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Commercial real estate leans on predictive climate risk models as insurers price in
The climate risk assessment industry is projected to roughly double to about $13B by 2030, as more underwriting shifts climate risk into core inputs.
Bisnow reports that as corporate ESG pushes fade, climate risk data is increasingly becoming a core underwriting input for commercial real estate. Developers and investors are building or buying predictive, physics based models to evaluate flood, heat, and severe storm risks as insurer premiums rise and extreme weather losses mount.
The outlet says First Street chief economist Jeremy Porter described the shift as a move from secondary ESG consideration to “core underwriting input” because investors, lenders, and insurers now need the analytics. The segment, which Bisnow characterizes as made up of a few hundred firms, is poised to roughly double to about $13B by 2030, according to Boston Consulting.
Bisnow also points to recent deal and partnership activity, including BlackRock’s 2021 acquisition of a climate scenario model from Baringa Partners, CBRE and JLL climate science partnerships announced over the past two years, and MSCI’s purchase of First Street in a deal reportedly worth $120M.
The story adds that pricing gap dynamics are central to the market opportunity, with climate priced in causing assets that otherwise look similar on demand and infrastructure to diverge. Bisnow notes that real estate investors are increasingly including this information in their process, and MSCI is particularly focused on supply chain intelligence to support exposure and resiliency analysis.