Investors’ reliance on insurance to cover climate-related risk could become more expensive as insurers improve climate risk modeling. Additional action must also be taken to mitigate the transitional risk of loss of liquidity.
In 2017, ratings agency Moody’s incorporated climate risk of cities into their credit ratings. Investors with assets in climate-risk prone geographies should work with local governments to ensure these areas remain attractive places for future capital.
Data around profitability for green buildings is mixed. Investors should view improvements not just through higher rents, but the potential downside of inaction. Green loans and bonds are attractive financing options.