decisions, it may already be outdated.
Use cases of climate-related risk assessments show significant deficiencies, including missing data, inconsistent data formats, incomplete metrics and limited geographic or sectoral coverage (NGFS, 2022[46]). There is a notable lack of consistent forward-looking metrics across firms and jurisdictions, particularly those that capture uncertainty and the tail risks associated with climate-related exposures (FSB, 2021[81]). For example, the European Central Bank’s 2022 climate stress test revealed that banks relied on widely divergent models and proxies due to data gaps, making results non-comparable and limiting their ability to capture tail risks across institutions (ECB, 2022[82]). This lack of robust, forward-looking data and metrics can make it difficult to assess how climate-related risks might be amplified or mitigated by actions taken across different sectors or by feedback loops within the broader real economy (FSB, 2021[81]).
Emerging methodologies are helping real estate stakeholders evaluate the financial benefits of climate resilience. For example, the Physical Risk Assessment Methodology (PCRAM), developed in 2020/21 by the Coalition for Climate Resilient Investment (CCRI) and Mott MacDonald. PCRAM was created in response to the lack of consistent tools for integrating physical risk into financial appraisals. It addresses the global financing gap in climate adaptation by enabling asset owners and investors to evaluate physical climate-related risks in financial terms and identify resilience measures that improve asset performance and long-term value (Mott MacDonald, 2022[83]). The result is a structured, open-source approach that supports evidence-based adaptation strategies across diverse asset types. The methodology is a set process developed by engineers, asset managers, investors, climate data providers and multilateral institutions, to support long term planning. It works to provide a common language across stakeholders and builds Key Performance Indicators (KPIs) to measure financial stakes across future scenarios (OECD, 2024[84]). The PCRAM process can use any climate data tool to scope and gather data, assess materiality and build the climate case, identify resilience-building opportunities and reassess the assets exposed to climate related risks (Table 2.5). By improving cost-benefit analysis of adaptation options, PCRAM provides the information needed to allocate capital more efficiently (CCRI, 2021[85]). The release of PCRAM 2.0 in 2025, under the leadership of the Institutional Investors Group on Climate Change (IIGCC), has extended the tool’s reach. The updated version will incorporate systems thinking, resilience metrics, credit risk assessment and nature-based solutions into its evaluations (Mott MacDonald, 2022[83]). As global markets move toward stronger enforcement of climate disclosure and risk integration, PCRAM sets an example as a methodology that will be essential for bridging the gap between resilience in the built environment and financial viability.
Transition risk assessment in real estate is being advanced through new tools and standardised methodologies. These methodologies are increasingly incorporating forward-looking climate scenarios, such as those from the Network for Greening the Financial System (NGFS), to quantify potential financial impacts on property valuations and cash flows. Furthermore, sector-specific frameworks are emerging to address the unique vulnerabilities of different property types, from commercial offices to residential buildings, ensuring more granular and accurate risk analysis (UNEP FI, 2022[87]).
Science-based frameworks are essential tools for evaluating how real estate assets align with decarbonisation pathways and for identifying potential stranded assets under global net-zero targets. A leading example is the Carbon Risk Real Estate Monitor (CRREM), developed by a consortium of European research institutions and industry partners with co-funding from the European Union's Horizon 2020 programme (CRREM, 2023[88]). CRREM provides science-based decarbonisation pathways for different property types and countries aligned with Paris Agreement ambitions to limit global warming to below 2°C (CRREM, 2023[88]). CRREM pathways are recommended for setting thresholds for building emissions as they translate macro-level climate goals into asset-level benchmarking, defining a maximum annual energy use and carbon emission intensity that decline predictably each year through to 2050 (UNEP FI, 2022[87]). By comparing a building’s current and projected performance against these stringent benchmarks, investors can calculate its specific stranding risk, defined as the year that the asset is projected to exceed its carbon budget, signalling a high probability of increased costs and regulatory penalties, value depreciation and potential obsolescence (UNEP, 2024[80]). As a result, CRREM has become an industry standard for fulfilling disclosure requirements under frameworks like TCFD and the EU Sustainable Finance Disclosure Regulation (SFDR). It acts as a base structure to inform data-driven methodologies to future-proof real estate investment (Noels & Jachnik, 2022[89]).
