About this dataset

The report analyses 2,134 assets from the largest REITs in Japan, Australia, Singapore, and Hong Kong. It provides a snapshot of climate risk impacts on these portfolios, with projections of damage from hazards such as flooding, coastal inundation, and forest fires. The focus is on high-risk assets by 2050 under RCP 8.5, with a broader analysis up to 2100 and across different scenarios.

How does XDI perform its analysis?

XDI uses a structural analysis approach combining global climate models, local weather, and engineering archetypes to calculate probable damage from climate change and extreme weather. This analysis categorises properties as high, medium, or low risk based on the expected annual maximum cost of damage.

How is damage measured?

Damage is quantified as Maximum-to-Date-Value-at-Risk (MVAR), representing the annual average loss from extreme weather damage as a percentage of a property’s replacement cost.

How is risk defined?

High Risk Properties (HRP) are those with estimated annual maximum damage costs exceeding 1% of their replacement cost, impairing the asset’s market value or income-producing ability.

Which climate models are used?

XDI models utilise a range of climate General Circulation Models (GCM) from CMIP5 and CMIP6 projects, focusing on high-emission pathways (RCP8.5/SSP5) while mapping to lower impact pathways for a comprehensive risk assessment.

Why focus on RCP 8.5/SSP5?

Despite indications that emissions are flattening, RCP 8.5/SSP5 is used for prudent risk assessment due to the potential for future levels of warming and impact, cumulative greenhouse gases, and emissions from feedbacks and tipping points.

Which hazards are included?

The report considers hazards like riverine and surface water flooding, coastal inundation, extreme wind, forest fire, and cyclones, which are likely to impact building structures and operational functions.

Why physical climate risk?

Physical climate risk data is crucial for investment decisions, adaptation measures, reducing insurance costs, and meeting regulatory requirements. It helps in identifying high-risk locations, planning building adaptations, and ensuring business continuity during extreme weather events.

APAC REITs regional overview

By 2050, nearly 10% of APAC REITs’ assets may be high risk due to climate change. Coastal inundation and flooding are the primary hazards driving this risk. The analysis covers 20 REITs with a combined market capitalisation of around US$142 billion.

APAC REITs markets in focus

• Australia-listed REITs: By 2050, 9.4% of assets will be high risk, primarily from coastal inundation. Most high-risk properties are overseas.
• Hong Kong-listed REITs: Experience the highest increase in damage risk, with 5.29% of assets high risk by 2050, mainly due to flooding.
• Japan-listed REITs: 6.68% of assets will be high risk by 2050, with coastal inundation as the primary hazard.
• Singapore-listed REITs: 8.91% of assets will be high risk by 2050, driven by coastal inundation and surface water flooding.

Use case: a REIT’s multi-stage approach to physical climate risk management

An ASX-listed REIT executed a multi-stage plan with XDI to improve climate resilience. Steps included screening for high-risk assets, asset-level deep dives, exploring adaptation pathways, offsite and cross dependency analysis, identifying supply chain risks, and investing in green infrastructure.