Schroders: How real estate investing can make real social impact

Traditionally, investors in real estate have shied away from deprived areas and focused on big city centres and affluent towns. Demand for space (as distinct from need) is typically stronger and there is an established investment market of buyers and sellers.

However, Mark Callender, Schroders’ Head of Real Estate Research, discusses how real estate investors can make a positive social impact.

“While most investors will continue to concentrate on maximising financial returns, we believe there has been a fundamental shift, accelerated by Covid-19, towards strategies which generate a positive social and environmental impact.

“The perceived conflict between fiduciary duty and sustainable investment reflects a historical view that social benefits and investment returns are drawn from the same, finite pot.

“If that was ever true, the equation has changed. The value of companies or assets is increasingly tied to the social benefit they provide. Pension funds and asset managers’ fiduciary duties increasingly require them to incorporate sustainability and positive social impact into investment strategies as a result.

“Any assessment of material investment risks must include ESG factors, as well as conventional financial risks. Indeed, the distinction between the two is becoming blurred. Governments are raising energy efficiency standards and starting to ban equipment which generates carbon emissions (e.g. gas boilers).

“Occupiers increasingly favour buildings which are sustainable and promote health and wellbeing (e.g. high quality air conditioning, cycle stores).

“Real estate which has positive social and environmental features is less likely to suffer from obsolescence and is more likely to retain its value over time.”