Standardised transition risk reports enable the real estate industry to fund greener buildings by clearly justifying investments in building retrofits and new sustainable assets. The transition risk assessment guidelines, published by the Urban Land Institute (ULI) in 2023, establish an open-access methodology for integrating climate transition risks into discounted cash flow models and asset-level investment decisions to quantify the cost of action and/or inaction. Twelve material risks are identified, of which nine can be quantified directly within financial models. These include: the cost of decarbonisation; fluctuations in energy costs; carbon pricing applied to operational and embodied emissions; accelerated depreciation and obsolescence; tenant voids arising from retrofit disruption or sustainability non-compliance; regulatory requirements under Minimum Energy Performance Standards; restricted access to insurance; reduced access to debt capital; and changes to exit yields as markets reprice carbon-aligned versus misaligned assets. Three further risks are not yet quantifiable within cash flow models but remain material: internal resourcing constraints; reputational risk; and the treatment of the discount rate and inflation. The guidelines provide disclosure templates to enable consistent communication of these risks between owners, managers, valuers, transacting entities and institutional investors, and are designed to complement existing valuation practice and reporting frameworks such as TCFD. They also use CRREM pathways as a benchmark to identify the stranding risk of assets and to align investment assumptions with sectoral decarbonisation trajectories (ULI Europe, 2023[90]; ULI Europe, 2025[91]) .
To support the adoption of the guidelines, ULI is developing Preserve, an open-access Excel-based tool scheduled for release in 2026. Preserve will automate the integration of transition risks into financial models, directly link investment analysis to CRREM pathways and enable users to undertake regulatory and market scenario testing, sensitivity analysis and quantification of both the cost of inaction and the cost of decarbonisation. Together, the guidelines and the tool aim to provide a standardised basis for embedding transition risks in real estate valuation and disclosure practice (ULI Europe, 2024[92]).
A comprehensive climate-risk assessment should address both physical and transition risks. While physical risks arise from climate hazards such as floods, storms and extreme heat, transition risks stem from regulatory, technological and market shifts in the low-carbon transition. In practice, both sets of risks overlap and reinforce each other. Decision-useful assessments therefore require shared infrastructures that connect hazard exposure with financial impacts and policy objectives. Three drivers in particular link risk types: international organisation initiatives, digitalisation and scenario analysis. These enablers integrate scientific data, real-time monitoring and forward-looking pathways.
International initiatives
International organisations provide crucial instruments that bridge physical and transition risk assessment by curating, harmonising and disseminating data, tools and frameworks. Unlike national governments, their platforms operate at a global scale, ensuring comparability across jurisdictions while linking hazard data with finance, policy and emissions indicators. This makes them particularly valuable for decision makers in real estate, who must navigate both the physical exposure of assets to climate hazards and the transition pressures arising from regulation, technology and markets.
The IEA-OECD Climate and Weather Tracker exemplifies this bridging role by integrating hazard data and energy system modelling into a single open-source platform. The integrated platform combines 2 open-source tools. The Climate Hazard Exposure Tracker provides detailed analysis of how populations and critical infrastructure are affected by climate hazards such as extreme heat events, wildfire risks and both coastal and riverine flooding, with comprehensive data coverage spanning from 1979 through to 2024. The Weather for Energy Tracker, developed in partnership with the Fondazione Euro-Mediterraneo Sui Cambiamenti Climatici (CMCC), delivers precise meteorological data tailored for energy sector applications. It features daily and monthly resolution datasets from 1979 to present, along with monthly climatological baselines and anomaly calculations. The platform's analytical capabilities are enhanced through the incorporation of the European Union's Copernicus Earth observation data, providing additional layers of environmental monitoring information (IEA and OECD, 2024[93]). Box 2.2 expands on further OECD frameworks and climate resilience initiatives.
The OECD’s broader contributions to climate and real estate are designed to address the physical and transition risks. It has developed a wide range of climate-related data tools, financial instruments, and analytical publications that support policymakers in managing risks to the built environment.
