🌱 The Unpriced Climate Risk: What It Means for Australian Homes — and How We Can Reduce It

A deep-dive conversation with Dr Michael Molitor and Michael Drage

Climate change and housing are no longer two separate conversations. They are merging — quickly — into one of the most urgent issues facing Australian families, communities, and the national economy.

In our recent live session, we were joined by Dr Michael Molitor, a climate and energy strategy advisor with decades of experience in global climate policy, carbon markets, risk advisory and corporate strategy. Together with Michael Drage from reimagined habitat, we explored the concept of unpriced climate risk — what it means, why it matters, and how the homes we build today can either deepen or dramatically reduce that risk.

This article distils that conversation into a comprehensive deep dive.

⭐️ 1. Who Is Dr Michael Molitor — and Why His Perspective Matters

Michael’s background gives him a perspective few others have. He’s worked across the University of California Climate Change Program, BP’s global carbon strategy team, PricewaterhouseCoopers as their global climate change lead, McKinsey, and later as part of the UNSW Climate Change Research Centre.

Across these roles, he’s advised governments, global insurers, high-emissions industries, and now climate-tech start-ups.

And crucially — he sees Australia’s residential property market as one of the most exposed, least-prepared sectors in the country.

With $13 trillion in residential property value, housing is the nation’s largest asset class — and also one of the most at risk.

🌏 2. The Global Cost of Climate Inaction — and Why It Matters Here

Michael opened with blunt clarity:

We now live in a world where we haven’t done enough to prevent climate change — and because of that, trillions of dollars of assets around the world are at risk.

To quantify this, organisations like McKinsey estimate that US$64–65 trillion of global asset value is exposed to climate risk.

Australia recently attempted to understand its slice of that number. According to the National Climate Risk Assessment:

• $611 billion in residential property value could be lost by 2050
• $770 billion by 2090

And this isn’t speculative modelling — it’s based on known climate pathways, insurance data and property exposure.

This is the financial backdrop behind rising premiums, retreating insurers and increasingly volatile weather. And it directly shapes the future affordability, liveability and resilience of Australian homes.

🔥 3. Understanding How Climate Change Fuels Risk

Michael delivered a short “PhD in a minute” explaining the physics behind climate instability — from CO₂ emissions to atmospheric mixing, ocean absorption and the increased energy in the climate system.

The key point is simple:

It’s not the annual emissions that determine climate risk — it’s the total concentration of greenhouse gases in the atmosphere.

As CO₂ rises (now at 426.4 ppm compared to ~280 ppm pre-industrial), the atmosphere absorbs more heat, increasing the intensity and frequency of extreme weather.

This explains:

• 2022 Lismore floods
• catastrophic hailstorms in Brisbane
• deadly heatwaves
• worsening bushfires
• hazardous smoke and air pollution

Extreme weather is now a feature, not an anomaly.

🌊 4. Case Study: Northern Rivers & the Lismore Floods

The Northern Rivers Reconstruction Corporation engaged Michael as part of the advisory team after the devastating 2022 floods that destroyed thousands of homes.

His observations were confronting:

• Lismore sits inside an ancient volcanic caldera — essentially a giant bowl.
• It is one of the worst possible locations for a growing town in a warming climate.

The state government needed to buy land, relocate homes, and rebuild. But the essential question became:

Where can we safely build future housing to avoid repeating this disaster?

This led to:

• using climate modelling tools to assess land suitability
• mapping flood, fire, heat and wind exposure
• understanding insurance requirements and reinsurer modelling

But an even bigger issue emerged — one that affects every Australian home.

🏦 5. The Silent Forces: Insurance, Reinsurance & Banking

One of the most powerful insights from the session was this:

Reinsurers (like Munich Re) have the best climate modelling in the world — because their survival depends on it.

And they’re acting faster than governments.

In the US, major insurers have already pulled out of:

• Texas
• Florida
• California

Because the financial risk is simply too high.

Australia is next. Premiums are rising sharply, and insurers are signalling that some regions will become uninsurable.

Banks, too, are beginning to respond. Higher risk = higher interest rates. Not just for individual homes, but for entire suburbs.

This is where Michael introduced two critical concepts:

Physical Risk

The direct damage caused by climate events — floods, fires, storms, hail.

Transition Risk

The economic shift as insurers, banks, regulators and markets finally begin pricing climate risk properly.

Transition risk is often worse — because it affects everyone, not just those in high-risk zones.

🧱 6. How Homes Can Reduce Climate Risk — Location + Design

1. Choose Low-Risk Locations

Where we build matters more than ever. Physical risk can’t be eliminated — but it can be dramatically reduced with better site selection.

2. Build Resilient, Energy-Efficient Homes

Resilience measures can mean the difference between a total loss and a home that survives intact — as illustrated by the Los Angeles fire example where one well-maintained home was left untouched while every surrounding house burned.

Resilient homes incorporate:

• high air-tightness
• double or triple glazing
• high-performance insulation
• passive solar design
• non-combustible cladding
• managed ventilation
• filtered fresh air
• reliable water storage
• rooftop solar + battery
• EV readiness

This is Passive House territory — or solidly on the path towards it.

