What drives institutional investors' climate adaptation decisions in commercial real estate?

Maria Fernanda Villalba Muñoz, Daan Schraven, Michaël Peeters and Hilde Remøy

Journal of Property Investment & Finance, 2026, vol. 44, issue 4, 303-324

Abstract: PurposeInstitutional investors play a critical role in adapting the built environment to the unavoidable impacts of climate change. However, little is known about their decision-making behaviours and the factors driving climate adaptation (CA) investments. Drawing on institutional theory, this study aims to examine how organisational and institutional contexts influence CA decision-making.Design/methodology/approachThis study employs a qualitative approach, drawing on nine semi-structured interviews with senior managers at different management levels in Dutch real estate investment organisations.FindingsAlthough coercive, normative and mimetic pressures drive CA, their capacity to generate action remains limited by low legitimacy perceptions for taking CA actions, lack of prioritisation of CA goals, partial enforcement of regulatory or policy frameworks, divergent views on climate uncertainty and low environmental interconnectedness. These limitations point to a prevailing institutional pattern of sustainable finance 2.0 that positions CA as a risk management tool rather than a systemic response.Practical implicationsThis study highlights structural institutional constraints that can limit stronger CA adaptation approaches and provides insights for policymakers and industry practitioners seeking to promote or engage in more coordinated, collective and systemic adaptation responses in real estate investment.Originality/valueThe study contributes to a limited but growing body of knowledge on CA in institutional real estate investment by empirically enquiring about the drivers and institutional factors shaping CA decision-making. Grounded in theory, it contributes to the sustainable finance debate by providing new explanatory insights into why growing awareness does not consistently translate into CA actions, pointing to a structural lock-in that constrains CA.

Keywords: Institutional investors; Climate adaptation; Real estate investment; Institutional theory; Property investment; Decision-making; Sustainable finance (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-10-2025-0163

DOI: 10.1108/JPIF-10-2025-0163

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