OECD Policy and Strategic Frameworks to help address transition risk
Some distinct features of the OECD’s work in managing risks include the Territorial Approach to Climate Action and Resilience (TACAR), which helps decision makers develop more effective, locally tailored climate action and resilience policies. As buildings are fixed assets whose exposure to hazards and transition pressures vary significantly across regions, TACAR’s approach in capturing territorial disparities, bridging national and local governance and strengthening access to subnational climate finance is very pertinent (OECD, 2023[94]).
The International Programme for Action on Climate (IPAC) is designed to track measurable global progress toward achieving net-zero greenhouse gas (GHG) emissions and building resilient economies by 2050, in alignment with the Paris Agreement. This is particularly relevant for the real estate sector, which accounts for substantial amount of global greenhouse gas emissions and faces significant transition risks, including the potential for stranded assets if decarbonisation is delayed. IPAC provides critical macro-level monitoring and measurable indicators that help assess both collective decarbonisation efforts and systemic vulnerabilities. To address transition risks, it uses Greenhouse Gas Trends and Targets (GETT) indicators to evaluate progress against emissions targets, alongside the Climate Actions and Policies Measurement Framework (CAPMF) to assess policy effectiveness. One of IPAC’s core structural components features the Climate Action Dashboard and Climate Action Monitor. The Dashboard provides an at-a-glance view of country climate action and tracks progress towards climate objectives. The Monitor then offers an annual digest, issuing a report that summarises progress and identifies good practices in mitigation and adaptation (OECD, n.d.[95]; OECD, n.d.[96]; OECD, n.d.[97]).
The Inclusive Forum on Carbon Mitigation Approaches (IFCMA) is the OECD’s flagship climate initiative, designed to help optimise global emissions reduction efforts by enhancing data and information sharing and fostering dialogue on the comparative performance of mitigation policies across jurisdictions. The IFCMA Climate Policy Database framework systematically classifies instruments by type (economic, regulatory, international) and uses standardised criteria to enable comparison across countries diverse mitigation approaches, supporting global climate goals and facilitating new empirical research (OECD, 2024[98]; OECD, n.d.[99]). This is particularly important for the real estate sector, where uncertainty about future climate policies and regulations is a barrier to assessing transition risks.
OECD databases to address both physical and transition risk
Moreover, OECD has developed accessible online databases that offer broad access to diverse statistical data in assessing both physical and transition risk as indicated in Table 2.6.
International organisations act as curators, guiding users through the overwhelming number of emerging tools. The World Resources Institute (WRI)’s Climate Watch curates over 100 platforms tracking emissions, finance and adaptation strategies, helping align efforts with global climate goals (WRI, 2025[103]). For region-specific insights, the Intergovernmental Authority on Development (ICPAC) Climate Prediction Centre offers African-focused datasets, like rainfall estimates from Climate Hazards Group InfraRed Precipitation with Station Data (CHIRPS), while linking to global sources such as NASA Earth Data and Copernicus (ICPAC, 2025[104]). For macro-level analysis, the World Meteorological Organisation (WMO) Global Datasets Catalogue provides rigorously vetted data, including the Global Runoff Data Centre and World Ocean Database, assessed via the WMO Stewardship Maturity Matrix (WMO, 2025[105]). The Climateworks Foundation’s Climate Data Platforms Explorer maps over 100 tools searchable by theme (e.g. mitigation or energy) and scale (from global to city-level) (Climateworks Foundation, 2025[106]). Dataland, developed under the United Nations Environment Programme Finance Initiative (UNEP FI), is an open-source hub integrating flood risk maps, urban heat island data and infrastructure vulnerability projections under the Intergovernmental Panel on Climate Change (IPCC) scenarios. The Climate Risk Dashboard from UNEP FI compiles over 80 related risk tools, including detailed features and applications. Further comparison of these tools can be found in subsequent UNEP Climate Risk Landscape Reports (UNEP, 2023, 24). At the project level, Adaptation M&E Toolbox offers an overview of tools developed by the German Agency for International Cooperation (GIZ) on adaptation monitoring and evaluation and Climate Analytics compiles open access tools for policymakers and researchers working on climate impacts and action (UCR GIZ, 2025[107]; Climate Analytics, 2025[108]).
