Climate change should be considered a new core aspect of creditworthiness when prospective home buyers apply for a mortgage, a new report suggests.
The analysis from the climate risk financial modeling firm First Street is a groundbreaking nationwide look at the ties between the growing risks from extreme weather such as floods and wildfires, and a long-suspected spike in mortgage defaults in hard-hit areas.
It finds that lenders and borrowers are exposed to more financial risk than they are aware of because current ways of determining creditworthiness leave out exposure to climate disasters as a factor. If climate risk were to be taken into account by lenders — which the analysis shows may be increasingly necessary as climate change worsens the severity and frequency of certain extreme weather events — then the next time someone goes to get a home loan their credit score could be knocked down (or adjusted upward) due to their climate risk exposure.
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The transition marks a decisive step toward net zero whole life carbon outcomes and an industry aligned with low carbon construction materials and renewable building materials. Policy and oversight are reshaping the framework of environmental sustainability in construction. The UK Climate Change Committee’s warning about the country’s outdated infrastructure has driven a review of sustainable building design, retrofit strategy and resilience standards.
Across Europe, assessments of natural capital are influencing budget plans and encouraging circular economy in construction investment to safeguard soil, water and ecosystem services that underpin eco-friendly construction and green building materials supply chains. Regulatory shifts underline a broader move towards sustainable building practices and transparent lifecycle assessment.
The tightening of environmental rules in the United States, alongside fresh attention to environmental product declarations (EPDs), reflects a commitment to decarbonising the built environment. Financial modelling is edging closer to integrating life cycle cost and life cycle thinking in construction so that investors reward projects promoting resilience and resource efficiency in construction rather than short‑term compliance.
The global construction sector is entering a phase where sustainable construction and low carbon design define competitiveness. From eco-design for buildings and BREEAM v7 certification to circular construction strategies and end-of-life reuse in construction, industry leaders see that green construction, carbon neutral construction, and net zero carbon buildings are not aspirational ideals but essential metrics of sustainable urban development.
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