Sarah Sayce Award for Sustainability Research: Pricing the unseen |
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Citation: Oluwaseun Damilola Ajayi PhD SFHEA ANIVS RSV (corresponding author) (2024) Pricing the unseen: Integrating climate risk into UK real estate investment strategies under the Thames Estuary 2100 Plan.
London: Property Research Trust. DOI: https://doi.org/10.52915/HWIF3595 Keywords: Real Estate, climate risk, flood risk, sustainability, property sector, environmental certification, non-linear ways, climate hazards, Thames Estuary 2100 (TE2100), physical infrastructure, climate VaR modelling, unseen risks. |
Summary:
Climate risk is rapidly becoming the most material sustainability challenge for the property sector, yet its financial implications remain poorly quantified and weakly embedded in valuation and investment practice. Conventional approaches have tended to concentrate on flood risk or environmental certification, thereby overlooking the complex and non-linear ways in which climate hazards translate into asset-level financial exposure. This research makes a distinctive contribution by integrating advanced risk-pricing models with the UK’s flagship adaptation strategy, the Thames Estuary 2100 (TE2100) Plan, in order to evaluate how climate risk is priced, mitigated and frequently mispriced in property market The study addresses a fundamental gap: the absence of asset-level, investor focused methodologies that can incorporate both physical and transition climate risks into real estate decision-making. Unlike earlier studies that treat adaptation policy as an exogenous backdrop, this research interrogates the TE2100 Plan as both physical infrastructure and regulatory signal, and examines how it interacts with market pricing and investor behaviour. The integration of Climate VaR modelling with elastic net regression, random forest algorithms and geospatial overlays establishes a robust, practitioner oriented framework for quantifying the “unseen” risks embedded within property assets and investment portfolios. |
Author
Oluwasuen Damilola Ajayi PhD SFHEA ANIVS RSV, Harper Adams University, Edgmond, Newport, Land and Property Management