3. Resilience = Comfort + Health + Savings

Airtight, well-insulated homes:

• stay cool during heatwaves
• stay warm during cold spells
• help reduce asthma and respiratory illness
• keep out smoke and PM2.5
• stay habitable during blackouts
• dramatically reduce heating/cooling demand

A Canberra example from the live session illustrated this vividly. During the 2020 bushfires, a near-Passive House office stayed at 27°C and smoke-free while the outside reached 40°C and the city was blanketed in hazardous air.

🏘 7. Housing Quality, Health & Australia’s Existing Stock

Simone observed the confronting reality of existing rental housing — mould, poor insulation, damp, old carpets, dust mites, and unsafe indoor air.

This represents a growing public health crisis, especially for children, asthma sufferers, older people, and anyone vulnerable to extreme heat or poor air quality.

This creates urgent need for:

• minimum rental standards
• renovation incentives
• upgraded building codes
• support for energy retrofits
• smoke-safe ventilation solutions
• mould-resistant construction

Our current housing stock is far behind global standards — and climate change will widen that gap unless we intervene.

📉 8. Housing Value Is Already Shifting

Multiple indicators show the market has already begun valuing efficient, resilient homes more highly:

• Homes with sustainability upgrades are selling for 9–15% more
• In Sydney’s last cycle, the median price uplift was $130,000 for upgraded homes
• Efficient homes attract 3–5× more interest at open homes and auctions

In many suburbs, demand for resilient homes already outstrips supply.

As Michael said:

There is no “green premium”. The real premium now exists for inefficient homes.

🚗 9. The Energy Transition & the Home as a Micro-Power Station

Another major theme was the relationship between climate resilience and electrification:

• rooftop solar
• home batteries
• EV charging
• vehicle-to-grid (V2G) systems
• induction cooking
• heat pumps

Banks such as Bank Australia are already offering mortgage discounts for upgrades like heat pumps, induction cooktops, EV charging and solar.

And international trials (e.g. Renault in the Netherlands and France) show strong financial returns from homes that generate and export power.

Australia, with far more sunshine, may see even greater benefits.

This transforms the home from a passive shelter into an active income-generating asset.

🛠 10. What Homeowners Can Do Today

Michael outlined practical, high-value steps homeowners can take to future-proof their homes:

1. Improve airtightness and insulation

Drone thermal imaging can show heat loss points — often cheap to fix.

2. Upgrade windows

Double or triple glazing dramatically improves comfort and reduces energy loss.

3. Electrify everything

Switching from gas to electric (heat pumps, induction) lowers emissions and improves indoor air quality.

4. Add solar and battery

This is increasingly a “no-brainer” from a financial perspective.

5. Use non-combustible materials

Cladding, roof materials and landscaping choices can reduce fire exposure.

6. Install ventilation with filtration

Essential for smoke events, mould prevention and daily indoor health.

7. Build smaller, smarter

Australian homes are the largest per-capita in the world (89m² per person).

Redesigning expectations around size could be transformational.

🏗 11. Prefab, Panelised Construction & Why It Matters

Prefab and panelised construction were highlighted as essential tools for the future:

• higher quality
• lower waste
• faster build times
• greater precision
• easier airtightness
• industrial-scale consistency

Countries across Europe already use prefab villages as models for circularity, lifecycle assessment and net-zero building — and governments won’t consider proposals that don’t meet these standards.

Australia is behind, but the shift is inevitable.

💼 12. Capital Markets Will Force the Tipping Point

Perhaps the most important insight from the session:

Governments will not drive this transition. Capital markets will.

As reinsurers and banks begin pricing risk accurately, we will see nationwide shifts in:

• insurance eligibility
• mortgage rates
• home valuations
• building standards
• rental requirements
• planning and zoning decisions

Mandatory climate risk reporting for companies begins next year. Once risks are formally disclosed, markets will respond rapidly — likely within 12–18 months.

This marks the beginning of the end for “business as usual”.

🌟 13. The Future: Homes That Make Money, Not Problems

Michael and Michael closed with optimism.

The next generation of homes will:

• cost less to run
• cost less to insure
• qualify for cheaper finance
• stay safe during extreme weather
• generate their own energy
• become income-generating assets
• maintain (or increase) value in a climate-exposed economy

At a national level, this could finally unlock:

• housing affordability
• resilience at scale
• sustainable energy transition
• healthier living environments
• reduced national economic risk

But only if we move now.

💚 Final Thoughts

This conversation made one thing unmistakably clear:

Climate change is no longer an environmental issue.

It’s a financial issue.

A health issue.

A housing issue.

A community issue.

A family issue.

And the most powerful solutions start at home — literally.

Through better design, smarter construction, resilient building envelopes, and embracing electrification and prefab technologies, we can create homes that are safer, healthier and more affordable to operate.

The question is no longer “Why would we build like this?”

It is now “Why wouldn’t we?”

The tide is turning — and those who adapt early will reap the greatest benefits.

You can watch the full session here.

https://youtu.be/FK2bp5KxCQo