Surveying Risk, Building Opportunity: Financial Impacts of Energy, Water and Climate Risks on Real Estate in Asia

Energy insecurity, water scarcity, and climate change pose growing risks for the real estate sector in South and Southeast Asia, yet the connections between these trends and financial impacts are not well understood by analysts, investors, companies, and governments in the region. This report presents a framework to assess risks associated with these trends, and also discusses financial opportunities in the region’s growing green building market. The analysis considers current and planned commercial office buildings in India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam, with a particular focus on the Indian market given the large size of its real estate market and data availability. The report’s lessons and the risk framework may also be applied and adapted to other countries and building types. Although other resource scarcity, demographic and/or environmental trends may be relevant to the region’s buildings (for example, air pollution, waste, or ecosystem degradation), the report’s scope extends only to specific aspects of energy insecurity, water scarcity, and climate change as defined in this report.

Key Points

• Emerging energy insecurity, water scarcity, and climate change trends in South and Southeast Asia will affect the risk and return associated with investments in (1) commercial building projects and (2) companies involved in commercial real estate development and investing.

• The focus countries’ limited energy and water infrastructure; rapidly growing demand for energy and water resources; and physical exposure and vulnerability to climate change impacts, all increase the likelihood and magnitude of financial impacts.

• Green building investments can minimize energy and water-related risks while achieving net positive returns in as few as three years.