The Risk No One in Real Estate Will Price

On March 4, plaintiffs sued Cushman & Wakefield. Not for neglecting any of the 5 billion square feet under their management, but for a retirement fund that, in its own investment documents, "expressly disclaims climate risk analysis." The ERISA class action argues that ignoring climate risk in a real estate portfolio is a breach of fiduciary duty. This is liability reform, not climate policy.

The real estate industry has evolved into a structure that punishes honest pricing and rewards denial. Investors cannot price climate risk without losing competitive bids. Lenders only price risks insurance can't cover. Insurers say regulators won't let them adjust premiums to actual risk levels. Regulators say they have to keep housing affordable. Everyone in this chain is doing their job. Everyone is rational. And no one is accountable for the risk that falls through every hand.

I have spent nearly two decades inside this chain. As a salesman at the country's largest homebuilder during the housing bubble, watching families buy homes they could not afford without cheap credit. As a researcher at one of the largest home insurers, modeling the climate risks those homes now face. As a strategist and investor for some of the world's largest owners of commercial real estate. At every stop, the same pattern: everyone sees the risk, no one can afford to price it first.

California's FAIR Plan, the state's insurer of last resort, grew from $50 billion in exposure to $458 billion in just five years, driven by private insurers exiting markets they could no longer price honestly. The FAIR Plan is not a safety net. It is a hidden subsidy, backstopped by every property owner in the state. Already, 6.1% of U.S. counties are insurance-distressed, meaning properties in those places may lose insurance at any moment and thus default on their mortgages. It took 5% of the country's housing stock defaulting on their mortgages to trigger the Global Financial Crisis.

This is not a technical problem. Companies have demonstrated solutions. One insurance company operating outside California's rate regulations charges 55% more for properties that aren't fire-hardened. During the January 2025 Los Angeles fires, while the rest of the industry was devastated, this company lost one property across thirteen portfolios. All their customers’ properties survived because they had been nudged to adopt fire-hardening.  

The barrier is legal, not technical.A lender who declines a loan based on climate data faces fair housing challenges. An appraiser who incorporates forward-looking risk models faces valuation liability. An investor who excludes climate-exposed assets faces securities claims. The system does not merely fail to reward honest accounting of risk. It penalizes it.

But courts are beginning to force the correction the market won't make. The Cushman filing is not isolated. Climate litigation reached nearly 3,000 cases globally by 2025. Oregon now requires its state pension to manage climate risk. Ignoring climate risk is becoming the liability.

What is missing is protection for those who choose to move first.

In 1998, Congress solved a structurally identical problem. Companies knew they had Y2K vulnerabilities but refused to disclose them because disclosure invited lawsuits. Congress passed a safe harbor: legal protection for good-faith disclosure, a higher burden of proof for plaintiffs, and an antitrust exemption so competitors could share risk data. A Republican Congress passed it. A Democratic president signed it. Y2K was largely a non-event.

Congress should apply the same model to climate risk in real estate. A safe harbor would protect lenders, investors, and appraisers who act on climate risk from the litigation that makes going first irrational. It would not mandate anything. It would remove the legal penalty for honesty.

Accurate pricing will raise costs in some markets. But the current system does not protect those communities. It hides their risk inside public backstops like the FAIR Plan, where taxpayers absorb losses they never agreed to carry.

Without a safe harbor, real estate faces a choice that is no choice at all. Price climate risk and face lawsuits under the current rules. Ignore it and face the courts that are coming under emerging ones. Every fund whose investment documents disclaim climate risk analysis just received a preview of its own ERISA exposure, across the $12 trillion U.S. retirement market.

The reinsurers have already repriced this risk. Swiss Re and Munich Re do not have a political position on climate change. They have a loss ratio. The question is not whether the market corrects. It is whether Congress makes that correction orderly --- or lets correction arrive the way 2008 did.

Parker White is a Sloan Fellow at Stanford GSB. He has spent nearly two decades in climate risk and real estate, including roles at Pulte Homes, American Family Insurance, JLL, and Google.