The climate change risk solution will incorporate critical risk components into a single lender-focused product which will identify any threats from transitional or physical factors both now and in the future.
The product supports objectives in the Bank of England’s climate strategy which hopes to build awareness of climate related risks amongst lenders. It also aims to improve understanding of how these threats can impact a property’s value and investment decisions.
David Ross, managing director, Hometrack, said: “Climate change is a very real risk of material consequence. Average temperatures continue to increase and scientists and governments are looking at ways to reduce that impact.
“Regardless of how this plays out, every scenario will have ramifications for property values and mortgage markets.
“Along with transition risk brought about by emissions, lifestyles, transportation and energy, there are already physical risks that are manifesting as a result of climate change. Those risks show themselves in property desirability, safety and subsequently saleability and value.”
“Our identification of that risk begins with identifying risks to the lender at the point of origination and portfolio to help them understand where their property is and what the risk of their location is.
“Our partnership with Terrafirma and Ambiental is the first of its kind and is one that we hope will deliver genuine, game-changing innovation, as we work towards solving climate change challenges for lenders worldwide.”
Delivery
The Climate Change Risk Assessment will be delivered through existing and integrated platforms, at origination and through portfolio assessment, enabling risk identification and decision management for lenders.
The product will also model the impact of climate change on property values with the use of Hometrack’s unique AVM.
Hometrack said the model would save time and money for lenders. It will be undertaking over 50 million valuations per year in order to deliver unique benchmarking insights for customers.
Tom Backhouse, CEO and Founder, Terrafirma said: “We are delighted to have partnered with leading property data experts Hometrack to deliver the next generation of climate risk assessment for mortgage lenders.
“As geologists, scientists and engineers, we are uniquely positioned to understand the impact that changing climate will have on ground hazards, such as subsidence, erosion and ground conditions.
“In partnering with the experts at Hometrack, we have unlocked never-before-seen insight into the impact ground hazards have on property value and saleability that can be translated into intelligence for mortgage lenders.”
He added: “The partnership between Hometrack and Terrafirma offers mortgage lenders an unparalleled assessment of risk now and into an uncertain future as our climate changes. We are delighted to be a key part of a solution that will bring huge value to lenders.”
