The prospect of a bitterly cold few months ahead of us with the possibility of more snow has been met with some cries of despair as people across the country contemplate the possibility of frozen pipes, frosted windscreens and freezing mornings so closely associated with the British winter.

Indeed, bemoaning the arrival of snow seems engrained within the British psyche.  But however tough the pill may be to swallow, my preferred message might be, ‘enjoy it while it lasts’.

Our climate is demonstrably shifting towards one with warmer, wetter winters, and hotter, drier summers. Research from the Met Office suggests that snowy winters are likely to be vanishingly rare by 2040.

While seemingly benign, the loss of these deeper winters in the UK is indicative of rapidly-changing climatic conditions, and the precursor to a whole raft of future climate and ground-related challenges.

A changing climate

Instances of destructive flooding are on the increase, according to the Environment Agency. There have been 17 record-breaking floods since 1900, nine of which occurred after the year 2000.

Flooding of the Somerset Levels and surrounding area during the winter of 2013 to 2014, and the flooding in 2015 to 2016 in Cumbria and Yorkshire did untold damage to families and property in those areas hit hardest.

For homes, infrastructure and land, complex ground hazards such as flooding, ground movement and even the collapse of historic mine shafts, already have the potential to impact millions of pounds’ worth of investments, putting individuals, families and businesses at risk.

For many businesses in the mortgage market, climate change will also be firmly on their radars – whether in lenders’ plans to meet growing demand from consumers for greener products, including eco and green mortgages, or through Environmental, Social and Governance initiatives within their own businesses.

Yet, climate change also has the potential to create new challenges in the form of ground hazards. As the cold winters of Victorian Christmas cards retreat, the scorching summers of the coming decade will trigger a cascade of property damage and subsidence claims across increasingly northern parts of the UK.

Financial institutions now face the task of building a comprehensive understanding of the future ground risks that could impact the properties they borrow and lend against.

Regulatory pressure

Already regulatory pressure is mounting in this area. The Bank of England has embarked on its climate strategy and a key immediate hurdle facing financial institutions is its Climate Biennial Exploratory Scenario (BES).

This will require financial services firms to report on their climate-related financial risks by the end of 2021. The Bank of England also expects to see a detailed breakdown of the impact of climate scenarios on the balance sheets of financial institutions from the year 2020 to 2050.

Businesses large and small in the financial services sector must therefore act fast to understand their exposure to both the risks we are aware of now, and a whole host of other environmental hazards which are likely to surface in new parts of the UK as a result of climate change.

So, what could these risks be?

Understanding future risks

As an indicator of things to come, the Climate Change Committee, the UK’s independent adviser on tackling climate change, predicts that if current global emission outputs remain constant, by 2050 we will see a 10% increase in UK heavy rainfall events.

Apart from the obvious flooding risks, heavy rainfall can also trigger the formation of sinkholes as subsurface erosion and dissolution intensifies.

Similarly, frequent rainstorm events will also lead to a greater number of landslides – a particularly destructive ground risk with the potential to cause significant damage to property and infrastructure. Other challenges include rising sea levels and subsequent acceleration of coastal erosion.

We have spent much of the last 12 months building new climate models to help us understand how the spatio-temporal pattern of UK ground hazards like subsidence will change over the coming decades.  As clay-rich soils dry, they shrink, leading to subsidence.

Areas like the North East (not known for its hot, dry summers) are set to experience massive increases in subsidence claims, as the soils, which previously rarely dried out, become as dry as those around London.

Bringing in the experts

The good news is that there are solutions for lenders that can help them to understand and better prepare for the challenges presented by future ground risks.

New services and models can help businesses establish a perspective on the risks out changing climate poses to their assets including property, land parcels or infrastructure, both now and into future.

Fundamentally, it is important to understand that climate and ground risks are here to stay, and the percentage of the UK properties they will affect will increase.

There will come a point when safeguarding against coastal erosion or solifluction will become as ingrained within homebuilding as checks on nearby planning permissions and flood risks.

It is in the long-term interests of institutions that will need to adapt to the Bank of England’s climate strategy and subsequent regulation to seek expert advice on ground hazards, rather than a ‘quick fix’, which could cost them more in the long run.

The objective here should not be to pacify new regulation and simply check the boxes, but to help prepare businesses for the potentially devastating consequences of climate change.

Predictive models that help businesses to understand potential future ground risks will be a vital component.

One such model is Terrafirma’s National Ground Risk Model (NGRM): Climate. Launched in November 2020, it represents the next generation in ground risk assessment. The model is focused on helping financial institutions to identify current and future ground hazards, so they can quantify how these changing risks could impact their balance sheets.

The mortgage industry has long understood the challenges posed by present hazards such as flooding. Yet, our rapidly changing climate is now presenting new challenges while intensifying existing hazards.

It will be vital for lenders to invest and prepare for these future risks in order to minimise potentially costly implications of climate change in the years ahead.

Dr Tim Farewell is science and communications director at Terrafirma