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Climate change: Managing the implications on construction

As construction projects become more audacious in scale and geography, and the number of climate-related disasters increases, there is a demand for more intelligence around climate risk and how it can be managed.

Aftermath of a flood inside a factory, water damaged machinery. Generative AI

Extreme climate events are becoming more frequent. By 2030, there could be four times the amount of heatwaves, twice the amount of droughts, and extreme rainstorms could rise by 50%, according to the Intergovernmental Panel on Climate Change.

Furthermore, the severity of these events is also on the rise. While extreme events have increased more than five times from 1970 to 2019, the cost of extreme global events has increased nearly eight times in that time, according to data from the World Meteorological Organization (WMO).

This equates to cost per event increasing nearly 77%, inflation-adjusted, over the past five decades.

What are the implications for contractors?

As construction projects become more audacious in scale and geography, and the number of climate-related disasters increases, there is a demand for more intelligence around climate risk and how it can be managed.

Unpredictable weather affects construction timelines and budgets. Research shows that each year, adverse weather events (such as flooding and snowfall) delay 45% of construction projects worldwide, costing billions of dollars in additional expense and lost revenue. In addition, for every 1ºC rise in temperature above 28ºC, construction worker productivity can decrease by up to 57%, according to an Air Force Institute of Technology report.

Additionally, construction companies may face unknown climate change-related exposures in their supply chains. Physical damage from physical risk events to suppliers’ locations, public infrastructure, and transportation networks can lead to long delays and impact business revenues and project delivery schedules.

To retain a competitive edge and to remain able to operate in these conditions, it is recommended that contractors take action to understand, characterise, and address these risks and improve resilience.

What are the implications of climate change and extreme weather on large-scale infrastructure construction projects?

Effects on design

As the severity of extreme weather increases over time, so too will its impact on the buildings of the future. If not accounted for, changes could outpace the climate-related tolerances set at the time of design.

Climate mitigation and adaptation should be an integral part of the design process. Low carbon building materials and efficient design help to mitigate additional contributions to climate.

Considerations around building separation, quality of foundations, elevation, combustible materials, as well as wind and heat tolerances not only have to cope with today’s environment but potentially the more extreme environment the future has to offer.

Moreover, for larger and more complex projects, where a construction timeline might stretch for a decade or more, climate change projections will need to be incorporated into the construction and commissioning phases, and the asset’s anticipated lifespan once complete.

Additionally, incorporating thermal efficiency into building design goes beyond making it more “resilient by design.” It also reduces the asset’s carbon footprint and could reduce the energy intensity of the building for tenants and residents, ultimately making it more attractive in high-energy cost scenarios such as worsening fuel poverty, increased cost-of-living, and uncertain energy security. Commercial tenants also increasingly expect low carbon buildings to deliver on their net zero commitments, so heat efficient building design can also improve longer-term value.

Construction businesses and industry bodies are already starting to address these issues by developing data pools, analytical techniques, and tools to support forward-looking design considerations. However, while these tools are becoming more adept at addressing physical risk, they often omit the insurability of assets in the context of a changing climate.

Seeking advice related to insurance implications of climate change predictions as early as possible in an asset’s feasibility and design phases can help deliver significant savings and avoid budgetary slippage.

Effects on physical works

The effects of climate change will also increasingly need recognition during physical work. Climate change is expected to bring increased intensity rainfall events, a poleward movement of tropical storms, and more variation in extreme hot and extreme cold days.

Increased winds affect lifting operations and work at height. Extreme heat and dry conditions impact the risks associated with hot works. Changing water tables affect excavation, tunnelling, and a site’s susceptibility to flooding. Considerations should be given to the storage of plant, equipment, and materials on site, particularly if they are vulnerable to adverse weather prior to installation. For example, cross-laminate timber can be particularly sensitive to wet conditions, meaning consideration of material storage is critical.

Climate change may need to be folded into long-tail planning for large complex projects with decades-long timelines. Feasibly, average temperatures may rise to be impactful over the lifespan of the construction process.

However, for most projects, the key to managing climate risk will be monitoring conditions, developing mechanisms for early warning, ensuring sites and processes are resilient and responsive to extreme events, and that people are protected.

Here again, a data-led approach is vital, and an informed and supportive insurance broker and risk adviser can help to ensure that this analysis is embedded into risk transfer programs and mitigation recommendations, which in turn can reduce construction risks and optimise a project’s insurability and success.

Effects on people

Above all, the risks posed to workforces by the increased incidence and severity of weather should be understood and mitigated.

Extreme heat and sun exposure can cause dehydration, dizziness, fainting, and heat stroke. Flooding and snowfall can also cause delays as workers cannot reach sites and potential safety issues when they return to work. The site worker is therefore on the front-line of all these hazards and can suffer the most severe effects of these risks’ mismanagement.

Incorporating real-time and future weather assessments into health and safety planning is becoming more important, but happily, also more feasible, due to the advent of responsive and dynamic risk tracking and training tools to support this. The construction industry already broadly recognises the importance of placing workforce safety at the heart of everything it does, and as such can lead the way in ensuring that its people are protected from the weather-related hazards of the future.

How to manage risk and gain optimum insurance terms

Understanding the risk of climate change and extreme weather events is critical to effective risk management. Modeling the physical impacts of climate change can aid contractors in developing holistic and right-sized risk management practices designed to avoid or reduce harm to employees and ensure that assets are “resilient by design,” reducing the opportunity for projects to slip and ultimately ensuring assets are built to last.

Businesses should work with an insurance broker who has experience in construction and expertise around the physical risk associated with environmental extremes. With their combined market, scientific, and technical expertise, experienced brokers can be especially helpful during periods of tightening insurance conditions as demonstrated in recent years within the construction insurance market.

For example, the right broker can help by performing a detailed climate risk assessment of a site and recommending appropriate resilience measures to put in place, either as part of the design of a planned project, or during the construction phase. By managing risk in this way, policyholders can be better positioned to respond to provide detailed risk information in response to increasing insurer scrutiny and ultimately achieve improved insurance terms.

To obtain the right insurance for their projects, decision-makers should start working with their brokers as early in the process as possible. This can help secure an (intelligent) insurance program, underpinned by a risk management approach designed to minimise the likelihood and impact of loss.

Our people

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Maarten van Haaps

Head of Construction, Marsh Specialty

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Brad  Day

National BDM – Corporate Construction, Marsh Specialty

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