Evaluating the Impact of Climate Risk Scores on Property Purchase Decisions

Abstract

Due to climate change, the likelihood and severity of weather disasters have increased over the past decades and are expected to continue rising in the future. To improve mitigation behaviors, governmental and private sectors are providing individuals with information about upcoming risks, their severity, and their impacts. This lab-based study examines one form of such information: climate risk scores, which are numerical values that indicate the likelihood a property will be exposed to different types of hazards, such as flooding and wildfires. The results of three experiments (overall N = 609) demonstrated that individuals were sensitive to climate risk scores and incorporated them into their evaluations of real estate properties. Participants consistently reported less willingness to buy high-risk properties and properties lacking climate risk information compared to properties with a low risk of climate disaster. Additionally, participants showed consistent risk perceptions regardless of the time frame (12 months vs. 30 years) or granularity (property-level vs. postcode-level) of the risk scores. Furthermore, those who perceived risk scores as accurate, trusted their sources, and believed in the substantial impact of climate change on past and future extreme weather events were more likely to integrate risk scores into their property evaluations. Together, these results provide evidence on how individual characteristics and attributes of climate risk information combine to influence risk perception and judgment.

Keywords: Climate Change, Risk Perception, Risk Communication, Climate Hazards, Decision-Making