Coalitions for sustainable buildings provide critical guidance and practical tools to help members assess risks and accelerate the transition to a zero-emission, resilient built environment. The Global Alliance for Buildings and Construction (GlobalABC), founded at COP21 and hosted by UNEP, is the leading international platform bringing together over 380 members, including 71 countries, to drive a zero-emission, efficient and climate-resilient built environment. As the sector’s global advocate, it catalyses action through international climate forums, supports governments with policy roadmaps, mobilises private sector transitions and tracks progress via its Global Status Report and Climate Tracker (UNEP Global ABC, 2025[109]). Through its Adaptation Working Group, GlobalABC is advancing a comprehensive review of resilience assessment methodologies for buildings and construction, aiming to strengthen transparency, comparability and innovation in climate adaptation approaches. Notably, GlobalABC provides an actionable and growing database with over 40 listed tools and methodologies, equipping policymakers, businesses and city leaders with practical resources to accelerate systemic transformation of the sector (UNEP Global ABC, 2025[110]).
As markets and regulatory frameworks evolve, decision makers count on international frameworks and sources for clear options to facilitate the choice of climate-related risk tools, frameworks and scenarios that best suit their needs and contexts. In practice, this means that datasets on hazards, weather and infrastructure vulnerability directly inform assessments of physical risks to assets, populations and supply chains. At the same time, platforms tracking emissions, climate finance and policy alignment shed light on transition risks, including regulatory changes, market shifts and reputational pressures. By linking both dimensions, these initiatives ensure that decision makers can anticipate and respond to the dual challenge of adapting to physical climate impacts while navigating the transition to a low-carbon economy. Ultimately, making use of these tools is only half the job: the real impact comes from translating insights into data-driven decisions that inform investment strategies, policy design and risk management.
The tech frontier: BIM, digital twins and beyond
Digitalisation is transforming climate-related risk assessment by enabling the collection, integration and analysis of real-time building and environmental data. Unlike static disclosure rules or one-off datasets, digital platforms allow decision makers to monitor building performance continuously, simulate future climate and regulatory conditions and integrate results directly into financial and policy decisions. This makes digitalisation a critical enabler for bridging physical and transition risk assessment.
Tools such as Building Information Modelling (BIM) allow stakeholders in the real estate sector to create detailed digital representations of physical assets even before construction begins. These models capture critical attributes such as geometry, materials, structural integrity and energy systems, enabling more efficient construction and lifecycle management. Design platforms integrate 3D parametric design and performance analysis that allows developers to test scenarios including energy use, daylight access and ventilation under current and projected climate conditions (Autodesk, 2025[111]). BIM supports collaboration between architects, engineers and contractors by providing a shared digital workspace which improves construction delivery and reduces waste (IEA, 2017[112]).
Digital twins extend this approach by creating dynamic, three-dimensional replicas of buildings and urban areas that integrate real-time data streams to create omniscient supervisory controllers (Yoon, 2023[113]). At the building level, digital twins combine BIM models, sensors and climate data to assess energy use, ventilation and resilience to heat or flooding. These tools allow designers and asset managers to make informed, climate-resilient decisions from planning through to operation. In Luxembourg’s Belval district, deindustrialised steel plants have been redeveloped into teaching institutions and public buildings. Digital twins are used to optimise solar uptake, cooling loads and water management, through a collaboration between the University of Luxembourg and the Luxembourg Institute of Sciences and Technology Digital Twin Innovation Center (LIST, 2025[114]). The digital twins use geospatial data, real-time sensors, hydrodynamic models and climate forecasts to assess risk across entire neighbourhoods or watersheds. In Luxembourg’s Alzette catchment, a research-led digital twin combines Sentinel-1 satellite imagery, LISFLOOD-FP hydraulic modelling and GloFAS streamflow forecasts to deliver daily flood simulations up to 30 days in advance. These digital twins help support emergency services, infrastructure managers and municipal planners by stress-testing flood defence strategies and enabling data-driven land use planning (Nguyen et al., 2025[115]).
