Today, every player in the real estate ecosystem is concerned about climate risk. Property owners, investors, operators, developers, lenders, and other stakeholders increasingly must evaluate and disclose climate risks of individual properties and property portfolios and align that assessment with existing environmental due diligence processes.
Clients from all areas are turning to environmental professionals to assist with now-essential climate risk evaluations. A consistent, efficient, and transparent approach is critical and helpful to everyone involved.
Clients from all areas are turning to environmental professionals to assist with NOW-ESSENTIAL CLIMATE RISK EVALUATIONS
To meet this urgent need, ASTM International’s E06.25 Subcommittee for Whole Buildings & Facilities is developing a standard guide. Called the Standard Guide for Property Resilience Assessments of Buildings (WK62996), it will provide a clear framework and outline best practices for the climate risk assessment process.
To better understand the new ASTM standard under development, ERIS spoke to Holly Neber, Chair of Task Group WK62996 and CEO of AEI Consultants, to learn about the new standard.
[Holly’s bio at the end]
Q: Holly, before getting into the details of the work you’re doing, can you give us some context? Tell us a bit about ASTM and how you got involved in developing this new guide for commercial real estate assets?
A: ASTM International is one of the largest voluntary standards-developing organizations in the world. It provides a forum for industry experts, end-users, consumers, government, and academia to come together and collaboratively produce an agreed-upon standard for a given purpose. Its standards provide a common language and reference guide for those in a given community, in this case, the commercial real estate space.
I have over 20 years of experience in the property assessment world, and I was fortunate to connect with Damian Wach of PGIM Real Estate. He is the chair of ASTM’s E06.25 Subcommittee for Whole Buildings & Facilities, within which this standard resides. I was honored and humbled to accept the invitation to chair the task group, leveraging my network to bring a broad range of experts and end-users to the effort.
Q: Who are the stakeholders on the committee? How many people are participating?
A: Financial institutions, real estate investors, and developers, as well as the providers of building assessments, including consulting, engineering, hazard screening, and modeling companies, and climate-related disclosure frameworks (such as BREEAM) are involved with the effort. In addition, representatives of the American Society of Civil Engineers, which is influential with respect to building codes, Institute for Sustainable Communities, U.S. Resiliency Council, and National Center for Atmospheric Research are participating. Representatives of the CPACE lending community, Fannie Mae, and Freddie Mac, also are involved. We have nearly 90 participants and welcome additional involvement in developing this standard.
We have NEARLY 90 PARTICIPANTS and welcome additional involvement in developing this standard.
Q: What is the purpose of the Property Resilience Assessments of Buildings standard? What gap or need will it address?
A: Property owners, investors, operators, developers, lenders, and those that support these various interests are experiencing greater pressure to evaluate and disclose climate risk at the property level in coordination with existing due diligence processes. Motivations for obtaining this information may include risk management, alignment with sustainability frameworks, disclosure requirements from capital sources or shareholders, concerns about rising insurance costs, evolving regulatory requirements, changing property values, and future exit strategies. These climate risk assessments are already occurring, so a standardized approach is essential.
The lending, investment, and consulting community collectively identified the urgent need for an ASTM resilience standard that aligns with the others that typically accompany CRE decision-making, such as the E1527 Standard Guide for Environmental Site Assessments: Phase I Environmental Site Assessment Process, E2018 Standard Guide for Property Condition Assessment: Baseline Property Condition Assessment Process, and E2026 Standard Guide for Seismic Risk Assessment of Buildings.
A more resilient building can better withstand hazards, RESULTING IN BETTER OUTCOMES for occupants, investors, developers, and lenders.
When we talk about resilience in the context of this standard, we are referring to the ability of a building to withstand natural hazard impacts. A more resilient building can better withstand hazards, resulting in better outcomes for occupants, investors, developers, and lenders. A Property Resilience Assessment (PRA) will create a standardized way of communicating the hazards and vulnerabilities that may affect a building and help identify resilience measures to improve its performance.
Q: Why is this standard important to environmental professionals? How will it help them?
A: The environmental consulting community needs to stay up to date with the pressures clients face. The Chairman of the Federal Reserve recently stated that climate change risk poses significant challenges to the global economy and financial system, and the Fed is currently evaluating how to best address climate-related risks for financial institutions and the broader financial system.
The environmental consulting community needs to STAY UP TO DATE WITH THE PRESSURES CLIENTS FACE.
Beyond regulatory pressures, many clients are also signing onto various voluntary sustainability frameworks. Although branded under a “sustainability” umbrella, these frameworks can leverage traditional consulting services such as compliance, EH&S, hazardous waste management, permitting, energy efficiency, air quality, and natural resource management. The frameworks also typically call for an explanation of how the participant is accounting for physical climate change risk.
