A new whitepaper released by the Steers Center for Global Real Estate at Georgetown University’s McDonough School of Business analyzes the findings of a recent flash flood simulation that was conducted in partnership with leading environmental, financial, and governmental stakeholders in Washington, D.C., to evaluate the infrastructure impacts, economic costs, and political risk associated with changing climate conditions. 

The research focused on the neighborhoods surrounding Washington Union Station, which demonstrated elevated flood risk in a range of scenarios. The simulation was developed by the Steers Center in partnership with Booz Allen Hamilton, Gallagher Re, and the US Naval War College, using KatRisk modeling technology to forecast both climate scenarios and asset impacts. These forecasts formed the basis of a simulation event that brought together teams from across industries and sectors to serve as key constituents in roleplaying the political dimensions of a disaster. 

“It’s critical that every community strategize how to address the impacts of climate change, because each city will face its own unique challenges,” said Jeremy Healey, whitepaper author and ESG Fellow at the Steers Center. “The simulation provided insights into how each industry will respond to a climate event in Washington, D.C., and how businesses and investors can both prepare for damages and assess their own climate risk across the region.”

Key findings of the whitepaper include:

• Flood exposure is high for certain neighborhoods in Washington, D.C. This comes from a combination of natural elements, climate change, and engineering, in a manner that suggests the need for the systemic reappraisal of physical risk.
• Adverse income and value impacts from growing climate risk are inevitable. Investors should expect risks, including any or all of reduced revenues, increased expenses, and required capital expenditures.
• As climate events become more frequent and expensive, well-capitalized private investors will be exposed. In the recovery phase of a climate event, governments are likely to allocate scarce funds to socially vulnerable constituents and owners with few other financial resources.

• Mitigation of climate impact is unlikely. While there are tools that may diagnose areas of increasing stress, governments are unlikely to prioritize or fund mitigation efforts in many cases due to limited budgetary resources.

• The city will look to private investors for support. New programs are needed to address climate issues, although achieving meaningful results from private or public-private action is difficult. These challenges, which may limit holistic solutions, will create opportunities for private investments as a result.

• Investors, be warned. Investors should anticipate the effects of increased climate risk on individual assets, adjusting both investment strategies and valuation accordingly. They should also expect the resolutions associated with future climate events, especially from government sources, to be less favorable than they have been to date.

Read the full whitepaper.