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For many years those dealing with Real Estate transactions have been used to considering environmental risks relating to a property; whether on the basis of planning requirements, site surveys or environmental property searches which assess the past data held in relation to a particular area. However the potential effects of future climate change are a fast-developing area which need increased focus when looking at real estate opportunities.
Why Climate Risk Matters in UK Real Estate
With the 30th Conference of the Parties to the UN Framework Convention on Climate Change (“COP30”) having taken place in November last year it is a useful time to reflect on what progress is being made in the UK from a real estate perspective in meeting COP30’s underlying objectives of:
- the delivery of robust national climate commitments for the financial support for the transition to green, inclusive and resilient economies (“Climate Commitments”);
- the use of finance and technology in cooling, buildings, forestry and transport to enable adaptation to and mitigation of climate change (“Adaptation and Mitigation”); and
- the collaboration between countries to agree priority actions to tackle climate change (“Global Collaboration”).
The most immediately impactful objectives are the Climate Commitments and Adaptation and Mitigation objectives that are already embodied in the Climate Change Act 2008 and Environment Act 2021 and which the current government’s climate change strategy focussed on:
- net zero emissions by 2050;
- transition to clean energy;
- job creation via its Green Prosperity Plan;
The strategy is exemplified by the creation of public bodies such as the Department for Energy Security and Net Zero, the National Infrastructure and Service Transformation Authority together with the issuance of guidance for both the public and private sectors such as Whole Life Carbon Management Handbook for the Built Environment and the Land Use Framework for England. These examples together with a whole range of others are having or are intended to have a direct and substantial impact on the UK’s built and natural environment and as a consequence it’s economic performance.
What Are Climate Risk Searches?
From a real estate legal perspective, the increased emphasis on adaptation to and mitigation of climate challenges has led to (amongst other things) the development and issuance of searches specifically on climate risk.
Unlike environmental searches which essentially deal with the risk of existing contamination together with the risk of flooding based on past flood events, the climate risk searches seek to provide a risk assessment of future climate events and existing regulation to mitigate such events by highlighting the following:
| Physical Risks | flooding; coastal erosion; ground stability; temperature changes causing heat and water stress, sea level rise and an increase in extreme weather events |
| Transition Risks | regulatory requirements / standards such as Minimum Energy Efficiency Standard Regulations; UK Building Regulations; Greenhouse Gas Reporting requirements; the Future Home and Building Standards |
Legal and Transactional Implications
Navigating through this ever-changing area can be a challenge. There are increasing legal risks arising from the potential negative impacts of both physical and transaction risks, for example a development project not being able to be built as planned or a physical weather event impacting the ability to comply with legal obligations.
Get Advice on Climate Risk in Property Transactions
Whether you are looking for help on interpreting how the physical risks of climate change may affect your property transaction or advice on the potential legal liability arising by virtue of an interest in land the Real Estate Team at Lester Aldridge are well placed to assist.
Contact our Real Estate Team by email or call us to discuss your enquiry.