Beyond regulatory pressures, many clients are also signing onto various VOLUNTARY SUSTAINABILITY FRAMEWORKS
The number of clients asking for climate risk rating reports along with their other due diligence needs is growing. Absent an ASTM standard, the potential for miscommunication about the assessment’s goals, scope, and limitations is a liability to everyone involved. The common ground of a consensus-based ASTM standard that defines the minimum acceptable scope of work, provider qualifications, shelf life, and user responsibilities, among other things, will benefit all stakeholders.
Q: What does the standard cover? What doesn’t it address?
Our vision is for the ASTM GUIDE TO BE AN UMBRELLA, referencing existing natural hazard and climate change-related resilience frameworks.
A: Our vision is for the ASTM guide to be an umbrella, referencing existing natural hazard and climate change-related resilience frameworks, including those outside of ASTM, to describe the process for assessing physical risks at a property and identifying risk-reducing resilience measures.
We are not attempting to cover all environmental, social, and governance (ESG) reporting or assess physical climate risk across a business or supply chain. The PRA focuses solely on physical risks to the building itself. Aspects of the standard could also be applied to building portfolios.
We envision the PRA to consist of three main phases.
- Natural Hazard Screening Stage. Screening is conducted to determine which hazards are likely concerns for the building. This natural hazard screening involves leveraging publicly and commercially available hazard maps and models and using community-based maps and models, if available. The guide will discuss the limitations of natural hazard and climate-related maps and models, as well as the pros and cons of various types of available resources.
- Risk Assessment Stage. A document review and site inspection are conducted to ascertain information about building materials, age of construction, on-site sensitivities, and vulnerabilities to identify the extent of the risk. The site inspection takes the hazards identified in the first stage and compares them to the building attributes, nature of occupancy, and any property adaptations already implemented.
- Example 1: Two buildings with similar building elevations are subject to the same type of flood risk; however, one has critical equipment in the basement, and the other has placed essential equipment above projected flood levels. The two buildings would experience the hazard differently.
- Example 2: An assisted living versus a self-storage building would be impacted by extreme heat in different ways.
Likely outcomes of this assessment stage include a risk rating and potential damage estimate. Our goal is to provide the property investor, lender, or other users with enough information to understand if there is a significant concern to the building so they can make an informed decision about the extent of the vulnerability and plan for any necessary resilience measures.
Our goal is to provide the property investor, lender, or other users with enough information TO UNDERSTAND IF THERE IS A SIGNIFICANT CONCERN…
3. Basic Resilience Measures Stage. The third phase involves identifying resilience measures such as temporary or permanent flood barriers, moving critical equipment, fortifying the building against fire hazards, upgrading HVAC equipment, etc. We also expect to provide general cost range estimates for these measures and the expected improvement to the risk rating identified in the risk assessment stage.
There are sites where basic resilience best practices will not be enough. Some sites or projects may be too complex to address under the standard and will be best served by advanced engineering and design consulting.
Q: How does the PRA standard tie into other ASTM standards and non-ASTM guidance?
A: The standard will reference related ASTM standards such as flood-related standards and the E3032 Standard Guide for Climate Resiliency Planning & Strategy. It also will reference non-ASTM frameworks such as the U.S. Green Building Council’s RELi 2.0 Rating Guidelines for Resilient Design and Construction, the UK Green Building Council (UKGBC) Framework for Measuring and Reporting of Climate-related Physical Risks to Built Assets, International Finance Corporation Building Resilience Index, Enterprise Communities Strategies for Multifamily Building Resilience, U.S. Resiliency Council (USRC) frameworks, Integrated Building Adaptation and Mitigation Assessment (IBAMA) Framework, AIA Climate Risk and Resilience resources, and U.S. Climate Resilience Toolkit, among many other helpful resources that have been developed. We continue to gather resources. ASTM is also developing climate-related ESG reporting standards under the E50 Committee as a separate effort.
Q: What is the timeline for finalizing the standard?
A: We’re in the initial task group phase right now. It usually takes about 18 to 24 months to get to the finish line. The draft is coming together, and we hope a version will be ready to vote on before the end of this year.
ERIS thanks Holly Neber for taking the time to meet with us for this interview.
ABOUT HOLLY:
Holly Neber is CEO of AEI Consultants, an employee-owned property consulting firm with over 25 offices across the U.S. AEI provides property due diligence, remediation, construction risk management, industrial hygiene, capital planning, climate risk assessments, and sustainability consulting services.
Mary Ann Grena Manley
Founder and President of 15E Communications LLC, Washington, DC
Mary Ann is the Founder and President of 15E Communications LLC, a Washington, DC-based consulting firm that assists clients with communications strategy, content, business development, and public relations. Prior to founding 15E in 2020, Mary Ann managed Bloomberg Industry Group’s coverage and analysis of global Environment, Health, Safety, and Sustainability issues for more than 20 years. With experiences cutting across environmental law, policy analysis, journalism, and marketing, she most recently served as Deputy Editorial Director for Bloomberg Environment. Her areas of policy expertise include environmental compliance, environmental due diligence, risk management, brownfields redevelopment, sustainability, and ESG. Connect with Mary Ann via email, or through LinkedIn.
