In this episode of the REIT Report special series, “Building Resilience,” Dr. Jeremy Porter, head of climate implications research at First Street, shares how data supports real estate stakeholders in making informed decisions and adapt to more extreme weather events.
In this special episode of the REIT Report, part of an ongoing series, “Building Resilience,” covering issues facing the REIT industry as it remains focused on investing for the long term, Jeremy Porter, head of climate implications research at First Street, joins Nareit’s Jessica Long, senior vice president of environmental stewardship and sustainability, to discuss how high-resolution climate models are helping people to understand property-specific impacts from different weather events and to develop and implement adaptation plans.
“One of the ways in which we’ve thought about climate risk is a one-in-a-100-year event, which implies that if I just had a one-in-a-100-year flood, I don’t have to worry about another one, I’m not going to live to be 100 years old. That’s not actually how they work,” Porter explains. “Understanding that every year there’s an independent opportunity for that probability of an event to occur, so if you look out over the 30 years of a standard residential mortgage, a 1% chance of flooding every year means that over those 30 years, you have a 26% chance of flooding. And so suddenly you’re saying, wow, I have over a quarter chance of flooding over the lifetime of my mortgage.”
He explains how the severity of a 1% likelihood event varies across the country and how this becomes even more complicated when looking at future projections. As extreme weather events become more likely, the specific risk (e.g., flood depth) that had a 1% likelihood is now more frequent, and the actual one in 100-year event is even more severe.
“As we built out different components of our flood model, we wanted to understand what the community impact was beyond just the property, so we included damage functions to capture risk to critical infrastructure, electrical grids, hospitals, police and fire stations, and social infrastructure. We also wanted to understand how commercial buildings are impacted in a way that’s different from residential buildings – what does that mean for commercial viability in communities following an event, for foot traffic, downtime, and lost revenue?”
Porter discusses how communities across the country are experiencing new and changing risks and some of the macroeconomic analysis captured in First Street’s twelve National Risk Reports . “Our perspective here at First Street is that it all starts with data. Just eight to 10 years ago, we didn’t have the data to make these kinds of decisions in an actionable way that drove decision-making around adaptation. We’ve made huge strides over the last decade in terms of how to understand the risk, to measure the risk, and how to effectively protect yourself, whether you’re a commercial entity or a residential homeowner.”
Stay tuned for the second episode in the Building Resilience series, in which Daniel Kaniewski at Marsh McLennan discusses his experience in disaster response and efforts to capture the value of resilience investments to a broad group of stakeholders.
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