Key points
- Awareness is not the problem. Real estate professionals understand the stakes. What is missing is a credible, prioritised pathway forward.
- The cost of inaction is already visible, in insurance premiums, in valuations, in lender appetite, and in assets that will be harder to exit than their owners currently assume.
- Physical climate risk and insurability are moving from specialist concerns to mainstream investment considerations, faster than most boards are tracking.
- The organisations that frame resilience as a financial argument now will be better positioned when insurers and funders make it a condition.
Keyah’s market research with real estate professionals reveals a sector that understands the stakes and is still stuck.
Real estate professionals are not, for the most part, unaware of what climate risk means for their portfolios. What Keyah’s recent market research found, across conversations with boards, asset managers, and advisory professionals, is something more uncomfortable: a sector that sees the problem clearly, understands that delay is expensive, and is still not moving.
That gap between recognition and action is not a values problem. It is a structural one. And it has a financial cost that is starting to become visible.
The compliance trap
The most consistent finding from our research was this: organisations know that reactive approaches to sustainability will cost more in the long run, but tight budgets and competing priorities keep most of them locked in compliance-only mode.
One participant described it as “treading water.” That is an accurate image. It is also an expensive one. The irony the research kept surfacing is that this caution is itself a form of risk. Money is being left on the table, and decisions are being deferred until the conditions for making them cheaply have passed.
The ROI problem is real, and it is starting to solve itself
Clients understand sustainability in principle. What blocks action is the absence of a clear financial narrative. Decarbonisation, resilience, and energy transition initiatives struggle to get board traction without a demonstrable return.
But that is beginning to shift. Where the economics are becoming genuinely compelling, particularly in energy infrastructure where payback periods are now in the five-to-seven-year range, decisions are being made. The challenge is making that case consistently, and making it in the language boards actually use.
This is precisely where most sustainability advisory falls short. Fluency in financial consequence, not sustainability principle, is what moves investment committees.
Complexity is not an excuse. It is the advisory opportunity
Sustainability cuts across every function in a real estate organisation: asset management, finance, legal, operations, procurement. That cross-cutting nature means most clients genuinely do not know where to start. Contractors, regulatory detail, cultural resistance, and the volume of moving parts create friction that looks, from the inside, like paralysis.
What the research makes clear is that there is strong demand for translation: turning regulatory complexity and strategic uncertainty into prioritised, actionable steps. At the asset level, covering EPCs, MEES, and exemptions, and at the portfolio level, where the question is which decisions to make in which order, and why.
That is not a communications problem. It is an analytical one. And it is where advisory adds real value.
Insurance is not a background issue anymore
This was one of the sharper findings. Insurance is already the third-largest operating cost for many real estate assets. Participants expect insurers to increasingly tie coverage and pricing to climate performance, and early engagement with insurers on resilience is seen as a significant, largely untapped opportunity.
Physical climate risk is moving from a specialist concern to a mainstream investment consideration. Funders and insurers are not yet routinely demanding detailed resilience data, but the expectation across the research is that this changes. The organisations that have already begun framing resilience as a financial argument, rather than a compliance one, will be better positioned when it does.
The market is beginning to move, unevenly
After a slow two years, transaction activity is starting to pick up. But many asset owners are still postponing decisions, and investors are watching to see how the market responds before committing. Yield remains the dominant lens.
The divergence is sector-specific. In logistics, where vacancy is low, ESG credentials are less of an immediate driver. In commercial real estate with higher vacancy rates, they are becoming real differentiators for attracting and retaining tenants. The gap between ESG-compliant assets and those falling behind is widening, and it is doing so quietly, in valuations, in lender appetite, and in insurance terms.
What boards need
Clients want forward visibility: what regulatory shifts are coming, what reputational risks are building, how market expectations are changing, and help developing a coherent longer-term strategy rather than a compliance checklist.
The research produced one finding worth sitting with. When it comes to engaging clients on this agenda, getting the framing right, building a shared understanding of what good looks like, is a precondition for financial conversations to land. Boards are not waiting for better data. They are waiting for someone to give them a confident, credible analysis of the direction of travel and a practical view on what to do about it.
That is a specific capability. It is not the same as sustainability reporting, ESG strategy, or carbon accounting. It is climate risk as a financial and fiduciary issue, which is a harder conversation, and a more useful one.
Keyah advises commercial real estate and residential-at-scale leadership teams on climate risk, insurability, and portfolio financial exposure. If this research reflects conversations you are having internally, or ones you know your board should be having, book a call.
Frequently asked questions
What is climate risk costing real estate portfolios right now?
The costs are operating through multiple channels simultaneously: rising insurance premiums (already the third-largest operating cost for many assets), declining asset liquidity for non-compliant stock, tightening lender appetite, and stranded asset risk as regulatory requirements tighten. The financial exposure is not theoretical. It is already appearing in valuations and refinancing conditions.
Why are real estate boards still not acting on climate risk if they understand it?
Keyah’s market research points to three structural blockers: the absence of a clear ROI narrative, the complexity of knowing where to start across a cross-functional issue, and regulatory uncertainty that makes long-term planning harder. The problem is not awareness. It is the absence of a credible, prioritised pathway forward.
How does insurance connect to climate risk in real estate?
Insurers are beginning to price climate performance into coverage terms. For real estate assets in flood-prone, heat-stressed, or storm-exposed locations, this means rising premiums, coverage exclusions, or outright withdrawal from certain markets. Early engagement with insurers on physical resilience is increasingly being treated as a financial opportunity, not just a risk management exercise.
What is the difference between ESG compliance and climate risk advisory?
ESG compliance focuses on reporting obligations: disclosures, ratings, targets. Climate risk advisory focuses on financial exposure, specifically how physical climate hazards, regulatory change, insurance repricing, and market shifts interact to affect asset value, liquidity, and lender relationships. The questions are different, the audience is different (board and investment committee rather than sustainability function), and the consequences of getting it wrong are different.
What should a real estate board be asking about climate risk?
Six questions structure the core exposure: What is happening to the insurability of our portfolio, and what does that signal? Are our valuations accurately reflecting regulatory and physical risk? Where are we exposed to geopolitical cost pressures on materials and energy? How is lender risk appetite shifting, and how does our portfolio map against it? What assumptions about liquidity are built into our exit strategies? And are we framing adaptation investment as cost or as value creation?
What does a climate risk board briefing involve?
Keyah’s board briefing is a half-day session for commercial real estate and residential-at-scale leadership teams, covering climate risk, insurability, and portfolio financial exposure. It is designed to move a board from general awareness to a specific understanding of where their portfolio is exposed and what decisions need to be made, and in what order.