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Archive » April 2022 » Climate Risk, Real Estate and Environmental Certification: an analysis based on RecVaR

Climate Risk, Real Estate and Environmental Certification: an analysis based on RecVaR

Andrea Beltratti, Alessia Bezzecchi
April 2022 - n. 4
Keywords: Banche, rischio climatico, real estate, RecVaR
Jel codes: G21, G28, Q56, L85

We consider a specific example of a real estate asset, a luxury hotel, and apply a Monte Carlo methodology to understand the sensitivity of its value to climate change, considering the impact of energy and environmental certification, transition risk, estimated through changes in the simulated price of CO2 emission permits, and physical risk. We calibrate the relevant parameters by using results published in various studies and simulate for 10,000 times the asset business plan in order to study the sensitivity of relevant indicators like net present value and internal rate of return, examining the marginal impact of each source of risk.

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