ULI Europe Conference: Climate risk is a critical challenge

ULI Europe Conference
Photography by Karla Gowlett

The real estate sector’s role in reducing carbon was a central topic of discussion at the Urban Land Institute’s Europe conference in June, reports Paul Strohm.

More than 700 delegates gathered in Madrid during June for the Urban Land Institute’s Europe conference, where they discussed the future of the sector, its challenges, opportunities and the collective action that is required.

The sector’s role in reducing carbon was a central topic of discussion. As Lars Huber, chief executive of Hines Europe and chairman of ULI Europe, said in his address: “The most impactful challenge to us is climate risk. ULI is well suited to play a major role in this.”

During the opening session, Lisette van Doorn, chief executive of ULI Europe, announced the launch of the Transition Risk Assessment Guidelines, part of the C Change programme.

C Change, inaugurated in 2021, is a ULI-led programme intended to mobilise the European real estate industry to decarbonise. The guidelines are designed to provide a common methodology to assess and disclose transition risks as part of property valuations.

The guidelines identify 12 transition risks of material impact to real estate assets now and in the future, including the cost of decarbonisation and energy, and tenant voids.

ULI Europe Conference
Delegates at the ULI Europe Conference (Photograph by Karla Gowlett)

C Change identified incorporating transition risks into property valuations as one of 13 intervention points where direct action to unlock barriers to change could be transformative for the decarbonisation of the industry. These 13 intervention points were the result of an extensive review undertaken by 103 Ventures, the systems change consultant, of the biggest barriers to the green transition of the industry in Europe.

“C Change is one of the initiatives to help the industry,” Huber said, explaining that it encourages members to get behind the ULI mission priorities. “It has never been so critical,” he added.

Unprecedented pace of change

Renewed pressures brought on by the changing economic environment were also at the forefront of discussions. In another session, Capital Markets: new highs amid uncertain times, a panel consisting of Brad Hyler of Brookfield Asset Management, Annette Kröger of Pimco Prime Real Estate, Ed Siskind of Cale Street Partners and Rohan Sikri of the Xander Group, moderated by Patricia Bandeira Vieira of KKR, discussed the unprecedented pace of change at a macro level and the difficulty this imposes on companies managing their investments.

Speakers during the day included the mayor of Malaga, the mayor of Porto and Joan Clos, a former mayor of Barcelona, former government minister and former executive director of the United Nations Human Settlements Programme.

Francisco de la Torre Prados, the mayor of Malaga, highlighted the city’s ambitious growth strategy, which is based on the development of its cultural infrastructure and technology and communications capability. “We need more houses, more offices and more education centres,” he said, stating that one of his objectives was to simplify bureaucratic processes.

Lisette van Doorn: Value preservation

Photograph by Karla Gowlett

The newly launched Transition Risk Assessment Guidelines “are the vital underpinning the industry needs to assess and build the business case for decarbonisation across our portfolios”, said Lisette van Doorn, chief executive of ULI Europe.

“This is not just about the capital expenditure, but also about value preservation. We believe they will help build evidence to better understand the upside of decarbonising, such as more-resilient assets, lower occupational costs and new income streams.”

Joan Clos: Housing supply

Photograph by Karla Gowlett

The European Union’s Next Generation funds have the potential to make a big difference to Spain’s housing market, according to Joan Clos, a former mayor of Barcelona.

“We have different levels of intervention: in single apartments, in multi-storey buildings and in neighbourhoods,” he said.

The population is ageing, family size is diminishing and there are many projects to subdivide housing and convert it to apartments. With support, this process can be accelerated.

Increasing the supply of housing will help control the Europe-wide house-price problem,
he said.

Jonathon Porritt: Insurance risk

Photograph by Karla Gowlett

Although many real estate leaders “have got their heads around the climate risk story”, not many appreciate the speed with which it is bearing down on conventional business models, according to environmentalist Sir Jonathon Porritt, founder of the Forum for the Future.

One aspect is insurance. In some affected areas, it is already hard to obtain cover, because insurers say the exposures are too great for them to deal with.

“Think about how that trickles through the whole real estate world. The real estate world depends on insurance; there is no real estate sector without insurance,” Porritt told Real Asset Insight during the conference.

Although the ULI has some “fantastic materials to share with members”, they really need to understand the speed of change, he said.

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