Digital twins can respond to urgent urban challenges including climate hazards and land scarcity. The Singapore Land Authority (SLA) launched Virtual Singapore, the world’s first national-scale digital twin, to address these challenges in the densely populated city-state in 2012. The project employed laser-scanning aircraft and ground vehicles to capture minute terrain and surface details and create a comprehensive 3D map. This dynamic 3D model, powered by Dassault Systèmes' technology 3DEXPERIENCE PLATFORM, combines millimetre-accurate city mapping with real-time environmental data to transform real estate planning and risk assessment (Dassault Systèmes’, n.d.[116]). GPS Lands Singapore consolidated these datasets into a unified platform, enabling precise flood risk assessment, land-use optimisation and infrastructure planning across public authorities. The digital twin’s above-ground model now aids government agencies in asset management, including tree canopy monitoring and green space allocation, while subsurface mapping addresses utility congestion and excavation risks through the Digital Underground initiative (UTM, 2025[117]; IG, 2023[118]; SLA, 2025[119]).
The complementary platform Climate Twin, provides block-level microclimate analysis, quantifying how green infrastructure impacts both temperatures and property values. The Climate Twin platform's advanced simulations enable developers in Singapore to test buildings against extreme weather scenarios. Flood modelling integrates tidal patterns with drainage capacity, while wind flow analysis ensures new towers enhance urban ventilation. Solar mapping predicts cooling demands, directly informing facade design and energy systems. Real estate analysts now use its heat stress projections to assess climate-related risk premiums, while architects leverage its shadow analysis tools to optimise building orientations (The Straight Times, 2024[120]; experion, 2025[121]). The Climate Twins and Virtual Singapore systems help stakeholders to model scenarios and test in real time, supporting Singapore’s 80-80-80 targets for 2030 (greening 80% of buildings, ensuring 80% of new developments are Super Low Energy (SLE) and achieving 80% improvement in energy efficiency for best-in-call green buildings compared to 2005 levels) (BCA, 2025[122]).
The digitalisation of building energy performance data supports the design, implementation and monitoring of results-based energy efficiency policies. By using The Internet of Things (IoT) by embedding sensors and smart systems into buildings, live feedback loops between energy performance, regulatory compliance and climate-related risk exposure can be created. Smart metering for example can ease implementing result-oriented policies. For example, France’s Observatoire de la Performance Énergétique, de la Rénovation et des Actions du Tertiaire (OPERAT) platform, introduced under Tertiary Decree (Décret Tertiaire), imposes legally binding obligations on owners and operators of tertiary buildings larger than 1 000 m² to reduce final energy consumption by 40% by 2030, 50% by 2040 and 60% by 2050. It also helps to create a dataset for benchmarking transition risks, such as energy efficiency and carbon compliance (Legifrance, 20219[123]; OPERAT, 2025[124]). Private providers are developing complementary solutions. For example, Egis’s Open Energy platforms use IoT data to model the energy performance of entire building portfolios, providing dashboards that link operational consumption to climate scenarios and retrofit planning (OpenEnergy, 2025[125]).
Scenario analysis: a common foundation for both physical and transition risk assessment
Scenario analysis offers a common framework, enabling both physical and transition risk assessments to be forward-looking and decision-useful. Unlike historical disclosure or static benchmarking, scenarios allow investors, insurers and policymakers to explore alternative futures under uncertainty, test resilience strategies and quantify the cost of inaction. They are indispensable because climate-related risks manifest over long time horizons, with complex interactions between hazards, socio-economic pathways and policy responses.
Multiple pathways may exist to reach the same scenario outcome depending on the approach taken and the actors involved. Pathways are action oriented. They outline the sequence of actions, policy decisions and systemic changes required to reach a specific outcome or scenario. Historical observations alone are insufficient for assessing future climate-related risks, as future conditions will be shaped by greenhouse gas emissions, which depend on socio-economic development, technological progress and policy decisions (IPCC, 2000[126]). To account for this uncertainty, it is a standard practice to use a range of scenarios that reflect different emissions trajectories. These scenarios enable stakeholders to assess the range and likelihood of future climate-related risks over relevant timeframes (UK Environment Agency, 2023[127]).
