Key points
- Adaptation and resilience are not the same thing, with different actors using the same terms but with different meanings.
- In real estate, this shows up as a real cost: in building regulations, in property valuations, and insurance pricing.
- While adaptation measures can be applied at the asset/local level, resilience is more focused at the systems level.
- For climate adaptation financing to work at scale, it requires an agreed baseline, agreed outcome measures and a way to capture benefits, and the creation of appropriate governance across time horizons.
A commercial building approved today will still be standing in 2075. The rules it is built to, how it is valued, the initial loan conditions and insurance terms all get fixed at the point it is built. A changing context, whether it be new building requirements, climate related risks, buyer sentiment, means that risks get carried for decades. But the words used to address these risks, adaptation and resilience, mean different things to different actors across the system.
This is the starting point of a new discussion paper I co-authored with Patrick Schmucki (Resilion), The Legibility Problem Across Real Assets: Adaptation and resilience finance without a shared language. In the paper we look at three key frameworks, the EU Taxonomy, the CBI/UNDRR Resilience Taxonomy, and the UNEP FI Adaptation Finance Taxonomy Playbook, and demonstrate that they each draw the boundary between adaptation and resilience in different places. This paper focuses on what this means specifically for real estate and the built environment.
A definitional split with financial consequences
Adaptation is exposure-driven. It requires a response to changing conditions that will not revert to the previous state. Across real assets, adaptation is generally thought about in relation to a specific asset or asset type such as roads or rail. Resilience is risk-driven. It concerns the danger of a system crossing into a set of circumstances it cannot return from. Treating the two as interchangeable, which happens routinely across regulation and market practice, produces instruments built for one problem but solving another.
Building regulations as de facto taxonomy
Building regulations govern everything from structural requirements to a building’s thermal performance. In practice, regulations are the most widely deployed determinant of whether a new asset is fit for its physical environment. However, a key challenge we are now seeing is that an asset built to current standards may be under-specified for future conditions. A building may have a green certification but could become uninsurable in the decades ahead due to local conditions.
Our paper poses this challenge directly to regulators and long-horizon investors: should building regulations be explicitly repositioned as adaptation instruments and updated on a defined cycle against IPCC-aligned scenarios, and with this, should these then be treated as a floor rather than a proxy for adequacy?
Valuation is catching up, but unevenly
From 30 April 2026, RICS members valuing commercial property worldwide are required to assess and document ESG and climate-related factors into their valuations, with substantiated evidence of value impacts. This marks an important move beyond building certifications.
The cost side of that assessment is critical with hazard exposure and the costs of mitigation expected to be quantified. The harder question remains on the benefit side. Transaction evidence does not as yet systematically capture the premium or discount attached to resilience features, meaning that valuation methodology is in misstep with market evidence that would normally support it.
Insurance withdrawal and the repricing cliff
Evidence from flood-prone, wildfire and coastal markets shows that repricing rarely happens gradually. It tends to be triggered abruptly by a significant event resulting in severe losses, including insurance losses, rather than being a smooth adjustment that gives owners time to respond. We are seeing this across a number of markets, from the UK, to Australia, New Zealand, and California.
Standard discounted cash flow models are not well suited to tail-event risks. The cost of such transitions falls unevenly with owners of lower-value residential property in high risk-areas least able to fund retrofits and have the fewest options if insurance becomes unaffordable or is withdrawn. For commercial assets, the same pressure arrives through financing as lenders begin treating physical risk assessment and continuing insurability as conditions of loan renewal.
The neighbourhood problem
Resilience does not stop at property boundaries. Flood resilience for a single property may be close to worthless if surrounding drainage is not maintained or inadequate . A heat-resilient building in a neighbourhood without tree cover can capture only part of the benefit. This is structurally different from energy efficiency measures where the benefit of action at the asset level is largely self-contained.
The challenge is that asset-level assessment is still what most valuation, lending, and insurance requires. Infrastructure concerns, regulated utilities and catchment level governance are among the few existing models built to internalise this type of interdependence, though none of them were designed with adaptation as their primary purpose.
What needs to exist next
The paper identifies five institutional conditions currently missing from the market: a defined reference baselines, outcome verification that works at system level rather than asset level, a mechanism for capturing diffuse public benefit, governance capable of committing across multiple decade horizon, and a valuation framework calibrated to tail risk rather than average loss. Resolving these issues, not refining definitions further, is what we argue needs to happen before adaptation and resilience finance can operate at a scale we need.
The full paper is available here: The Legibility Problem Across Real Assets – Adaptation and resilience finance without a shared language
Frequently asked questions
What is the difference between climate adaptation and climate resilience?
Adaptation responds to a permanently shifted baseline, such as changes in average temperature or rainfall, new regulatory requirements and so on. Resilience concerns a system’s proximity to thresholds, that once cross, cannot be reversed. Adaptation is usually attribute to a specific asset. Resilience is a property of the wider system.
Why do adaptation and resilience frameworks disagree with each other?
The EU Taxonomy, the CBI/UNDRR Resilience Taxonomy, and the UNEP FI Adaptation Finance Taxonomy Playbook each draw the boundary between the two terms differently. Each is internally coherent, but none is fully legible against the others, meaning counterparties can finance the same asset against incompatible assumptions.
How do climate-related factors affect property valuation?
From 30 April 2026, RICS requires members valuing commercial property to assess and document ESG and climate-related factors with asset-level evidence. Cost-side risk, such as hazard exposure and mitigation costs, can already be quantifies. The premium or discount attached to resilience features is harder to establish because transaction evidence has not yet caught up.
Can a single building be resilient on its own?
Not fully and resilience concerns the wider system. A flood-resilience building surrounded by inadequate drainage, or a heat-resilience building in a neighbourhood without tree cover, still carries much of the surrounding area’s exposure.
What needs to change for adaptation finance to scale?
The paper identifies five missing conditions: a defined reference baseline, system level outcome verification, a mechanism to capture diffuse public benefit, governance able to commit along long time horizons, and a valuation framework that properly weights tail risk rather than average loss.