‘The future is not some place we are going, but one we are creating.’

John Schaar, Legitimacy in the Modern State (1981).

The last year has been a challenge for the property world and, understandably, all eyes have been on the impact of Covid-19 and resultant acceleration of structural change in real estate markets. Indeed, no one would argue with the severity of that problem and the resulting hardship suffered by many property owners when the value of their assets fell substantially as market uncertainty prevailed, especially in the retail and hospitality sectors and, to a lesser extent, offices, with continued evidence of structural shifts in occupational demand. 

But, while the pandemic will have ongoing impact, it falls into minor significance when pitted against the long-term greater global issue challenge: climate change. To many it might have become ‘out of sight, out of mind’, but for the major investment market players and for governments this has definitely not been the case. Indeed, 2020 proved to be a year when governments around the world really started to propose more major steps ahead of this year’s COP 26 climate change summit, due to take place in Glasgow in November.  Physical climate change risk and the policy or ‘transition’ risks associated will have a much larger impact on property values than anything that has happened during the pandemic. 

Two major announcements by the UK Government are pointing the way to why there is an impending impact on the real estate sector. First, at the end of 2020, the  Government published its Department for Business, Energy & Industrial Strategy (2020) Powering our Net Zero Future: Energy White Paper. And, second, its announcement to enhanced climate change commitments by aiming for a cut in carbon emissions of 78% before 2035 – years earlier than had been anticipated.