Physical and climate change-related risk identification in valuation practice: an Australian perspective

Abstract

PurposeThe purpose of this research is to investigate Australian property valuers' identification and consideration of physical risks to properties in valuation practice. The research further explores valuers' considerations of climate change-related risks.Design/methodology/approachThe research approach comprised an online survey of Australian valuers who were members of the Australian Property Institute. The online survey included structured and unstructured questions to explore types and extent of risk investigations in valuation practice.FindingsThe analysis reflects that while valuers easily identified and engaged with physical risks, there is a lack of understanding of, and engagement with, climate change risks. This supports the need for better information sources and guidance to inform valuers of climate change risks per se, as well as the development of specific mechanisms for consideration of such risks to be included in valuation processes, practices and reports.Research limitations/implicationsThe research is limited by the small sample size achieved due to the timing of the survey deployment, which occurred during the first wave of COVID-19 lockdowns in Australia. Thus, the findings are not necessarily representative of the Australian valuation profession, but they do provide indications of current approaches to risk identification in practice and the need for more guidance in relation to climate change risks.Practical implicationsThis research identifies that more support, guidance, information and tools, as well as awareness-raising, are required to enable valuers to accurately identify all risks affecting a property.Originality/valueThe research provides a snapshot of current understandings of physical risk identification in valuation practice. As investors and other organisations integrate and build up their analysis of climate risks to their portfolios and organisations, this research indicates that valuers also need to be aware of changing market assessment of physical and climate risks associated with property for consideration in valuation.