Integrating Climate Adaptation into Physical Risk Models

This report presents an analysis of the integration of climate adaptation into physical risk models, specifically focusing on the financial risks posed by climate change to global real estate properties within the S&P Global REIT Index. It outlines the significant economic losses attributed to climate-related events, which have reached approximately US$4.3 trillion over the past five decades. The report details projected increases in physical climate hazards and their potential costs, estimating that cumulative projected costs could reach US$559 billion by 2050 under medium-high climate change scenarios. Furthermore, it discusses the limitations of existing risk assessment models that often overlook adaptation measures, which can lead to an incomplete understanding of investment risks. The study also identifies potential adaptation solutions and their economic implications, suggesting that proactive adaptation investments could mitigate some of the financial impacts of climate hazards. The analysis serves as a foundation for improving risk assessments in the financial industry by incorporating adaptation considerations.