Assessing the impact of climate-related risks on Canadian real estate investment trusts: insights and implications for investors

Purpose We evaluate how physical climate risks influence the operational and financial performance of Canadian real estate investment trusts (REITs). We focus on natural disasters and show how systematic climate risk assessment can strengthen investment and management decisions. Design/methodology/approach Using the multi-hazard exposure (MHE) average index (Duprey et al., 2021), we match a century of disaster data to 1,658 Canadian Forward Sortation Areas (FSAs). Panel regressions link portfolio-level MHE exposure to operating metrics (rental revenue, operating expenses, net operating income (NOI) and adjusted funds from operations (FFO)) and market metrics (abnormal return and beta). Findings MHE exposure reduces rental revenue and is unexpectedly associated with lower operating expenses, suggesting strategic cost management, while market pricing already embeds the risk. Impacts differ by property type: multifamily and self-storage assets are most exposed; hotels and retail assets show relative resilience. Practical implications Investors and regulators should embed forward-looking climate risk metrics in capital allocation, insurance and disclosure. Recent instruments such as OSFI Guideline B-15 and the Canadian Securities Administrators' climate disclosure rule illustrate viable policy levers. Originality/value We unite a granular multi-hazard index with REIT-level financial and operating data, providing the first evidence for Canada and demonstrating how adaptive management strategies can mitigate location-specific climate exposure.