Climate Risk Assessment Framework in Real Estate: A Focus on Flooding

Shu-Han Wu (), Chun-Lien Chiang, Yu-Hung Huang, Jung Huang, Jung-Hsuan Tsao and Ching-Pin Tung
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Shu-Han Wu: Department of Bioenvironmental Systems Engineering, National Taiwan University, Taipei 106319, Taiwan
Chun-Lien Chiang: Formosa Climate Smart Service Limited, Taipei 104102, Taiwan
Yu-Hung Huang: Formosa Climate Smart Service Limited, Taipei 104102, Taiwan
Jung Huang: Formosa Climate Smart Service Limited, Taipei 104102, Taiwan
Jung-Hsuan Tsao: Formosa Climate Smart Service Limited, Taipei 104102, Taiwan
Ching-Pin Tung: Department of Bioenvironmental Systems Engineering, National Taiwan University, Taipei 106319, Taiwan

Sustainability, 2024, vol. 16, issue 21, 1-21

Abstract: Climate change exacerbates flood hazards, resulting in risks to real estate values that should be considered by long-term investors. Flood risk presents two major financial risks: market risk and credit risk. Market risk refers to potential property value loss, and credit risk increases the likelihood of mortgage defaults. However, methods and comprehensive data for quantifying global real estate flood risks are lacking. To address this problem, this paper proposes two flood risk assessment frameworks: the local-oriented approach (LOA) and global-oriented approach (GOA). Two hazard and three vulnerability assessment methods are also introduced to support these frameworks. The LOA vulnerability estimates of regions with complete records are required to support the GOA. Taiwan was selected as an example for the LOA assessment, and the results were used to estimate vulnerability overseas in GOA assessments. The results of case studies for buildings located in four cities in different countries were compared. The proposed framework enables investors and asset owners to globally quantify climate risks in real estate, even when the available data are incomplete. Users can choose the most appropriate approach on the basis of the available data and their tolerance for uncertainty.

Keywords: climate risk assessment; flood risk; real estate; price fluctuation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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