Adapt to survive – climate risk and readiness

January this year, the World Economic Forum published its Global Risks Report. It was clear that the biggest risks relate to climate change and particularly our failure to mitigate its effects and to adapt to its impact.

With UK temperatures rising by an average of 1°C between 1991 and 2021[1], coupled with the increasing frequency of extreme weather events (e.g. predictions show that the UK will experience a 10% increase in average rainfall by 2100[2] increasing flood risk), the housing sector faces a monumental challenge. Housing stock in the UK is simply not designed to withstand the 50°C temperature ranges we have experienced (as recorded by the Met Office in 2022). Housing providers are supposed to provide people with a place to live, where they feel comfortable and safe. It is, therefore, essential to consider whether you can continue to offer this in the context of the climate crisis.

Extreme weather events cause problems for assets and customers, damaging buildings, disturbing occupations, and impacting residents’ physical and mental health. In addition, the financial costs associated with providing temporary accommodation, delayed development pipelines, property repairs, and the potential reduction in property values, create an enormous economic burden for housing providers. We have already witnessed these risks becoming a reality within the sector. In 2015, flooding in Northern England impacted over 3,000 homes creating over £150m worth of damage, including to 300 properties owned by Salix Homes, a housing association in the Greater Manchester region.

Aside from the physical and economic risks caused by climate change, housing providers are also vulnerable to many transitional risks (risks which originate from the uncertainty created by climate change). These include changing regulatory environments, reporting requirements and governance structures. Supporting the management of these transitional risks, the FCA announced (in January 2022) that all listed companies, large regulated asset owners and asset managers are required to publish a transition plan[3]. It’s not unlikely that we’ll see this requirement placed on the likes of housing providers in the near future.

Managing these transitional and physical risks requires planning and change to ensure business readiness. Change and adaptation is critical to survival, but the big question is, what is the adaptation that’s needed?

Change in the housing sector to protect against climate risk is taking place, albeit gradually. For example, large RPs such as L&Q and Sanctuary are undertaking climate risk mapping exercises to assess the risk to both their business operations and their residents[4]. This involves mapping and assessing the potential impacts of extreme weather events to produce an adaptation strategy and support transition planning.

As with many things in life, the first step towards change is to recognise and acknowledge the responsibility that we (our sector and organisations) have in mitigating climate change and preparing for its effects. For housing providers, this must be considered and delivered strategically.

Physical and transitional risk should be on everyone’s corporate risk register, recognising the financial impacts of both inaction and proactive adaptation. Residual risk needs to be understood and accounted for in the Business Plan. Management of this risk must be embedded into governance practice, so strategic decisions are assessed against, and informed by, climate risk.

Assessing and monitoring climate risk is a step in the right direction, but these risks are not isolated to one function or service and cannot be managed by adapting in silo, but rather needs an organisational shift. Integrating sustainable design principles into an organisation’s way of operating can mitigate the risks and future-proof services to colleagues and customers.

Successful adaptation and change is always a challenge and may involve reconsidering your governance structures, business processes, data library, organisation design, culture and even values. Some organisations may need to commit to a new target operating model, making the adaptations across the business purposeful and synchronised.

There will be different priorities and solutions for different parts of our sector, but ultimately, the window of opportunity for planning, preparation, and effective mitigation is narrowing. But there is a lot that can be done, and in our experience, housing associations can be surprisingly adaptable in the face of challenges.

 

At Altair, our sustainability team can support you to undertake climate risk mapping and prepare adaptation strategies. Our Sustainability team closely work with our Transformation team to realise these adaptation strategies and design more sustainable business models for housing providers. 

Contact us if you require more information on how we can support your organisation in embracing sustainable business transformation.

[1] UK: average temperatures 1961-2021 | Statista

[2] IPCC 5^th Assessment Report Summary for Policymakers

[4] Inside Housing – Insight – How a growing number of social landlords are planning for the climate crisis and risk of extreme weather