Current Climate Data of Little Use to Businesses, Law Professor Says

Climate risk is a real thing to landlords, investors, and operators. Property faces increased repair costs, potential regulatory fines, uninhabitability, forced isolation, or even destruction due to weather incidents such as floods, hurricanes, and wildfires.

As the effects of climate weigh heavily on commercial real estate and all the industries and individuals that lease property, prudent affected parties would understandably want information for decision making.

“The outcomes of these risk projections have significant consequences in the economy, including allocating investment capital, impacting housing prices and demographic shifts, and prioritizing adaptation infrastructure projects, writes Madison Condon, an associate professor at the Boston University School of Law teaching environmental law and climate risk, in an upcoming article in the Arizona State Law Journal.

But information is “limited and expensive to access,” particularly for municipalities, individuals, and, it seems reasonable to add, smaller businesses. In addition, in the commercial “climate intelligence arms race,” the results are delivered from “black box models” that prevent users from seeing assumptions or how calculations are made. The opacity has led to “scientific critiques that many may be obfuscating the uncertainty in their projections.” The inherent problems have surfaced in the “physical risk scores produced by leading ESG firms [that] have been found to have little correlation with one another.”

If many risk scores have little correlation and the models and calculations can’t be examined, then there is no way to know which risk scores are more likely to be right. That fact alone suggests the CRE industry, among others, is largely flying blind.

There is federal government data, but “it has arguably lagged the private sector in the production and broad dissemination of ‘usable’ climate science—that is, science aimed at the scale of adaptation decisions.”

And considerations that businesses must make are complex. “Whether a factory or a luxury condo is resilient to hurricane risk depends, in part, on its location and projected climate conditions, but it also depends on the resilience of the surrounding municipality,” Condon wrote. “A building that has zero flood risk is not very useful if all the roads leading to the building are washed out. This systemic aspect of climate-change related risks requires proactively considering where we think capital should go, not only where we think it will go.”

Condon’s view is that the country needs a “public good”—a “centralized provider of climate data in the form of a National Climate Service (‘NCS’) to both serve as a ‘public option’—an alternative to private providers—and to guide federal regulators, including financial regulators.”

In addition, Condon points out that all private climate services depend on data and models produced by a network of public institutions and urges state and federal governments “to invest in their own climate services capacity at a scale not currently contemplated.”