SPMS is urging its investment managers to address climate risks within its €1bn unlisted real estate portfolio after a review by the pension fund identified properties in the US states of Florida and Texas as particularly susceptible to flooding from rising sea levels.
Last year, the €13bn pension fund for Dutch medical specialists took stock of the physical climate risks in 15 of the 17 real estate funds in which it invests. “This showed that a large part of the portfolio is exposed to hurricane risk, wildfire and flood risk,” SPMS said in its annual sustainability report.
The pension fund’s assessment revealed that 15% of the properties within the real estate portfolio face potential damage from coastal flooding due to sea level rise. This is higher compared to risks from hurricanes and forest fires which could impact 7% and 3% of the real estate portfolio, respectively. The properties most at risk of climate-related damage are primarily in the US sunbelt region.
“We see that especially real estate in South Florida and on the Gulf Coast of Texas is exposed to the risk of coastal flooding,” Fred Wouters, investment manager at SPMS said. “This is not only because of the low elevation of these areas but also because coastal protection is often lacking.”
Wouters said SPMS may only invest in certain areas if there is a “discount to sufficiently compensate for the risks, or if sufficient protection measures have been taken.”
He said the results of the study only relate to data from the fund managers themselves.
“We still want to have the results validated externally. Ultimately, we want to have a complete overview for all our real estate holdings at the property level,” Wouters added.
Following the study, SPMS has instructed its real estate consultant Townsend to ask the managers concerned to take sufficient defensive measures.
“At a number of properties with an increased risk of forest fires, for example, fire barriers have already been installed. Possibly dam walls can be placed at properties with a high risk of flooding,” said Wouters.
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