Managing climate risks in the real estate sector: From analysis to strategy
Published: May 19, 2025Last updated: May 23, 2025
Topics
The physical risks posed by the effects of climate change pose major challenges for property owners and investors. To support clients with a scientifically sound basis for climate risk adaptation, Wüest Partner is collaborating with ETH Zurich spin-off CLIMADA Technologies.
By modeling various emission scenarios and time horizons through to the end of the century, the risk posed by various climate hazards can be analyzed for individual buildings or entire portfolios. Relevant risks can be identified at a glance, and the potential for value depreciation can be minimized through targeted adaptation measures. This not only enables risks to be identified and addressed at property level, but also allows well-founded risk adaptation strategies to be developed for entire portfolios. Together, Wüest Partner and CLIMADA Technologies provide a reliable decision-making foundation to safeguard long-term asset value.
Understanding and managing climate risks with Wüest Partner and CLIMADA Technologies
In the first part of our blog series, we highlighted the serious impact of climate change on the real estate sector – and why systematic management of climate risks is essential today. Our 2025 Immo-Monitoring study (in German) also examined the Swiss building stock’s exposure to hazards such as heatwaves, heavy rainfall, flooding, and storms, now and in the future.
While such extreme weather events are increasingly threatening buildings and infrastructure, regulatory requirements such as the EU taxonomy or the FINMA circular oblige companies to disclose these risks transparently. But how can owners and investors understand their climate risk exposure, make informed decisions, and define concrete action strategies?
This is precisely where the joint offering from Wüest Partner and CLIMADA Technologies comes in. CLIMADA Technologies is an ETH Zurich spin-off that specializes in scientifically based climate risk analyses. The underlying open-source software is constantly being further developed in collaboration with researchers and enables transparent, verifiable results – in contrast to classic “black box” solutions. Further information on CLIMADA Technologies can be found in the first part of our blog series.
A central element of risk analyses, like those carried out by CLIMADA Technologies, is climate models. These are computer-aided simulations based on physical laws that link various components of the Earth system, such as the atmosphere, oceans, ice sheets, and land surfaces. These models can simulate the climate’s condition and development over decades. For example, it is possible to estimate how temperature, precipitation, or extreme weather events could change by the end of the century. However, the results of such models depend heavily on underlying assumptions – in particular on future human influences such as greenhouse gas emissions or changes in land use. In order to systematically record these uncertainties, climate researchers work with so-called emission scenarios.
These scenarios describe possible developments in greenhouse gas emissions based on different assumptions about the economy, technology, population growth, and climate policy. The most widely used scenarios come from the Intergovernmental Panel on Climate Change (IPCC), considered the scientific standard for international analyses, policy advice, and research.
In its Fifth Assessment Report (AR5) from 2014, the IPCC introduced the Representative Concentration Pathways (RCPs), which are based on projected levels of radiative forcing – the energy retained in the Earth system due to greenhouse gases – by 2100. Of these, the RCP2.6 scenario assumes an ambitious reduction in emissions and calculates an additional radiative forcing of 2.6 W/m². This contrasts with the RCP8.5 scenario, which assumes a sharp rise in emissions and expects a radiative forcing of 8.5 W/m². These differences have a direct impact on the global average temperature; while a rise of around 1.6°C (relative to the pre-industrial level of 1850–1900) is expected under RCP2.6, RCP8.5 predicts a temperature rise of around 4.3°C by the end of the century.
The IPCC’s Sixth Assessment Report (AR6) introduced Shared Socioeconomic Pathways (SSPs), which offer a slightly different approach. These scenarios make various assumptions about the development of key socioeconomic factors:
- SSP1: Sustainability/“Taking the Green Road”. This scenario describes a world on a sustainable path, with a focus on environmentally friendly practices and global collaboration.
- SSP2: “Middle of the Road”. The world follows a medium development path in which existing trends remain largely unchanged.
- SSP3: Regional Rivalry/“A Rocky Road”. This scenario assumes a fragmented world with strong regional differences and less global collaboration.
- SSP4: Inequality/“A Road Divided”. Envisions growing inequalities both within and between countries, with different levels of development and access to technology.
- SSP5: Fossil-fueled development/“Taking the Highway”. This scenario describes a world with strong economic growth based primarily on the intensive use of fossil fuels.
These SSP scenarios can now be combined with the emission and radiative forcing targets of the RCP scenarios (e.g. SSP1‑2.6, SSP2‑4.5, or SSP5‑8.5) which for the period 2081–2100 are associated with a temperature deviation relative to the pre-industrial average of 1850–1900 of 1.3–2.4°C, 2.1–3.5°C or 3.3–5.7°C (IPCC6).
Figure 1: Global temperature deviation relative to the pre-industrial average (1850–1900). The gray line shows the historical deviation based on the ERA5 reanalysis (Credit: C3S/ECMWF 1). The blue and orange lines represent smoothed 20-year averages from various CMIP6 climate models: the blue line illustrates historical trends, while the orange lines project future developments under the emission scenarios SSP1‑2.6, SSP2‑4.5, and SSP5‑8.5.
The CMIP6 data are taken from the IPCC’s Sixth Assessment Report (Figure 8, Summary for Policymakers). This work is licensed under the Creative Commons Attribution 4.0 International License (CC BY 4.0) 2 3.
