Mandating Materiality: A Policy Framework for Mandatory Climate Risk Disclosure in Commercial Property Acquisitions and Valuation

Abstract The commercial real estate sector faces a critical information gap, as climate-related risks remain inadequately disclosed and inconsistently priced in property acquisitions and valuations. This information asymmetry creates significant market inefficiencies, mispricing of climate-exposed assets, and potential systemic financial risks. This conceptual paper addresses this gap by developing a comprehensive policy framework for mandatory climate risk disclosure in commercial property acquisitions and valuation. The study employs a conceptual research methodology based on systematic literature review and theoretical synthesis across real estate economics, climate finance, and regulatory policy. The analysis reveals that emerging regulatory frameworks, including the International Sustainability Standards Board (ISSB) standards and Task Force on Climate-related Financial Disclosures (TCFD) recommendations, provide foundational elements for mandatory disclosure, yet significant gaps remain in property-level application and acquisition due diligence. The conceptual framework identifies four core pillars of mandatory disclosure: governance oversight, risk identification and assessment, materiality determination, and valuation integration. The study concludes that mandatory climate risk disclosure in commercial property transactions can enhance market efficiency, protect asset values, and support the transition to a climate-resilient built environment. This paper contributes to emerging scholarship on climate finance and real estate regulation by providing theoretical foundations for policy development and practical guidance for market participants navigating evolving disclosure requirements. Keywords: Climate risk disclosure; Commercial real estate; Property valuation; Mandatory reporting; TCFD; ISSB; Materiality; Due diligence; Financial stability; Regulatory policy