Climate risk is a locational risk that resonates in a tangible way for both home buyers and investors. It’s an important part of the due diligence process and also a way to respond to consumer demand for sustainability, corporate ESG imperatives, and government regulations.

Yet, traditionally, information on location has been dependent solely on boots on the ground, personal experience, or gut feel — not data. Today, the risks and stakes (environmentally, socially, and financially) are too high to base real estate decisions on anything but data.

So, how are residential and commercial real estate using climate risk data in decision-making?

1. Assessing the vulnerability of current and potential properties to physical climate risks, such as flooding, storms, and sea level rise

Identifying properties that may be at higher risk of damage and financial losses can help real estate companies decide which assets to buy, renovate, or divest.

2. Evaluating the long-term financial performance of properties

Investors can choose which properties or markets to focus on in the future. Data on temperature and precipitation patterns can help forecast how climate change affects rental demand or property values in a particular region.

3. Developing strategies for adapting and protecting properties from climate risks

The implementation of measures, such as flood-proofing, green infrastructure, and resilient design, can help diminish the risk of damage from extreme weather events in urban areas.

4. Identifying opportunities for investing in properties or regions that are less vulnerable to climate risks

Investors can reduce overall exposure to climate risks by diversifying their portfolios using data. They might look for properties located in areas with low risk of flooding or drought, or in regions with strong track records of adapting to and managing climate risks.