December 29, 2005
Socially Responsible Property Investment Still on the Drafting Table
by William Baue
A blueprint of the fledgling field of socially responsible real estate investment.
Socially responsible property investment (SRPI), which has established a foothold abroad with the
Commonwealth Property Office
Fund in Australia and the Morley Igloo Urban Regeneration
Fund in the UK for example, has yet to gain traction in the US. However, indications abound
that this sub-field of socially responsible investing (SRI) may soon produce investable products.
The former paper surveys the current landscape of SRPI, mapping five possible
future paths. First is the launching of publicly-traded Real Estate Investment Trusts
(REITs--which pool property investments similar to the way mutual funds pool securities), and
second is to invest in publicly-traded real estate companies focused on sustainability. Third is
private SRPI funds for institutional investors, fourth is an SRPI "fund of funds" that invests in
multiple private funds as a way of making SRPI accessible to individual investors. And fifth is
socially screened real estate mutual funds comprised of REITs or real estate stocks.
possible is the application of SRI screens to existing investments to see if they would meet SRPI
criteria. Determining what such criteria would be, however, is complex. Prof. Pivo points out
that SRI screens such as those applied by Sustainable Asset Management (SAM) Research for inclusion in the Dow Jones
Sustainability Indexes (DJSI)
typically assess company-wide social and environmental performance. However, existing assessments
of real estate such as US Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) and
Environmental Protection Agency (EPA) Energy Star programs certify individual
"The LEED and Energy Star programs may already have created an expectation
among SRI investors that in real estate, social and environmental issues should be evaluated at and
aggregated up from the property level," Prof. Pivo writes in the Real Estate Issues paper.
Also at issue is the actual criteria for determining best practice on social and
"Is high rise better than low rise?" asks Prof. Pivo. "Is housing
better than shopping?"
"Is mixed use better than single use?" he continues. "Is new
urbanism better than shopping malls?"
The paper ends with five recommendations, starting
with the identification of where SRI and real estate investment currently overlap.
University of Arizona and the Boston College Institute for Responsible Investing are planning
a meeting to bring together leaders from the real estate and the SRI industries to talk about
current investment opportunities, new product development, and metrics for reporting on the social
and environmental characteristics of real estate investments," Prof. Pivo told SocialFunds.com.
The SRI community has already started taking its first steps toward SRPI. The September
2005 SRI in the Rockies conference
included a session entitled "Is There a Green Real Estate Investment Trust In Our Future?" with a
Prof. Pivo. It also included a presentation by Leanne Tobias of Malachite LLC, which focuses on green or
sustainable real estate, and another by Richard
Imperiale of the Forward Funds Uniplan
Real Estate Investment Fund (ticker: FFREX), which applies SRI criteria.
"Three dozen people at the meeting signed up to follow up on the topic," said Prof. Pivo.
"Discussions are ongoing by people who were there on at least two new investment products: a green
REIT and a land conservation fund for ranches and other working landscapes."
also ongoing on the newly-established responsible property investment listserve hosted at the
University of Arizona.
"Since being launched in November, it has grown to 130 members from
eight countries," said Prof. Pivo. "One of the most interesting threads so far was on green
The closest thing to a green mortgage currently is the energy-efficient
mortgages offered by Fannie Mae (FNM), according to one listserve
participant. Another cautioned the green mortgages could prove counterproductive by increasing
loan amounts to fund bigger houses that may not end up reducing overall energy consumption.
Prof. Pivo also hopes to fuel the socially responsible property investment market as a
participant and not just an academic as a founding partner in a new property investment firm. SRI
investors may soon have options to fill this current void in their portfolios.