GRESB is raising the bar on climate risk disclosure for real estate

Commercial real estate insurance premiums in the US have risen 88 percent over the last five years, according to JLL. This is a signal from the market that stranded assets, ones that fail to keep pace with climate mitigation, are a growing risk. 

The financial case for taking climate risk seriously is already in the numbers for real estate and construction. As a result, the Global Real Estate Sustainability Benchmark (GRESB) is tightening its requirements on climate risk disclosure. 

Reach out to our expert Freddie Baker to get started on climate risk – or go further

GRESB provides standardised ESG assessments for the real estate and infrastructure sectors. It evaluates portfolios on metrics including energy consumption, greenhouse gas emissions, and sustainability policies.

The shift towards climate risk disclosure on asset level is significant, as GRESB scores feed directly into investment and financing decisions. Unlike asset light organisations that may find little exposure through their operations, the real estate sector is asset heavy, vastly increasing the likelihood of exposure to climate risk.

Not only can climate risk raise costs in real estate, but it can also push assets off the market

For most industries, asset level risk causes a change in insurance premiums or operational downtime. Damaging, but manageable.

In real estate, the asset itself is the revenue generation source. A building that floods, overheats, or misses an energy performance threshold does not just cost more to run. It can become uninsurable, unfinanceable, or unlettable. Most climate risk frameworks weren’t built to capture this kind of exposure.

GRESB now scores physical and transition risk directly, and the bar for what counts as credible risk management is rising

GRESB’s climate risk indicators go further than most because they were built specifically for real assets.

Along with other sustainability disclosure, GRESB is increasingly requiring climate risk disclosure at the asset level, meaning companies need to demonstrate an ongoing, asset level process rather than a portfolio level policy.

The weighting for the risk management section has increased as the focus moves from assessment to action.

Companies working through what credible climate risk management looks like for their portfolio don’t have to start from scratch

Beyond GRESB, companies that treat climate risk as an asset-level question, rather than a reporting exercise, are also better positioned with investors, lenders, and occupiers who are increasingly asking the same questions.

Nordic Sustainability has extensive experience guiding companies through integrating climate risk into strategy, operations, and investment decisions. Get started today by reaching out to our expert Freddie Baker for guidance.