IPE RE Conference: Investors must increase climate resilience on path to net zero

Investors must get to grips with how climate-driven events are affecting real estate portfolios, become more prepared and increase resilience, according to Christof Reinert, head of Risk Management Partners at German reinsurer Munich Re.

Reinert referred to the World Economic Forum’s Global Risk Report 2025, which states that extreme weather events “are anticipated to become even more of a concern than they already are, with this risk being top ranked in the 10-year risk list for the second year running”.

Addressing a room of more than 400 delegates at this year’s gathering of real estate professionals at the IPE Real Estate Global Conference in Copenhagen, Reinert said: “This is not just an environmental concern, it’s a business imperative. According to the report, we are facing extreme weather events, obviously ecosystem degradation, shifts in the Earth’s natural systems, but also shortage of critical natural resources.

“You can see how climate risk now affects every part of your business, the economic disruption when supply chains breakdown to reputational damage and compliance pressures. So it’s the whole operation you have to align, and come from a reactive approach to a proactive assessment.”

But what does climate risk really mean, he asked. “There are the four important questions, from my perspective,” Reinert said. “There is an increased exposure; there is an uncertainty of climate resilience; questions over how effective the existing resilience, defence measures are, and does the public or the private sector invest enough to increase the defences? And then, of course, you have a tremendous pressure to get the right transparency for all of your stakeholders.”

The good news, according to Reinert, is that the real estate industry has “five superpowers” to tackle the issues head on. He said the industry is “future thinking”, “capable of including climate models into asset planning and asset assessment”, good at “data collection”, “decision making”, and “agile”.

He said: “That means you’re using data to tackle your challenges, your market challenges. Now you can do it also for the for the climate, and that’s not about only collecting ESG data. It’s about making the data really actionable. You also have interdisciplinary collaboration, we see that risk managers are talking with asset managers, with the ESG people, the different departments coming together, and you’re capable to orchestrators. And then, of course, you have the regulatory foresight.”

Reinert said that increasing resilience to climate events would also help boost profitability. “Adaptation creates competitive advantage, improves operations planning. According to the World Bank, the average benefit-cost ratio for climate adaptation is four to one. That means for every $1 invested, there is a $4 return.”

Is the real estate industry on target to meet net-zero goals?

In the following session, delegates were treated to presentation from Laurent Ternisien, deputy global head real estate investment, at BNP Paribas REIM, who asked whether the real estate industry is on track to reach net-zero goals.

In a surprise for the audience, Ternisien opened his talk by asking whether it helps or hinders to have the concept of net zero.

He said: “It’s a very powerful concept, net zero, but I think it’s not understood super well. The term net zero refers to the difference between the greenhouse gasses emitted in the atmosphere and those removed from it. So what does it mean for our sector? It means that, in fact, we’ve got to do three things together. We must reduce energy consumption, decarbonise the energy we use, and we need to offset the remaining carbon emissions.”

He said that BNP Paribas REIM had assessed the nearly 500 assets it manages and found that 50% of its assets were ahead of their net-zero trajectory and 50% were performing below.

He went on to assess the difference between the energy performance of the various real estate asset classes, starting with offices which he said tended to perform better and logistics assets which are “more complex and not very energy efficient”.

“Our commitment, like many others of you, is to ensure that all of these assets will be compliant with the net-zero trajectory by 2030,” Ternisien said. 

He added that this will be achieved by increasing three things: capital expenditure, operating expenditure and stakeholder engagement, with tenants the most important of these.

Ternisien concluded by touching on the issue of obsolescence, a major issue considering the large percentage of ageing real estate. He said the real estate industry must take action to achieve net zero, “not only to fight against obsolescence”.

He said: “It’s also to generate extra value for our investors, and that’s why we are really convinced that’s an opportunity, and we need to find a way within this industry to seize this opportunity altogether.”

To read the latest IPE Real Assets magazine click here.