The impacts of climate change are already beginning to materialize into financial risks. According to the World Meteorological Organization (WMO), climate change-related events over the past five decades have resulted in US$4.3 trillion in reported economic losses.

In a new report, GIC and S&P Global Sustainable1 analyze the projected increase in physical climate hazards for global real estate properties held by companies in the S&P Global REIT Index.

To read the full report, click here.

Key takeaways from the research include:

• Physical risks have tangible impacts on real assets. Under a medium-high climate change scenario (SSP3-7.0), the projected cumulative exposure to climate physical risks could reach US$559bn, or 28% of the total real estate asset value of the index, by 2050. Regardless of the climate scenario used, the warming that is already embedded in the climate system means that physical risks are likely to increase over time, raising costs across the broader economy for customers, tenants, building operators, owners, and investors.

• Existing risk assessment models often overlook the impact of adaptation, offering an incomplete picture of actual investment risks from climate events. This omission can lead to an incomplete view of the net costs of physical risks and create challenges for investors in prioritizing risk management efforts.

• Climate change creates opportunities for adaptation solution providers and for asset owners to invest in adaptation. Our study examines some readily available climate adaptation solutions for non-residential real estate, such as green or cool roofs and wet or dry floodproofing, and estimates the annual demand for these solutions to reach approximately US$29bn globally through 2050 (or US$726bn in total).