The MSCI Real Estate Climate Value-at-Risk (‘VaR’) measure is a means of identifying a path towards net-zero carbon emissions across a variety of properties and portfolios. The measure estimates the potential valuation impact on real estate portfolios attributable to future expected costs of carbon-emission reduction.
The Climate VaR tool plots Portfolio Climate VaR, Property/Project-Level Climate VaR, Carbon-Reduction Requirements (t CO2 /yr) against Floor Space per-square-meter (‘psm’), Capital-Value (weight), Capital-Value (psm), Energy Intensity, Emissions Intensity and Carbon Emissions to establish a transition pathway towards net-zero carbon emissions.
MSCI finds that most energy-intensive assets are not necessarily the most emission-intensive depending on the mix of renewable energy and economic significance of mitigation costs varies by current carbon-emission intensities.
A simulated portfolio has an aggregate Climate VaR of -6.4% in a scenario where global temperature increase remains under 1.5°C by the year 2100. Property-level contribution to aggregate portfolio risk is reflected in sample properties where mitigating actions, e.g. cleaner mix of energy, can be explored for each.Link to resource
Sectors: Buildings, Finance
Country / Region: EuropeTags: Banks, carbon, carbon dioxide, citizens, climate change mitigation, economic cost, emissions, emissions intensity, energy, energy intensity, global climate, Industry Regulators, Institutional Investors, mitigation costs, National Regulators, projects, risks, SMARTER, Supranational Regulators, targets
Knowledge Object: Web Resource
Author: Robson, Will; Harmse, Niel