Sustainability and Risk Management
Sustainability is one of the most effective, and perhaps the most underutilized, tools in risk management.
Indeed, some of the world’s largest insurers have determined that green buildings present less risk, and greater resiliency, than conventional buildings.
However, to most real estate owners the concept of leveraging sustainability to reduce risk is an unknown strategy.
Green buildings use less energy, consume less water and offer lower maintenance costs than conventional buildings.
Operations and maintenance plans focused on efficiency can reduce the operating costs associated with commercial buildings by as much as 30%.
Buildings certified as green command leasing premiums of 3-20% and sales premiums of 8-26%.
Green building design characteristics focusing on occupant health and well-being can result in 6-16% increases in occupant/employee productivity.
These and other positive green building characteristics can improve a property’s risk profile, allowing green building owners to receive additional benefits from insurers.
Green Building Claims Reduction
As mentioned above, many real estate owners and operators are unaware of the concept of sustainability as a risk management strategy.
This is changing, however, as the strong economic and business case that green buildings and sustainable business practices carry can be seen in all segments of the real estate marketplace.
Indeed, 40% of commercial and industrial construction starts in 2015 will be considered “green”.
USGBC’s Leadership in Energy and Environmental Design (LEED) rating system, the most widely accepted international green building rating system, has certified over 3.6 billion square feet of space as of January 2015.
And yet, despite this increased interest in green building and sustainable real estate operations, most insurers and their clients remain unaware of the risk implications of not adopting sustainable practices.
Standard insurance forms are outdated… Or reveal big gaps in coverage.
The aforementioned aspects of green building design, operations and maintenance are within our control…
But what about risks that may be beyond our control?
According to Ceres, a global non-profit organization advocating for sustainability leadership, the changing climate is profoundly altering insurers’ business landscape.
These shifts are affecting the industry’s ability to price physical perils, creating potentially vast new liabilities and threatening the performance of insurers’ far-reaching investment portfolios.
The unpredictability of extreme events, combined with the potential for climate change to undermine the industry’s diversification models, threatens the industry’s long term viability along with the very concept of insurability itself in some parts of the world.
What You Need to Know
The economic and business case for green buildings and sustainable business practices is real.
Knowledge of sustainability-related risk management strategies is the future of risk management, and may represent the difference between a successful insurance agent and an unsuccessful one.
Will you be there to help your current, and future, clients understand and manage these risks? Now is the time to learn about green building risk management for your clients or your commercial property portfolio.
To learn more about the opportunity in sustainability and risk management enroll in the Sustainability Risk Management Certificate Program with Stephen Bushnell.
Have questions about green building risk management and specialized insurance for your property? Please call (866) 715-7737 or contact us.