Are Real Estate Investors Managing Climate Risk... Or Simply Timing It?

On November 3-4 2025, Greenbuild hosted the second annual Sustainable Finance and Investing Forum, a pre-conference event held exclusively for real estate investors, operators, developers and fiduciaries. While last year’s forum in Philadelphia was defined by themes of ESG disclosures, portfolio benchmarking and the uncertain policy landscape following the 2024 US presidential election, this year’s Los Angeles gathering centred on climate adaptation and resilience amid resource constraints driven by data centre demands, outdated grid infrastructure and the evolving business case for decarbonization, given global rollbacks of ESG policies and incentives. Among the most notable takeaways from the event was the transparent view of how climate risk is being factored into investment decisions.

Long-horizon investors – such as pension funds, endowments, financial gatekeepers and insurance-linked asset managers – demonstrated that climate intelligence is now embedded in both strategy and operations. These firms reported relying heavily on analytics providers such as ClimateFirst, MSCI and Munich Re to quantify property-specific exposure to flooding, heat stress and storm events. The resulting insights guide acquisition strategies, inform underwriting assumptions, shape capital expenditure plans and support long-term portfolio management, representing a significant advance towards holistic portfolio assessment compared with earlier methodologies. For these investors, climate risk is seen as actionable and directly tied to multi-decade liabilities. Ignoring it would be irrational, as it could compromise their ability to meet those obligations in the future. Embedding resilience, therefore, protects both the portfolios and the beneficiaries these investors serve.

Yet the event also revealed a sharp contrast. Managers from opportunistic private equity and value-add real estate vehicles, including short-term core-plus and renovation-focused funds, grew noticeably quieter during these climate integration conversations. While these participants acknowledged using analytics to evaluate potential climate risks, none indicated that projected risks had ever been sufficient to prevent a deal. They reflected that properties that are expected to face severe flooding or heat stress in future decades still move forward through the deal pipeline because the holding period is short enough to exit before risks materialize, and investment performance is measured over that limited window of time. In these firms, climate intelligence informs expected returns, sets risk premiums and guides logistical elements such as insurance coverage or minor retrofit planning, but it rarely determines whether acquisitions proceed.

For most of these investors, the impact of long-term climate exposure is effectively discounted out of view. A potential drop in a property’s future value, equivalent to a one or two percentage point hit to expected returns 20 years from now, may seem minor in a three- to five-year model, but it represents a major threat over time. In short-term investment funds, the maths makes even serious future climate risks appear small in today’s valuations, allowing deals in highly exposed areas to proceed despite the potential for severe losses in the decades ahead.

The approach of short-horizon funds is rational within their mandates, but ultimately raises a critical question: Are these firms genuinely managing climate risk, or merely timing it to fall outside their period of responsibility, leaving future owners to shoulder the consequences? Current incentives raise the risk of properties in vulnerable areas being systematically underprepared for future climate impacts.

This is an issue that will remain at the forefront of future Greenbuild forums, as the industry grapples with aligning financial imperatives and climate realities. In the absence of unified regulation, such forums may be where the next generation of market norms quietly begins to take shape. The test ahead is whether market behaviour can evolve as quickly as the risks it now seeks to measure.