The Pension Real Estate Association is taking a stab at clarifying the "S" in ESG, which the real estate trade group executives consider the least well understood letter in the acronym standing for environmental, social and corporate governance.
PREA's report released in December is meant to be a primer for real estate investors, providing them an overview of what social factors in real estate investment are, how they can be incorporated in investment decision-making, and what existing resources can be accessed to help, said Greg MacKinnon, PREA's Greg MacKinnon, director of research.
Developed by PREA's social impact committee, the guide points out common misconceptions about social factors in investments. Among the social factors that real estate investors may choose to target are affordable housing and community amenities and resources such as grocery stores and healthcare services.
According to the report, one misconception is that social factors should only be considered by self-described impact investors.
Another misconception is that impact investments must sacrifice investment performance to achieve social or environmental goals, the report said. The report pointed to the results of a 2023 Global Impact Investing Network survey showing that most impact investors, 79%, reported returns that were either in line with or exceeded expectations. Seventy-four percent of impact investors target market-rate financial performance on a risk-adjusted basis, the survey found.
Twenty percent reported exceeding their financial expectations.
"Importantly, it (PREA's guide) shows how socially responsible strategies can be implemented in a programmatic way with measurable outcomes that are consistent with fiduciary responsibilities," said Jacques Gordon, co-chair of PREA's social impact committee and executive in residence at the MIT Center for Real Estate, in a news release.
