January 23, 2020
Buyback programs have implications for real-estate portfolios as well. Many investors are watching such programs closely to see how they develop and assess risks accordingly.
One potential implication is that such government intervention can slow down the market’s ability to accurately assess risks, according to Jonathan Needell, president and chief investment officer of Kairos Investment Management, a real estate investment company that focuses on making a positive environmental and social impact in affordable and workforce housing.
“There is political pressure to keep that FEMA insurance going at prices that don’t make sense. It’s retarding the normal market adjustments,” he told Karma.
Needell said his firm takes rising sea levels and storm surge into account when assessing properties, relying on publicly available climate-change projections to calculate an area’s risk based on location, rainfall, and other factors.
“When we’re assessing flood risk like this, it’s pretty nuanced,” he said. “Just because water can come into an area doesn’t mean the whole city is going to go down. There may be higher lying areas that are more valuable.”
Andreas Wiencke, head of strategic projects and ESG solutions at Credit Suisse Asset Management, says impact investors should be more aware of the risks climate change poses to their portfolios.
His firm includes sustainability as part of its due diligence assessing a property, and while that isn’t common in the industry yet, Wiencke says it is necessary.
“This should be more and more part of a due diligence of a portfolio and on a portfolio level,” he said. “Real estate portfolios are at risk if we miss to care about climate change.”
That’s a reality that is already clear in places like Woodbridge. Coleman now lives in a home in nearby Highland Park, where the flood risk is lower.
“When we were searching for other communities, I was checking elevation levels. Those are things I’d never thought about before,” she said. “I don’t know want to be anywhere near a flood zone.”
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