“The Risk Landscape is Changing”, with Immobilien Business
Climate ResilienceArticleJanuary 12, 2026
Heavy rain, storm surges, droughts: climate change is leading to an increase in extreme weather events – and with it, the risks to real estate. Holistic climate resilience assessments enable risks in portfolios to be evaluated at an early stage and informed investment decisions to be made in order to secure long-term value.
The use of low-carbon cement and steel in construction, the installation of electric heat pumps and photovoltaic systems for generating electricity: given the relevant share of global CO2 emissions, it is now standard practice in the real estate industry to actively reduce the ecological footprint and make a positive contribution to the climate.
What is newer, however, is the reverse perspective: What impact will possible climate scenarios have on real estate portfolios? Which regions will be particularly affected by natural hazards in the future, and what does this mean for the valuation of existing and planned real estate? What damage can be expected? And how should one adapt appropriately and invest accordingly?
Triggered by the increasing frequency and intensity of extreme weather events, stricter regulatory requirements, and increased pressure from investors, these issues are becoming increasingly important. Some aspects are now increasingly being taken into account in the context of energy-efficient renovations. However, responsible players are going one step further to improve their risk management and due diligence processes, make valuable investments, and build long-term resilience.
Climate Change is Affecting the Real Estate Industry
The current consensus is that by 2100, average global temperatures are expected to be two to three degrees Celsius higher than in the year1850. Switzerland, with its complex topography, is particularly affected by this. If global temperatures rise by three degrees Celsius, the increase in Switzerland is expected to be 4.9 degrees Celsius. As a result, not only can we expect more frequent extreme weather events, but also longer-term climate changes that could affect buildings and infrastructure. This is particularly relevant for the real estate sector: an analysis by GIC and S&P Global predicts that physical climate risks could cause losses of up to USD 559 billion in the S&P Global REIT Index by 2050.
This corresponds to around 26 percent of the total asset value of this index. The regulatory environment for physical climate risks is also changing: at the national level, at least since the Ordinance on Reporting on Climate Issues 4 (Art. 964a ff. OR), which establishes the TCFD recommendations as standard.
From 2026, banks and insurance companies will be subject to transparency requirements on climate risks, as set out in the revised Swiss Financial Market Supervisory Authority (FINMA) circular (2016/1). In addition, international standards such as the Global Reporting Initiative (GRI), Leadership in Energy and Environmental Design (LEED), Building Research Establishment Environmental Assessment Method (BREEAM), and Global Real Estate Sustainability Benchmark (GRESB) are driving further development. In short, the risk landscape is changing, and it therefore makes economic sense to actively anticipate and assess future natural hazards and to factor them into investment decisions.
Findings from the Climate Resilience Assessment
For an efficient and effective approach, it is recommended to: First, use scientifically sound scenarios provided by the IPCC. Second, pursue a systematic assessment approach at the portfolio and location level. Zurich Insurance Group manages over 700 properties and approximately USD 25 billion in assets globally and undergoes regular assessments.
The importance of high-quality climate resilience assessments will continue to grow in the Real Estate sector, with an increasing focus on quantitative methods, particularly in the area of cash flow modeling.
In the first phase, a data-based analysis of potential natural hazards for the entire real estate portfolio is carried out, taking into account various climate scenarios up to 2050. Furthermore, location data will be linked to market and insurance values, making it possible to identify and categorize the probability of hazards (return intervals) occurring at particularly exposed locations and the potential aggregate damage in each case.
The quantification consists of the share of the damage in the total value of the building and is calculated in the form of direct property damage and loss of income, for example, due to possible rent losses or downtime as a result of damage to the property (damage ratio). Building factors such as the type of building use, building material, and year of construction are included. The aggregated average annual loss (AAL) at portfolio level indicates the average expected annual financial loss.
After the identification and prioritization phase at portfolio level, a second phase involves an analysis at location level, including the surrounding infrastructure. This serves to understand the “weak points” of the property and the effectiveness of existing protective measures against the identified natural hazards. These can be both physical (structural measures such as facades with heat-reflective materials) and organizational (such as local business continuity management). This is used to derive a concrete investment plan. The comparison of investment costs and achievable risk reduction defines the effectiveness of individual measures.
The final phase involves continuous monitoring of the properties. According to Roger Baumann, COO and Head of Product Development Global Real Estate at Zurich Insurance Group, the sale of individual properties is also not ruled out. In the case of new acquisitions in the balance sheet portfolio, climate risks are already taken into account during due diligence.
A Wide Range of Action
Zurich Insurance Group's climate resilience assessment represents a holistic approach. However, companies are at different stages, which leads to a wide range of fields of action. For example, a global real estate manager has had both desktop and on-site analyses carried out for selected properties in Europe to assess the risks of storm surges, flooding, and heavy rainfall. The aim was to quantify realistic damage scenarios using the average annual loss (AAL) and the potential individual damage (asset level damage potential), taking into account existing structural measures, and to provide cost estimates and effectiveness assessments for CAPEX planning.
A Swiss-based financial institution with a significant real estate portfolio commissioned analyses for several portfolios using two climate scenarios up to 2050. For effective management, a globally designed analysis tool provided a clear overview of Swiss locations, sorted from highest to lowest aggregate climate risk. The analysis showed that the intensity of droughts and strong wind events in particular will develop particularly negatively in five cantons. Based on this, an assessment was made of how exposure and expected damage could affect cash flow and the market value of the properties. A UK-based real estate manager specializing in the conversion of traditional office space into “green” workplaces commissioned comprehensive desktop analyses for various locations and districts in London. Based on these analyses, individual recommendations for adaptation measures were developed for each location. This enabled the company to convey additional certainty regarding the long-term resilience of the properties during lease negotiations.
The valuation of investments in adaptation measures is also becoming increasingly scalable. However, there is still considerable potential for development in data quality.
Trends and Developments
The examples cited illustrate the progressive and forward-looking approach already being practiced in the real estate industry today. The importance of high-quality climate resilience assessments will continue to grow in the Real Estate sector, with an increasing focus on quantitative methods, particularly in the area of cash flow modeling. These approaches take into account, among other things, potentially declining rental income due to falling demand for vulnerable properties in high-risk areas, as well as anticipated increases in insurance and financing costs. The valuation of investments in adaptation measures is also becoming increasingly scalable. However, there is still considerable potential for development in the area of data quality.
At the same time, technologies such as smart building design based on networked IoT solutions and automated systems, as well as intelligent early warning weather systems, are undergoing continuous development; market conditions and regulatory requirements are also constantly changing. In order to secure their competitiveness and the long-term value of their real estate, companies are required to adapt their strategies in a flexible and forward-looking manner.
Zurich Resilience Solutions
Zurich Resilience Solutions' global Climate Resilience Team consists of over 60 climate risk experts, including climate data specialists, environmental scientists, catastrophe modelers, and civil engineers.
Assessments in the real estate sector are based on specially developed climate data, which is combined with global climate models to enable the following:
Forward-looking assessment: Detailed portfolio analyses based on four IPCC climate scenarios for periods up to 2100 to forecast over 20 natural hazards and their extent of damage.
Holistic risk picture: Location analyses that take existing protective measures into account to provide a complete picture of the situation and precise quantification at the location level.
Strategic prioritization: The results support the risk-oriented prioritization of investment decisions in order to make optimal use of resources and understand the financial added value.
English Translation. Originally published by Immobilien Business, December 2025.