“It will be our homes that are flooded”

“There is a real challenge in the room about the speed of change needed,” says Oldham. “If we only rebuild 1-2% of our cities every year, this will take a generation… Every single building development matters.

“The scale of the challenge is huge.”

Although the pace of change is slow in property, an increased awareness of the financial risks of climate change has woken up investors. Alexandra Notay, build-to-rent fund director for PfP Capital, tells the audience about a major shift in investor thinking: “There’s a huge appetite that’s suddenly emerging from cities, sovereign wealth funds and institutional investors, who frankly five years ago wouldn’t have given a monkey’s,” says Notay, who adds that the growth in green bonds and ESG (environmental, social and governance) investment is precipitating change.

“There’s a huge appetite from institutional investors who five years ago wouldn’t have given a monkey’s”

“The understanding is that climate risk is materially important and it’s something they actually need to invest in preventing any further,” Notay says, pointing to Legal & General’s pledge to no longer fund oil and gas projects.

Notay pinpoints 2014 and the aftermath of Hurricane Sandy as a tipping point for real estate, “That year, a ULI [Urban Land Institute] report was published showing the monetary losses related to real estate and infrastructure from severe weather events were recorded as £109.5bn per year, and I think that’s going up.

“As increasing numbers of climate events happen, stuff becomes uninsurable and how do we manage that? Real estate fund owners are really considering this in a much more cohesive fashion.”

“What we’re seeing is a reduction in insurer capacity,” says Paul Berg, partner and group director at Griffiths & Armour, who claims climate risk is raising “questions of insurer appetite”.

“Pretty much overnight premiums doubled, trebled and quadrupled… The reason for that was a number of significant claims,” he says.

When a series of international projects under construction were hit by multimillion-pound water leaks and fires, Berg says that made “insurers start to get a bit panicky”. There was also the high-profile Mandarin Oriental hotel fire in London, and Glasgow School of Art being struck by fire twice, with the same insurer hit by both claims.

As for floods, “Historically flood has always happened around rivers and floodplains, but now it’s internal floods that we’re seeing... which usually happen a couple of weeks before practical completion,” says Jack Wolstencroft, client services director at Griffiths & Armour.

The growth in high-profile pay-outs saw Lloyds examine its losses, and the insurer identified that “professional indemnity was the second-worst performing portfolio,” says Berg. “Losses are increasing and the costs associated with managing those losses are increasing.”

“What we’re seeing is a reduction in insurer capacity”

If the financial risks to property from climate change are real and tangible, what are the blockers to change? One challenge for developers, says Chantal Henderson, director of commercial finance at Grosvenor Britain & Ireland, is getting everyone aligned and committed to action.

To tackle internal inertia, Henderson says Grosvenor invested in training and education: “We took our entire senior leadership team to the Cambridge Institute for Sustainability Leadership,” says Henderson. “Frankly a lot of people went in a bit cynical… Two days later everybody came out, aligned and united, saying we just can’t ignore this.”

Grosvenor also set personal objectives for every member of staff and made 35% of people’s bonuses based on meeting sustainability goals, to guarantee employee buy-in. “So if you didn’t like it because you didn’t think your appraisal stacked up, you might think about your salary.”

“The real risk is the status quo,” says Henderson. “Resilience is [found] in looking at this straight on and how we work together.”

Climate resilience is a theme at this year’s Festival of Place, happening on 7 July 2020 – go to www.festivalofplace.co.uk for updates on tickets and speakers.

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