Real estate and climate transition risk: A financial stability perspective

Real estate plays an important role in debates on the transition to a carbon-neutral economy. Based on detailed real-estate data and climate scenario analysis, this study analyzes climate transition risks in real estate and their impact on Dutch financial institutions. First, for a substantial part of the real estate exposure, transition risk may already materialize before 2030. Second, a significant share of homeowners may face financing constraints, which would increase credit risks. Third, stricter standards may impair asset values, which would mean significant financial losses for investors. Such climate financial risks underline the importance of an orderly and, therefore, timely transition to carbon neutrality.