Several internationally recognised scenario frameworks are currently used to support investment planning, portfolio risk management and regulatory compliance in the built environment. Climate scenarios are developed by institutions such as the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA) and the Network for Greening the Financial System (NGFS) among others. Together, these institutions have produced dozens of recognised scenarios.
The IPCC Representative Concentration Pathways (RCPs) were developed in preparation for the IPCC Fifth Assessment Report (AR5) and were officially introduced in 2014 by the climate modelling community, led by the Integrated Assessment Consortium (IAMC) (IIPCC, 2007[128]). The RCPs represent a set of greenhouse gas concentration trajectories and their associated levels of radiative forcing by 2100, measured in watts per square metre (W/m²). These scenarios range from RCP1.9, a very stringent mitigation scenario (the radiative forcing per square metre increased by 2.6 watts in 2100), which reflects strong mitigation efforts aligned with ambitious climate policy, to RCP8.5 (the radiative forcing per square metre increased by 8.5 watts in 2100), a very high warming scenario which assumes high emissions with limited mitigation. Modellers use RCPs to project physical climate impacts such as global temperature rise, sea level change and the frequency of extreme weather events (IIAS, 2025[129]). Although RCPs provide essential climate data, they do not explain the economic or policy conditions that lead to specific emissions levels and are limited in near-term emissions. This impedes their application for investors who need to assess broader risk drivers within the real estate sector (Peters, 2020[130]).
To address this, the IPCC Shared Socio-economic Pathways (SSPs) were introduced as a complementary framework. SSPs describe internally consistent socio-economic futures, incorporating assumptions about population growth, urbanisation, economic development, technological change and climate policy ambition. The five SSPs range from SSP1 (Sustainability), representing inclusive and environmentally conscious growth, to SSP5 (Fossil-fuelled Development), which assumes high economic growth and continued reliance on carbon-intensive energy. These scenarios demonstrate over 30 possible combinations based on inputs (Pirani, 2024[131]). While SSPs help to contextualise emissions trajectories, they do not directly quantify climate impacts without being paired with an RCP (IPCC, 2021[132]).
By combining SSPs and RCPs, the IPCC created the SSP-RCP framework, which supports fully integrated climate scenario analysis. This allows users to assess both the physical impacts of climate change and the socio-economic drivers behind them. For instance, SSP1-1.9 (Taking the Green Road) represents a sustainability-led pathway consistent with limiting warming to 1.5°C, while SSP5-8.5 reflects a high-emissions, high-growth world (NZ Gov, 2024[133]). These combinations offer a practical tool for real estate investors to evaluate how climate-related risks may evolve under different global scenarios. Investors can use these scenarios to assess exposure to extreme events, changes in urban growth patterns and the economic implications of mitigation policy. The SSP-RCP framework informs many of the property risk models and regulatory tools used to support resilient, forward-looking investment decisions (UNEP FI, 2023[134]).
Climate scenarios developed by the Network for Greening the Financial System (NGFS) provide a financial-sector-focused approach to assessing climate-related risks. Established in 2017, the NGFS is a global coalition of 141 central banks and supervisors driving climate-related risk management and sustainable finance. Its flagship climate scenarios developed with leading research institutions provide forward-looking pathways to help financial institutions assess risks and guide transition strategies, without predicting specific outcomes. These scenarios incorporate macroeconomic, sectoral and physical risk variables across four core pathways: Orderly, Disorderly, Hot House World and Too Little, Too Late (Figure 2.4). The NGFS short-term climate scenarios add a near-term perspective by modelling the immediate effects of climate and policy shocks on financial stability. This is a publicly available tool to guide analysis of the immediate effects of climate change. While originally intended for use by regulators, these scenarios are increasingly useful for real estate investors seeking to assess near-term risks such as insurance repricing, market volatility and liquidity impacts. They support the quantification of both transition risks (such as policy-driven costs, carbon pricing and stranded assets) and physical risks that can affect asset performance, valuation and insurability (NGFS, 2025[135]).
Source: (NGFS, 2022[136]), recreated by the OECD.
