One of the interesting developments over the past decade has been the emergence of an entire system of funds, consultancies, websites, nonprofits and regulatory agencies watching the impact investment and ESG (Environmental, Governance, Social) space. One of the best of the consultancies is 427, a numbers crunching firm that specializes in climate risk. Recently they released a report on the potential impact of climate risk on real estate investments. While they focused primarily on REITs (Real Estate Investment Trusts), the numbers for insurance losses, damage and destruction are equally relevant to multifamily investors. Here are some highlights:

  • The cost of floods in Hurricane Harvey in 2017 was $127 billion, much of it in low lying areas around Houston that PCRP Group avoids. (Higher elevations are another story). In one case, American Homes 4 Rent, which has a portfolio of Houston area properties, suffered $20 million in hurricane-related damage. Their insurers only paid $11 million, leaving them to come up with the rest. Needless to say, investors suffered.
  • U.S. markets most exposed to sea level rise include New York, San Francisco, Miami, Fort Lauderdale, and Boston.
  • 35 percent of REITs properties globally are currently exposed to climate hazards. Of these, 17 percent of properties are exposed to inland flood risk, 6 percent to sea level rise and coastal floods, and 12 percent to hurricanes or typhoons.

Read the Full Report Here.

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