Article | Creating Resilience

From Caution to Catalyst

By: Marcella Thompson, Senior Vice President, Corporate Sustainability and Reporting and Allan Wickham, Global Head of Occupier Sustainability Advisory

September 12, 2025 3 Minute Read

Graphic showing the connection between global trends and local development in the commercial real estate market, emphasizing sustainable city growth.

At a time of increasing climate risk, an integrated business approach can drive value creation.

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It’s no longer possible to enjoy the summer without considering heat stress.

This year has been another hot one. And while it will take some time for 2025 data to be assessed, 2024 already ranks as the warmest year on record, at about 1.55 °C (2.8 °F) above pre-industrial levels. Heat stress is clearly a top-tier climate hazard, impacting our health, employee productivity and communities.

Up until recently, extreme weather was perceived as a black swan event. We were concerned about avoiding the worst impacts of climate change while also seeing it as something looming in the future.

Now feels very different. The effects of climate change are visible all around us. We’ve seen the significant costs of the loss of services and the subsequent recovery and repairs. And we’ve had the direct experience of needing to reach out to colleagues to ensure they and their families were safe after major flooding, wildfires and other extreme weather events.

These changes don’t just impact us on a personal level but also are changing the way our businesses operate—and the places companies consider when they are evaluating their real estate. At CBRE, we are fielding an increasing number of questions from clients about climate adaptation and how they should modify their real estate strategies to address a changing climate.

There’s an interesting duality to climate risk. The risks themselves seem foreboding and uncontrollable, manifesting at an unpredictable pace and scale. Yet how we respond is entirely up to us.

Real estate is increasingly exposed. With buildings directly impacted, mitigation and adaptation strategies for commercial buildings are becoming urgent priorities for many investors and occupiers.

Evaluating and addressing climate-related risk isn’t new for most companies, but we’ve reached a tipping point.

The world of reporting about conceptual climate risks is changing. Now, required regulatory reporting is creating an increasingly complex web, from California’s climate disclosure laws to the European Union’s Corporate Sustainability Reporting Directive and the Australian Sustainability Reporting Standards.

This complexity is compounded by expectations for specificity and financial quantification. Theoretical and overly generalized assessment of risk is no longer acceptable. Disclosing the specific business impacts of a changing climate is imperative.

We know that our clients can view this shift as a compliance and risk-reduction exercise, with increased overhead and expenses. While that is true, we also see this moment as a tremendous opportunity to create value.

The biggest opportunities happen when occupiers and investors work together to design and manage properties that are more resilient to climate impacts—while simultaneously reducing our carbon emissions.

So how should companies approach this collaboration efficiently while connecting it to business strategy to drive value?

Rather than reacting to emerging regional regulations, start with a global approach.

Bring together senior business leaders to develop a company-wide climate risk and opportunity assessment consistent with existing Enterprise Risk Management processes. Then, working with local experts, review those risks and opportunities and develop geographic- and entity-specific disclosures.

In our experience, this approach creates value in three key ways:

  • Efficiencies of time and expertise. Using a centralized, International Sustainability Standards Board-aligned methodology enables the creation of a global climate risk and opportunities register that can be scaled down for any market with locally applied expertise. CBRE analyzed our operational and business activity climate risks with the same tools as we use for our clients. We’ve expanded our capabilities to leverage AI to synthesize insights, enabling us to focus on local impacts to and from the business.
  • Consistent information. If every country where a business operates led its own climate risk and opportunities analysis, there would be just as many different methodologies. Results would not be easily comparable across geographies, hindering business leaders’ ability to make strategic decisions to mitigate the risks or develop scalable innovation. By applying a consistent methodology globally, a canvas is established for the entire company to paint a singular picture, with room for teams to punch up local color. It also means that as new regulations emerge, the frame can expand—but the holistic depiction remains.
  • Top-to-bottom feedback loop. Starting with a global view of climate risks and opportunities for all business segments gives local teams an understanding of what leaders have prioritized, providing a head start on regulatory readiness. Local insights help identify emerging issues and enable global leaders to refine an assessment based on regional learnings. This macro-to-micro feedback loop supplements the global lens with a local one, helping leaders make more informed strategic mitigation and adaptation decisions.

Once the risk is evaluated, what comes next?

For real estate owners, it’s all about buildings—how they’re designed, operated and managed. When it comes to physical climate risks, many of the decisions about improving a building’s resilience fall to this group because they have operational control.

In a high-flood-risk area, for example, occupiers may look for green stormwater infrastructure surrounding an asset to effectively manage wet-weather impacts so their operations aren’t disrupted—but they can’t implement these fortifications on their own.

Occupiers may also seek sustainability performance on the inside of buildings to lower costs, reduce emissions and create a productive workplace. In fact, nearly 70% of office occupiers say the presence of sustainable building features impacts their decision to occupy and what they are willing to pay. Today, those features may not be dealbreakers. But as global temperatures rise and we experience more frequent and severe weather events, we expect that both sustainable and resilient buildings will be nonnegotiable.

Quantifying the costs of climate risks and the value of the opportunities is critical to moving from a theoretical to an integrated business approach.

For occupiers, the business impact can include lost productivity and operational disruption. For investors, there are additional capital expenses to repair or replace assets damaged by climate-related events or to harden assets against physical risks.

Investors are also exposed to higher operating expenses, with insurance premiums in climate-vulnerable states nearly doubling since 2019—now representing over 10% of operating expenses. These costs can sometimes be passed through to occupiers, further increasing their focus on sustainability issues during lease negotiations.

Managed correctly, internal sustainability improvements are an opportunity for investors to contribute to financial performance. Less energy consumption and early regulatory preparedness reduce costs. Meeting tenant sustainability needs drives demand. Our research also shows that more energy-efficient buildings improve total returns for building owners, and a sustainability certification can yield a 4.9% rental premium in European markets.

At the same time, occupiers are positioned to send important demand signals to building owners to prioritize resiliency and the transition to net zero. They have the flexibility to choose a location strategically, avoiding flood- and wildfire-prone areas, for example, and favoring future-proofed assets adapted to physical risk or with low emissions.

Investors in markets facing the biggest risks should implement sustainability initiatives or they will lose both prospective tenants and asset value.

Climate risk is not a theoretical caution. Mandatory disclosures of specific impacts are part of doing business today. How we assess and mitigate climate risk preserves asset value, enhances operational resilience, increases efficiencies and serves as a catalyst to uncover new ways of working.

Together, building owners and occupiers can shape this future, leaning into both climate adaptation and mitigation strategies. How should they take action? The first step is a data-driven climate risk and opportunity analysis to capitalize on opportunities and inform business strategy.

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