The NGFS technical documentation (Version 5.0, 2024) supports these frameworks by detailing the use of Integrated Assessment Models (IAM) such as REMIND-MAgPIE, MESSAGE-GLOBIOM and GCAM. These models simulate emissions pathways, economic trajectories and land use changes, producing outputs suitable for real estate-specific climate-related risk analysis. The documentation also provides spatially downscaled data and estimates of macroeconomic damage, which allow for regional-level assessments of property exposure and vulnerability (NGFS, 2025[135]). The NGFS Phase V scenarios assess both physical and transition risks globally, distinguishing themselves from IEA and IPCC models through longer time horizons (2100), macroeconomic granularity and endogenous carbon pricing. Designed for financial risk analysis, they are widely used by central banks and investors to test portfolio resilience, inform climate disclosures and align strategies with net-zero goals (NFGS, 2024[137]).
Scenarios developed by the International Energy Agency (IEA), such as the Net Zero Emissions (NZE) and the Stated Policies Scenario (STEPS), offer energy transition projections that are particularly relevant to real estate. These scenarios help investors evaluate the impact of policy trends, energy efficiency targets, electrification strategies and carbon pricing on property values and operational costs. In the case of NZE, the scenario provides a pathway for limiting global temperature rise to 1.5°C by 2030 (IEA, 2024[138]). STEPS reflects the current trajectory of the global energy system by incorporating only those policies and measures that are already in place or under active development. It serves as a conservative benchmark, offering a sector-by-sector view of how existing commitments may shape future energy and emissions trends without assuming full implementation of long-term pledges. While it is not designed to achieve a particular outcome, it considers national policies both active and planned as well as Nationally Determined Contributions under the Paris Agreement among others (IEA, 2024[138]).
The central challenge is consistency and comparability. A proliferation of frameworks risks confusion, but credible initiatives such as those developed by the IPCC, IEA and NGFS demonstrate that convergence is possible. These institutions emphasise the importance of linking physical risks with transition dynamics, offering standardised data and modelling approaches that can be directly applied to property markets (NGFS, 2022[136]; IEA and OECD, 2024[93]). Embedding these tools enables real estate actors to align risk assessments with the standards used by regulators, lenders and institutional investors and to ensure that the sector’s risk assessments align with broader financial system stress-testing and regulatory expectations.
While respondents to the OECD Future-proof Real Estate Investment Survey recognise the importance of scenario-based analysis for understanding and managing climate-related risk, there is room for greater alignment and capacity-building to ensure consistent and comparable assessments across the sector. For example, the survey suggests a strong reliance on IPCC’s RCPs and SSPs, 47% (20 out of 43) and 44% (19 out of 43) respectively. The IEA scenarios follow, used by 21% of respondents, while other sources such as the NGFS or OECM, Greenpeace and IRENA also inform some analyses, reflecting the diversity of approaches in the market. Additionally, a notable 23% share of respondents (10 out of 43) reported being unsure which scenarios they use, which implies the need for capacity-building, clearer internal processes and potentially greater harmonisation in how scenarios are selected and applied within the sector (Figure 2.5).
Note: Question from the survey: “Climate transition scenarios utilised”. The survey respondents could select all applicable options. The survey question uses the Other Effective Area-Based Conservation Measures (OECM), Greenpeace, the Network for Greening the Financial System (NGFS), the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change’s (IPCC) Shared Socioeconomic Pathways (SSPs) and Representative Concentration Pathways (RCPs) scenarios.
Source: OECD Future-proof Real Estate Investment Survey
Climate scenario analysis is valuable because it exposes the range of stresses real estate may face under radically different futures. This knowledge helps all stakeholders to ensure assets are protected in the best ways, be it physical upgrades or investment strategies. Knowing future risk is the first step in any climate-related risk assessment.
Embedding scenario analysis directly into investment strategy, design choices and disclosure, allows the real estate sector to treat uncertainty as a framework for resilience and competitiveness. The priority now is to move from availability to application and deeper integration into decision making. This means using scenario outputs to inform investment strategy, asset design, capital allocation and disclosure in a way that actively prepares for policy shocks, stranded assets and systemic repricing (DNB, 2021[139]). Without timely or consistent integration, portfolios remain exposed to these and other related financial impacts (ECB, 2025[140]).
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