When generating climate projections, it is not just a single climate model that is used. Instead, so-called model ensembles – collections of various climate models running a common emissions scenario – are applied. Each model incorporates slightly different assumptions and methodologies, leading to varying strengths and limitations, for instance, in simulating precipitation, temperature, or wind speeds. By analyzing results across all models, a more nuanced picture of potential climate development emerges. These ensemble approaches are standard in scientific literature and IPCC reports, allowing a more robust assessment of future climate conditions – including the likely range of temperature increases and extreme weather events.
From climate models to measurement: How CLIMADA Technologies quantifies risks
CLIMADA Technologies uses ensembles from various climate models, assuming SSP and RCP scenarios, to simulate a wide range of property-relevant climate risks up to 2100. These include heatwaves, heavy rainfall, flooding, landslides, storms, wildfires, and sea-level rise.
These simulations are location-specific and consider multiple time horizons. In the next step, these climatic changes – such as a projected increase in temperature or rising precipitation levels – are converted into specific risk values. CLIMADA Technologies has developed its own risk factor-specific assessment methods for this purpose. The results provide standardized risk ratings for each risk type being analyzed, and range from 1 (very low) to 5 (very high). This enables a clear comparison.
Additionally, financial losses from extreme events are quantified using so-called damage curves. These show how high the percentage loss in value of a building could be for a certain intensity of event, such as flooding or storms. The curves are based on empirical data, including from the insurance industry, and focus on the most financially relevant loss events.
An example: For a flood with an intensity of 1 meter, an average loss in value of around 20% could be assumed, while a loss of up to 70% may be realistic for an intensity of 3 meters. The damage curves are also adapted to building-specific characteristics. For instance, wooden structures tend to suffer more damage than solid concrete structures under the same flood intensity.
From analysis to action: How Wüest Partner harnesses climate risks
Building on CLIMADA Technologies’ data, Wüest Partner creates application-oriented evaluations for individual properties or entire portfolios. For this purpose, risk ratings and financial loss forecasts are retrieved from CLIMADA Technologies and matched to the exact geographic locations of the assets. A clear PDF report summarizing the climatic risk exposure is then automatically generated, including a differentiation according to emission scenarios and development paths over time. This provides investors, owners, and financial institutions with a reliable decision-making basis to identify and manage risks in a targeted manner.
An example of such an evaluation – here for a subset of the available risk variables – is shown in Figure 2. An example portfolio with 100 buildings in the DACH region was analyzed, in each case for the reference year 2000 and the year 2050 under pessimistic assumptions (SSP5‑8.5). The results show at a glance:
- Wildfires, drought, and flooding do not pose any relevant risks
- The risk of frost will decrease in the future
- The storm risk remains roughly the same over both periods
- Heat waves, heavy rainfall, and landslides will become much more relevant in the future
For the most financially relevant risks – in particular, flooding and storms – the amount of damage expected on average every 100 years depends significantly on certain building characteristics. In Figure 3, we compare the amount of damage for 100 buildings with a respective value of CHF 5 million. The total damage due to flooding in 2050 (assuming the SSP5 scenario) is CHF 4.7 million if all buildings in the portfolio have a basement – and CHF 3.7 million if none of the properties have a basement. The type of construction also influences the amount of damage. For example, in the case of storms, while no damage is expected for 100 buildings based on a concrete construction, 100 buildings with a wooden construction would be expected to suffer around CHF 45,000 in damage every 100 years.
Figure 2: Analysis of a selection of different climate risks based on a sample portfolio of 100 buildings in the DACH region. The number of buildings per risk rating is shown for each risk type. For each risk, the left-hand (2000) bar shows the exposure in the reference period, while the right-hand (2050) bar shows the exposure in the future assuming the SSP5‑8.5 emissions scenario.
Based on the identified risks and our many years of experience in maintaining the value of properties, we then develop a customized catalog of proposals for specific adaptation measures. These recommendations are aimed at avoiding or minimizing potential losses in value with the help of suitable structural measures. In this way, we create real added value – and lay the foundation for a forward-looking, climate-resilient real estate strategy.
Figure 3: Total damage expected every 100 years in 2050 (emission scenario SSP5), based on the risk of flooding or storms. In each case, it was assumed that all buildings have either a basement or no basement and either a concrete or wooden structure.
Conclusion: Actively managing climate risks – well-founded, forward-looking, and compliant with regulations
The joint offering by Wüest Partner and CLIMADA Technologies provides the real estate industry with a scientifically sound tool that not only helps to systematically identify and assess physical climate risks but also provides specific recommendations for risk adaptation. Thanks to its robust methodology, transparent database, and clear risk classification, the tool provides a sound basis for decision-making – for individual properties as well as entire portfolios. It also supports owners and investors in meeting the growing regulatory requirements, such as the EU taxonomy or FINMA. This makes climate risk management not just a duty, but a strategic advantage for long-term value preservation.
- Copernicus ↩︎
- IPCC, 2021: Summary for Policymakers. In: Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S. L. Connors, C. Péan, S. Berger, N. Caud, Y. Chen, L. Goldfarb, M. I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T. K. Maycock, T. Waterfield, O. Yelekçi, R. Yu and B. Zhou (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 3−32, doi:10.1017/9781009157896.001. ↩︎
- Fyfe, J.; Fox-Kemper, B.; Kopp, R.; Garner, G. (2021): Summary for Policymakers of the Working Group I Contribution to the IPCC Sixth Assessment Report — data for Figure SPM.8 (v20210809). NERC EDS Centre for Environmental Data Analysis, 1.4.2025. doi:10.5285/98af2184e13e4b91893ab72f301790db. ↩︎
