OECD Report on Future-Proofing Real Estate Investment and Managing Climate-Related Place-Based Risks
SDG 11: Sustainable Cities and Communities | SDG 13: Climate Action | SDG 1: No Poverty
Ministry of Housing and Urban Affairs | Ministry of Finance | Reserve Bank of India (RBI) | National Housing Bank (NHB)
The OECD report, ‘Future-Proofing Real Estate Investment’, examines the profound impact of climate-related physical and transition risks on the global real estate sector, which represents a value of USD 111 trillion—nearly double the total global GDP. As buildings account for 37% of global energy-related emissions, the sector is both a primary target for decarbonization and a major victim of climate hazards.
Key risk dimensions identified:
Physical Hazards: Mounting threats from floods, wildfires, and heatwaves are deeply exposing property markets and household wealth to sudden devaluation.
Transition Pressures: Evolving regulations, green building technologies, and shifting market expectations are creating “transition risks” for assets that fail to meet new sustainability standards.
Financial Stability: The report highlights that climate risks in real estate are systemic, threatening not just individual assets but broader economic stability and livelihoods.
Management Gaps: Current risk assessment across the ecosystem—from investors to insurers—remains fragmented, requiring policymakers to better align investment with resilience goals.
What are Place-Based Risks? These are climate-related vulnerabilities specific to a geographic location, such as a property’s proximity to a flood zone or a wildfire-prone forest. Unlike general financial risks, these cannot be easily diversified away, as the physical asset is fixed in space, making local adaptation and resilient urban planning critical for protecting asset value.
Policy Relevance
The OECD findings are highly significant for India, where real estate is projected to reach a USD 1 trillion market by 2030, yet remains deeply exposed to “place-based” climate risks.
Unlocking Investment: By aligning with the USD 17.8 trillion green building potential in South Asia, India can transition from reactive recovery to a proactive “investment-first” model for urban resilience.
Regulatory Localization: Adopting “context-aware” building codes—modeled after international best practices like Kenya’s recent reforms—is essential to prevent new construction from becoming “stranded assets” in flood-prone or extreme-heat zones.
Climate Equity: Addressing the massive climate finance gap for informal settlements is a critical policy imperative; India must integrate community-led adaptation and “equity safeguards” to protect the 1.1 billion urban poor on the front lines of physical risk.
Fiscal Stability: The RBI and NHB should consider promoting “Green Mortgages” and resilience-linked financial products to lower capital costs for households, ensuring that India’s primary vehicle for personal savings—real estate—remains a secure asset class amidst escalating climate hazards.
Follow the full report here: The Future-Proofing Real Estate Investment