Poor measurement and data continue to frustrate investing that is socially impactful, investors say, as they underscore a need to improve social performance nonetheless.
Maarten Jennen, senior director and strategist in private real estate at PGGM Investments, the €277 billion Dutch pension fund, noted continuing challenges in achieving standardised data for social impact, contrasting it with progress on emissions data, which was available in a format that could be compared across the portfolio regardless of property type or location.
“Social impact is hard to measure reliably across a global portfolio,” he said, comparing the exercise to assessing the impact of a multi-family building with that of an office building.
But he emphasised investors’ responsibility to improve the social impact of buildings they owned. “We are working with our managers to make social [impact] more quantifiable on a per fund basis,” he said, noting that concentrating at that level was the most effective way of quantifying impact.
Jennen pointed to initiatives by the fund to improve the social performance of individual buildings, such as at a fund-owned logistics building in Japan that provides day care facilities for workers with young children.
Stan Bertram, PGGM Investments associate director for private real estate ESG, said that one solution was to pursue socially targeted investment themes, such as investing in a fund focusing on old age care and which owns and runs nursing homes. “To create that type of property is a way of making a social impact,” he said.
In Europe and the US, inflation has increased living costs, compounding issues of housing affordability in many major cities.
At the same time, increasing investment in multi-family housing is a chance for investors to play a role in reducing housing costs for many renters, including those on low incomes or those who qualify for designated affordable housing schemes under a growing range of national schemes. Between 2013 and 2022, investors allocated €399 billion to Europe’s build-to-rent market, according to Knight Frank, a real estate investment advisor.
ASIA FOCUSES ON GREEN
While the wider adoption of green leases has allowed investors to improve collection of emissions data from tenants, as well as improving buildings’ carbon performance, few leases currently include provision for landlord or tenant to improve the social performance of buildings.
“For now, the majority are focused only on the E of ESG,” said Kamya Miglani, head of ESG research for Asia Pacific at JLL in Singapore.
Where clauses governing social factors are present, they focus on two areas, she noted. Firstly, health and wellbeing – working to achieve a healthy working environment to support the physical and mental wellbeing of those working in the building – and secondly, promoting diversion and inclusion (D&I) among staff in buildings’ operating teams – from maintenance teams to cleaners to front of house staff.
“In general, the social dimensions of green leases are relatively crude; it will be some time before green leases become full ESG leases,” said Peter Hobbs, managing director of private markets at Bfinance in London. More than half of its clients are institutional investors across Asia.
While leases were beginning to cover social dimensions, including healthy living, or lighting and designs that improve the experience of a space, measures were not detailed, he said. Hobbs sees the lag as being less about the challenges of measuring social factors than the currently greater emphasis on improving buildings’ green credentials.
“Property investors in Europe and the US still give greater to priority to social factors than those in Asia,” he said.
In January, Hobbs told AsianInvestor that investors in the US and South Africa were leading scrutiny of social impact through the property supply chain, focusing particularly on diversity and inclusion topics with regards to investment manager’s workforce, building management teams, and the workforces of other companies that provide building services.
“In this regard, focus on the social impact of a building is generally greater than the focus on its environmental impact,” he said at the time.