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February 07, 2008
Making a Real Difference with Real Estate
    by Anne Moore Odell

The Responsible Property Investment movement gathers momentum with the help of the Responsible Property Investment Center and the backing of UNEP FI.


Investing in property is more than just buying land or buildings. It is investing in the people and the organizations that use the space to conduct business, to learn and to live. Responsible Property Investing (RPI) offers investors a way to create long-term growth in real estate while also accounting for non-financial returns.

The Responsible Property Investing Center (RPIC) was formed in 2007 as a joint project of the Boston College Institute for Responsible Investment and the University of Arizona to create a forum for investors, lenders, fund managers, developers and others to connect and create best practices around real estate development.

The RPIC website and the new publication, "RPI Quarterly" are two new resources for those interested in learning more about this field. RPIC is also hosting the 3rd Annual Responsible Property Investing Forum at the Fairmont Copley Plaza in Boston on March 25-26.

"There is a great deal of overlap in RPI and community development investing," said David Wood, Director of The Institute for Responsible Investment and Boston College Center for Corporate Citizenship (BCCCC). "RPI looks just at real estate, but tends to cover a range of investments in property, from direct ownership and development, private equity funds, to bank loans, fixed-income investments, REITs, etc," Wood added.

Wood continued, "Many of the concerns of RPI - the creation of good jobs, affordable and workforce housing, mixed-income, urban revitalization - all are long-standing elements of the community investment world."

Additionally, RPI also covers other concerns like energy efficiency, transit-oriented and smart-growth development, fair labor standards, community and corporate citizenship, and land conservation.

"For our part, we have found that focusing on real estate as an asset class has helped begin the creation of a community of practice that brings together mainstream institutional investors, fund managers, social and mission-related investors, developers, banks, consultants, etc., around a set of real estate investments that offer both market-rate returns and tangible social and/or environmental benefits," explained Wood.

The United Nations Environmental Programme Finance Initiative's Property Working Group (UNEP FI) conducted a survey of key markets in RPI. Gary Pivo, a professor at the University of Arizona and one of the founders of the RPIC, created for UNEP FI an RPI overview survey, "Responsible Property Investing: What the leaders are doing" which was released in October 2007. The briefing lists the ways in which various real estate investors around the world are using sound fiduciary strategies that create social and/or environmental value.

Ten elements of PRI are presented in the briefing: Energy Conservation, Environmental Protection, Voluntary Certifications, Public Transport Oriented Developments, Urban Revitalization and Adaptability, Health and Safety, Worker Well-Being, Corporate Citizenship, Social Equity and Community Development, and Local Citizenship.

The briefing further separates two types of RPI investments: no-cost and value-added approaches. No-cost investments include ways to increase social and/or environmental performances of properties that don't require any money, for example, turning off lights in unused areas. Value-added investments create long-term returns, for instance, installing energy-efficient windows.

"One of the key issues here is that RPI is a moving target - changing demographic patterns, consumer preferences, environmental regulations, carbon constraints, and infrastructure investment patterns will have considerable influence on how various RPI investments perform in the future," said Wood. "One of the benefits of an RPI focus for investors, we think, is an enhanced attention to these future trends when making their investment decisions."

The UNEP FI Briefing also makes the point that constructing new green buildings is not enough to address current climate change concerns and environmental impact. Existing buildings need RPI investors to update energy use patterns and social usage concerns.

As the RPI field starts to gain momentum, both Wood and Pivo see exciting room for growth.

"We need to know more about what institutional investors are doing in this area and more about the economics of RPI," Pivo told Socialfunds.com.

"The field is relatively new, and there is frequently no set of standards that allow for apples-to-apples comparisons," said Wood. "In the environmental arena, the success of green building standards such as the US Green Building Council's (USGBC) LEED ratings systems, and the Energy Star Program, will likely lead to better and better research on green building performance. Some of the social attributes of property investment may be harder to track, but there is still plenty of room for research into performance across the triple bottom line."

Wood concluded: "Social investing has traditionally focused on public equities investment and community investing, and quite well too. RPI is a way to translate some of the successes in creating a rigorous evaluation of environmental, social, and governance criteria into an asset class which hasn't necessarily received the same amount of attention."

 

 
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