Building a Resilient Asset Lifecycle
Climate risks are expected to add nearly $200 billion to annual premiums for property insurance by 2040, according to Swiss Re. The commercial real estate industry has identified climate resilience as a key priority in their sustainability planning. However, in spite of this realization, most firms still rely on traditional risk assessments that focus solely on building level data, rather than modeling the vulnerability of network dependencies that properties rely on to function, such as transportation and power networks. The lack of cohesive modeling that properly integrates network dependencies leads to unexpected losses through:
Valuation Gaps: Properties are currently being priced incorrectly due to an incomplete understanding of their true resilience;
Misspent Mitigation Funds: Most firms have earmarked budgets for mitigation which are evenly distributed across hazards. However, in reality, vulnerability to some hazards may be significantly higher than others, leaving firms exposed to significant losses;
Poor Building Use: The highest and best use assessment process is currently largely qualitative, and based on an imprecise valuation of client preferences, similar properties, and assessor experience. Without comprehensive, forward-looking predictive modeling, firms are not always able to prioritize the highest and best use for a property; and
Incomplete Due Diligence: Because the due diligence process currently relies on building data rather than modeling that accounts for network impacts, it does not accurately measure the true vulnerability of a property. Most due diligence processes also involve an audit of historical disaster data, rather than considering the future impacts of climate change.
Despite the real estate industry’s wholehearted embrace of ESG +R , the industry currently lacks the insights to integrate resilience into their processes and as a result, is unable to properly mitigate, price and transfer climate risk in the real estate lifecycle.
Advanced risk intelligence will transform the practices of the commercial real estate industry. Once the industry has an understanding of network risk, firms will be able to foster resilience in themselves and their clients throughout the real estate lifecycle, from selection to valuation and sales. This will include:
Comprehensive Due Diligence: Asset Managers and commercial real estate firms can properly assess the true vulnerability of a prospective property prior to purchase, including forecasting the impacts of climate change on the property and the networks it depends on;
Precision Mitigation: With clear, actionable insights about which business lifelines (such as power or transportation) will fail first in the event of a disaster, and for how long, property managers can prioritize how to effectively spend mitigation budgets. They will be able to mitigate the right risks and minimize losses;
Resilience Adjusted Valuation: Evaluators can understand the true value of an asset, inclusive of its resilience to hazards, during the sales process; and
Highest and Best Use: Firms can prioritize the most resilient use for a property based on both network and property-level data and climate predictions.
How we'll get you there
One Concern’s platform unlocks advanced risk intelligence that enables informed property management, investment and sales. Our digital twin offers visibility into the reality of dependencies like power and transportation, and allows users to visualize the impacts of extreme weather both now and into the future through our predictive, forward-looking models. One Concern also offers resilience metrics which can be applied both across geographies and over time, enabling stakeholders to adjust their offerings for a constantly changing landscape.
One Concern’s platform enables resilience throughout the real estate lifecycle, from selection to sales. One Concern’s technology provides both building and portfolio data and integrates risk both inside and outside the fence of a property. We paint a complete picture of risk that enables the user to make informed decisions and select resilient investments.
- 1C curated data helps portfolio managers understand and manage their assets by filling in gaps in underlying data for understanding their individual risks benchmarked across geographies, ensuring selection of top tier risks, and adequate mitigation of bottom tier risks.
- 1C risk metrics provide a pure scoring of resilience risk, not unlike a credit score, to accelerate pricing and portfolio management.
- 1C risk statistics enable clarity on margin, risk/return, and solvency capital needs and ensures selection of top tier risks, and adequate pricing of bottom tier risks.
- One Concern DNA™ also facilitates portfolio-wide evaluation of climate-change scenarios. This ability to monitor on the basis of a consistent suite of metrics improves portfolio steering.