Waterfront-Resilient-Buildings

The draft ASTM Property Resilience Assessment Guide recommends discussion of the following items prior to conducting a Property Resilience Assessment. Many of these questions are helpful during the process of selecting a climate risk modeling solution as well. Development of responses to these questions will help you select the best tools for you. Your consultant can assist with researching and documenting answers to these questions, if needed.

  • What is your current relationship to the properties being assessed (e.g., owner, buyer, lender, property manager, investor, insurer)?

Question 2

  • What assets, operations and/or systems are of concern and where are they located?

Question 3

  • Which natural hazards does the asset(s) currently face or are anticipated to face?

Question 4

  • Are you concerned about future climate hazards only or the broader range of natural hazards that may presently exist.

Question 5

  • Are loss histories or related data for natural hazard-related damage available and can copies of any such histories or data be provided?

Question 6

  • What data or decision support tools are you currently using? (Example global climate risk reporting tools)

Question 7

  • What materiality thresholds have been established and can they be applied to your resilience assessments? Are your materiality thresholds expressed as a dollar amount, value at risk, or percent of property value (see page 2)?

Question 8

  • To what extent do your resilience-based objectives consider community resilience and functional recovery? Logistics facilities have different concerns than multi-family or office, for example, as further discussed on page 2.

Question 9

  • What are your timelines and goals for functional recovery?

Question 10

  • What is the time horizon(s) of interest, for example, number of years, loan term, hold period?

Question 11

  • Which RCPs / SSPs are relevant, for example RCP 2.6, RCP 4.5, RCP 6.0, and RCP 8.5.

Question 12

  • What are the preferred return periods for each applicable hazard, for example, 100-year flood, 500-year flood, 475-year earthquake?

Question 13

  • What is the geography of the asset or assets being evaluated? If in a single jurisdiction that has robust climate risk modeling tools, such as the City of Boston or New York, the publicly-available tools that are used in Building, Planning and Zoning decisions may be preferable.

Once these questions are answered, the selection of a climate risk modeling provider can be narrowed to focus on those who have strengths aligned with your needs. While you may choose to work with multiple consultants to review the risk data on the property level, we recommend you select a single climate risk model provider so that the findings will be comparable across the portfolio and from one transaction to the next. Your consultants should be able to work with any data provider you choose.

Selecting Your Climate Risk Provider

In order to select your climate risk modeling provider, it will be helpful to evaluate your answers to the questions below:

  • Would you like to connect your climate risk and resilience efforts with your insurance program? If so, selection of a firm connected to the insurance industry would be beneficial. Talk to your internal insurance team to inquire which models your broker recommends.
  • To what extent does the climate risk data intersect with credit decision-making? Can the selection of the vendor benefit both the sustainability reporting goals and the credit risk management process?
  • To what extent do you want to interact with the platform to modify the results based on property data such as age of construction, presence of modifications, etc. To what extent would you like your consultants to be able to modify results based on updated property information, such as building age, presence of modifications, etc.
  • Do you intend to use this data for a full Property Resilience Assessment if the elevated hazards are identified or are you mainly concerned with portfolio level reporting?

A matrix summary can be compiled to help you compare the providers. The sample table below considers 4 different climate risk modeling providers showing different variables.

Company Name

Climate Risk Provider #1

Climate Risk Provider #2

Climate Risk Provider #3

Climate Risk Provider #4

Hazards Included

Present-day Natural and Climate Hazards

Climate Hazards and Earthquake risk

Focus on Flood Risk

Natural and Climate Hazards, except for Extreme Cold

Geography (Areas Excluded?)

Hawaii and Caribbean islands excluded

Global

Only North America

Only US

Time Horizon
RCPs/SSPs

2030, 2050,
RCP 4.5, 8.5

2030, 2050, 2100
RCP 4.5, 8.5

2050, 2100
RCP 2.6, 4.5, 8.5

2040, 2100

SSP 1, 2, 5

Damage Calculations

No

No

Yes, % of property value

Yes, $ value at risk

Ability to Influence Findings  with Property Data

No

No

Yes, Year of construction and type

Yes, option to include asset variables

Connection to Insurance (Underlying Models)

No

No

Yes

Yes

Clarity of Findings / Visual Presentation

Clear interface; includes risk maps

Clear interface; does not include maps

Complicated interface, need help to interpret data

Advanced interface, might need help to interpret data

Disclosure of Methodologies and Uncertainties

High clarity level

Low clarity level

High clarity level

High clarity level

Community Resilience Information

None

Limited

Limited

Extensive (includes evaluation of lifelines and infrastructure)

Post-Screening Consulting Services/Support

Yes

No

No

Yes

Program Development:

Program process and documentation could include:

  • Identify and explain which hazards are being evaluated and why (tie together the hazard information needed for insurance (flood, wind, hail, wildfire, etc.) with the hazard information needed for climate risk reporting. Are there synergies that could create co-benefits?
  • Consider whether you want “Climate” Value at Risk calculations and which type:
      • Modeled based on loss history for similar building types and similar hazards in this geographical area (insurance approach) from modeling platform. If this is desired, ask how much you can influence outcomes by entering property specifics (building age, type of construction, etc.) If you don’t want to do this in-house, your resilience consultants can do this for you.
      • Modeled based on engineering evaluation of specific building components and hazard severity projections – obtain from resilience/due diligence consultant in a multi-hazard Property Resilience Assessment or a hazard-specific report (e.g. for wind or flood) – this can also leverage the information in the first bullet above.
      • Either or both of the above incorporated into Appraisal
  • Develop your Risk and Resilience Thresholds – Document at what point the hazard or risk becomes material within your decision-making process and what type of evaluation is triggered.
      • Describe whether this materiality threshold is communicated relative to value at risk (dollar or percentage) or downtime days/months. Downtime tolerance may vary by property type.

 Data centers, hotels, senior housing – very low tolerance for downtime
 Office – higher tolerance for downtime depending on tenancy

      • Determine what level of risk requires further assessment. For instance, you may stipulate that any hazard identified as “moderate” or “high” risk or above requires further assessment within or alongside the PCA.
      • Determine if any hazards should be excluded from next steps. For instance, drought risk may be important but high drought risk may not necessitate additional on-the-ground assessment unless property has significant water use, such as a data center, is subject to water resource limitations or restrictions, or is served by a private well.
  • Determine how important community resilience is to your decision-making. Community resilience considerations, such as infrastructure support to the building, may be more or less important depending on property type.
  • Develop your processes for interrogating the climate risk data that you receive. The climate risk reports may overstate risk if regional or on-site resilience measures are not captured in the modeling. Your process should include a way to explain and substantiate why your final risk analysis does not agree with the model that was provided. This can be framed as both a risk avoidance measure and a way to leverage the inherent opportunities in seeing a site as more or less at risk than your competitors and acting accordingly.
  • Ensure your processes and the underlying models are transparent and available for stakeholders, and that you’ve considered potential unintended consequences associated with equity and environmental justice in lending processes.

Resources:

For more information, please contact Helena Ariza at hariza@aeiconsultants.com and Holly Neber at hneber@aeiconsultants.com.