Index provider MSCI has launched a product it claims enables real estate investors to assess climate risks.
The MSCI Real Estate Climate Value-at-Risk tool is designed to provide a forward-looking return-based valuation assessment to measure possible climate-related risks to real assets.
Jay McNamara, head of real estate at MSCI, said: “Private real estate, as a long-term asset class, is particularly vulnerable to climate-related events.
“Our research has shown that the potential impact for real estate investors from climate events is far reaching and spans assets and geographies.”
He added that investors could face increased operational costs including property repairs, higher insurance costs, property devaluation and even the complete loss of property.
MSCI’s tool intends to calculate the financial risks from both changing legislation due to climate action (transition risk) and the extreme weather impacts caused by climate change (physical risk), per real estate asset and per scenario.
“As more global investors are increasing allocations to real estate and other private assets, there is a growing need to identify and understand financial risks from climate change and take necessary action for risk management, portfolio performance optimization and regulatory reporting purposes,” McNamara said.
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