Nature-related risks, including biodiversity loss and climate change, are growing concerns for real estate investors. These risks have the potential to affect property values, development and operating costs, tenant demand, and adherence with emerging regulations and initiatives. As the built environment is a significant contributor (30%) to global biodiversity decline,1 the real estate sector holds both the responsibility and opportunity to drive change through nature-positive strategies.
Nature and real estate
Real estate has both direct and indirect impact on biodiversity through asset design, development, operation and supply chain dependencies. There is also a dependency on nature to create desirable, resilient locations; for example, green spaces could strengthen climate adaptation, reduce environmental impacts, and enhance tenant appeal. According to the taskforce on Nature-Related Financial Disclosures (TNFD), nature has been defined as the ‘natural world’, with an emphasis on the diversity of living organisms, including people, and their interactions among themselves and with their environment.2 It’s fundamental to the long-term health of our social and economic system.
More recently, nature has been framed as the construct of four core realms: land, ocean, freshwater, and atmosphere.3 The four realms provide an entry point for understanding how organizations and people depend, and have impacts, on nature. Given the complex role nature plays, real estate investors should integrate nature-related risks and opportunities into their investment decisions.
Assessment and integration
To navigate these risks, real estate investors can leverage frameworks such as the TNFD to understand and disclose nature-related dependencies and risks, much like TCFD does for climate.
A preliminary risk assessment can be conducted on the current and projected dependencies of real estate investments on natural capital (e.g., water usage, pollution) using a materiality assessment tool such as ENCORE.4 The material nature risk factors can be integrated into investment decision making, across the stages of a property’s lifecycle, as each can have an influence on biodiversity and ecosystems.
For example, during design and development, decisions made on land use could influence the level of impact on nature, such as effects on natural habitat and ecosystem disruptions. During a building’s operational phase, usage of energy and water contributes to GHG emissions and pollution while poor waste management can degrade soil and biodiversity.
At an asset level, nature baseline analysis, such as carrying out an ecology survey to determine the species and habitats present in a specific area, can help to evaluate the effects on ecosystems, and develop appropriate nature strategies. Certain actions will require a collaborative approach with multiple stakeholders such as local government / councils, tenants, and local communities. Changes in biodiversity should be monitored over time, potentially with the support of expert ecologists, ensuring that the data collected is both accurate and meaningful.
Final thoughts
The integration of nature-related risks into real estate strategies is part of future-proofing assets from rising environmental concerns and emerging regulatory demands. For the real estate sector, taking a nature-related risk approach not only protects ecosystems, but also creates long-term competitive advantages by creating spaces that appeal to tenants, investors, and fulfill potential regulatory requirements alike. By embracing these strategies, real estate investors can contribute to a resilient, sustainable future that aligns financial success with environmental stewardship.
1 World Economic Forum, 2020
2 The Taskforce on Nature-related Financial Disclosures
3 The TNFD Nature-related Risk & Opportunity Management and Disclosure Framework
4 ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) is a business assessment tool, developed by UNEP-WCMC, SECO and MAVA Foundation, to understand how environmental changes might impact businesses and the wider economy.