Climate Migration and Real Estate investments

News - 01 February 2022 - Communication BK

Climate migration, or the movement of people due to environmental changes, is expected to grow as the climate changes. The Internal Displacement Monitoring Centre projects that 14 million people could be displaced annually by disasters, for example. Where will people leave, and where will they go – and why? How can we, as a society, manage this change in an equitable way?

Researcher Zac Taylor focuses on a small piece of this grand challenge: climate migration in the context of the investment decision-making of large real estate funds, which manage hundreds of billions of euros in investment in property around the world on behalf of clients like pension funds. He is working on this topic in collaboration with the Urban Land Institute and real estate investment firm Heitman.

Climate risks

In recent years, real estate investors have started to incorporate physical climate risks, like hurricanes or floods, into their investment decisions. They question: “Is this office building likely to flood? Is this apartment building resilient to extreme heat?” Climate risks are usually analysed at the asset- or portfolio-scale, rather than community level. A house might be elevated to be flood proofed – and therefore seemingly a resilient investment – but what happens if the road is washed away, or local businesses can’t reopen after a storm? This is where research on climate migration comes in. Population migration is both a large- small-scale process: it happens between countries and within cities and neighbourhoods.

Decision-making process and investor perspectives

The research collaboration had two aims. First, Taylor and team assessed how real estate investors define and address climate migration within their investment decision-making process. Do investors avoid investment in areas that they think could see population loss, because they are highly risk-exposed? Do they prioritize communities that have more physical resilience, or which might receive ‘climate migrants’ in the future? Zac Taylor: “For most investors, this is an emerging topic, but one where they nevertheless have already developed several thematic insights that we can build on to inform industry practices.”

The second aim of the project was to create a new investment decision-making framework, which connects these thematic insights with the investment decision-making process. ”A key takeaway? Investors can help society to manage climate migration by promoting equitable and inclusive urban resilience. To do so, investors need to better understand climate risks in the markets they invest in, they should more closely collaborate with other stakeholders, and they can make further investments in affordable housing and infrastructure” Taylor explains.

RED&BLUE project

This research dovetails with a Faculty initiative called RED&BLUE (Real Estate Development and Building in Low Urban Environments). RED&BLUE addresses real estate climate risks in investment and urban area development in the Dutch urban delta, and is being led by Ellen van Bueren, Co Verdaas, and Tom Daamen of the MBE department, with ties to other faculties at TU Delft and beyond, and several societal partners, including real estate investors and developers, engineering firms, and local governments.

Creating urban resilience in the Netherlands and other regions with significant climate risk exposure requires broad collaboration and integrated long-term strategies. Real estate and infrastructure investment and finance will be essential to any strategy. Understanding how real estate investors address climate risk, and promoting strategies that can connect their efforts with a broader agenda for equitable and resilient built environments, is essential.

Figure: Brandon Weil / ULI

A new (open access) publication

The Urban Land Institute (ULI) recently published the comprehensive (open access) report ‘Climate Migration and Real Estate Investments Decision-making’ by Zac Taylor as lead author, in collaboration with the Urban Land Institute and the real estate investment firm Heitman. Zac Taylor is a postdoctoral researcher at MBE, with a background in real estate-finance climate risk governance.

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