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While all industries have been impacted by the growing trend of ESG investing, real estate is significantly important for establishing platforms for sustainability. Where and how we live, particularly in more urban areas, can largely be determined by the operations of real estate companies. Recently there has been a particular push to have real estate companies act more socially and environmentally conscious when it comes to both the establishment of their buildings and who has access to them. Real estate not only has the potential to increase its positive environmental impact, such as through the establishment of eco-friendly buildings, but also to increase social impact as well. Considerations like the impact of properties on community and diversity are becoming more visible.
But what have real estate companies been doing as a result of ESG investing? One of the main issues being raised is the sustainability of buildings themselves. According to the U.S. Green Building Council, there are over 100,000 LEED projects being undertaken around the world (with 6,633 buildings achieving platinum status). LEED refers to a green building rating system that is used to determine the environmental performance of buildings from their carbon footprint to their indoor environmental quality. Real estate companies are increasingly interested in achieving LEED certification, thanks to ESG investments that are making LEED and other certifications more desirable, and, achievable. In order to be considered for certification, companies are required to implement energy/resource-saving strategies and other methods to help the environment. ESG investing has also helped facilitate the development of ‘Smart Cities’ in real estate, which refers to the design of different innovative technological methods that seek to manage and organize cities more efficiently, and often includes initiatives like greener transport or optimization of energy/waste consumption.
Real estate companies have also been focusing on the social aspects of ESG, particularly through offerings like multi-tenant shared spaces, affordable housing options or transforming underutilized spaces into something of use.
Some investment firms have already been heavily involved in the process to make real estate more sustainable. For example, New York based investment firm Pembrook Capital Management has specialized in affordable housing for years and makes investments to keep housing affordable in various neighborhoods, like the Dupont Circle in Washington, D.C. However, it doesn’t take creating a firm to make a difference. From the individual to the institutional, investors everywhere should look into adding sustainable real estate options to their portfolio that can help create better living conditions for all.
At Physis, we specialize in leveraging data to track, measure, and grow sustainable portfolios.