Analysing climate risk at property level
Looking further ahead, national climate projections point the same way, with summers by 2070 potentially between 1.3°C and 5.1°C warmer and winters between 0.9°C and 3.8°C warmer under a high emission scenario. As that pattern settles in year on year, it is worth remembering that climate risk seldom arrives in a single, predictable form and that the same stretch of hot, dry weather sets in motion a sequence of effects that unfold over very different timescales, so that the property most exposed to one of them is not always the property most exposed to the next.
Prolonged heat and drought cause shrinkable clay soils to contract, reducing permeability, raising the likelihood of subsidence for the buildings that sit on them. When heavy rain eventually falls on ground that has baked hard over the summer, much of that water runs off rather than soaking away, increasing the risk of surface water and flash flooding in places that abroad hazard map might never flag. A third pathway is easy to overlook. When autumn rain finally reaches aquifers left depleted over the summer, water tables can rise quickly and in places rise beyond their previous recorded highs, bringing a groundwater flood risk that surfaces well after the weather that set it in motion. A single season, in other words, can leave behind a slow structural risk alongside more sudden ones and these rarely share the same footprint.
When one hazard sets off another
For lenders, surveyors and the professionals advising them, the difficulty is not a shortage of data. Environmental and property information is abundant and much of it can now be accessed instantly online. The harder problem is context.
Climate hazards interact with one another and with the specific characteristics of a site, so that the risk a property carries in August is not the risk it carries in November and the exposure recorded against its postcode may bear little resemblance to the exposure at its own boundary. That interaction is what makes climate risk so easy to misread. Assess flood risk in isolation and you miss the drought that preceded it. Assess subsidence on soil type alone and you overlook how the ground behaves once the rain returns. Understanding how soils, flood and environmental matters affect a particular property, across both the short term and the longer term, has never been more important.
The limits of the postcode view
A single postcode or regional classification can paint with too broad a brush. A wide area might be marked as elevated risk, yet that label can obscure the truth of an individual property, where the exposure may sit at the far end of a plot rather than beneath the building itself, or where recent resilience measures have materially changed the picture. General data reporting of this kind can cause delay, prompt inappropriate decisions and hold back good business that ought to complete. The reverse is just as costly. A property treated as low risk on a coarse map may sit on shrinkable clay, close to a watercourse, or on ground that sheds water rather than absorbing it. Importantly, the distinction between notional and real risk cannot be drawn from the map alone. It calls for intelligence at property-level granularity.
From information to understanding
Moving from raw information to genuine understanding is a matter of combining authoritative, enriched data with the specialist judgement to interpret it. Data establishes what is present. Expertise explains what it means for a given property, across the portfolio, holding and divestment of an asset and how the shorter-term originating risks sit alongside the longer-term climate-related ones. That is the discipline behind our approach, which is to identify, analyse and de-risk. Rather than flagging a hazard and leaving the reader to draw their own conclusions, the aim is to qualify the assumptions a valuer or underwriter would otherwise have to make, to differentiate real risk from notional risk and to set out each case with the context needed to act on it with confidence.
It is the thinking that underpins D-Risk, our climate and environmental risk service and its Land Perils Assessment for commercial lending.
Reaching certainty sooner
Whatever the season brings, the value lies in reaching a clear view of a property sooner and with greater confidence. By combining the efficiency of enriched, financial grade data with specialist underwriting and climate expertise, firms can move beyond basic hazard mapping to a position of certainty at the level that matters, the individual property and make decisions that reflect the true nature of risk rather than the broad assumptions of the past.
To find out more about D-Risk and its Land Perils Assessment, visit clsq.com/d-risk or speak to our team at connect@clsq.com.
