Relevance of social sustainability in institutional real estate portfolios
Joëlle Zimmerli has been working on the interface between society and the real estate industry for over ten years. Her field of activity covers all phases of the real estate cycle, from basic research to project development and management. Zimmerli is a member of the SSREI audit committee and, as technical director of the Swiss Sustainable Building Standard (SNBS) building label, was responsible for operationalising the criteria and project certifications.
Ms Zimmerli, you are developing criteria for assessing the social sustainability of institutional real estate portfolios. What are your motives?
In recent years, many institutional owners have set climate targets that go beyond the legal requirements as part of their ESG strategies. After the “E”, the “S” is now slowly coming into focus. The problem is that nobody really knows what constitutes social sustainability. We observe that a lot is projected into the “S”, and the big social contexts are often pushed into the background. We have therefore decided to test with partners from academia, real estate associations and institutional investors on the basis of various portfolios what an operationalisation of social sustainability might look like. Our goal is to define a few clear, easily interpretable and comparable key figures for social performance, to create short checklists to complement them, and thus to give more room to competition for good ideas.
Many portfolio and asset managers are currently busy preparing reliable energy and emissions data. What prompts you to develop key figures for social sustainability right now?
It is true that the focus of the real estate industry is still on the collection of climate key figures at the moment. Thanks to the REIDA CO2 benchmark and the environmentally relevant AMAS key figures, there is now a clear orientation framework and good instruments. We want to take both the momentum and the focus on the essentials of these instruments with us, because we are convinced that the real estate industry simply cannot afford to reduce sustainability to environmental issues. The heated debates on the reference interest rate, housing protection and major development projects show that the public and politicians also expect sustainable real estate portfolios to provide answers to social questions.
In the industry, there is currently no consensus on what is meant by the “S” or how societal-social sustainability should be measured. How do you see it?
Against the background of the current political discussions, the “S” is not complicated: At the societal level, it is about providing housing to broad segments of the population, about socially mixed living environments and about well-functioning neighbourhoods and districts. For institutional owners, it is about how property portfolios are structured and how the available living space is distributed. For new construction and renewal projects, the question is what happens to existing tenants, for which target groups additional living space is created and how neighbourhoods and districts can be strengthened. Of course, there are countless other needs. However, we believe that key figures should refer to the major social levers and that the market should play a role in individual needs.
How can and should the “social performance” of a real estate portfolio be effectively measured or assessed?
We are guided by the philosophy of the environmentally relevant key figures of AMAS and REIDA: “Keep it simple”. In essence, social performance can be measured simply with hard-testable key figures: We are currently testing how data on the portfolio structure and on first-time lettings and re-letting can be collected and evaluated as simply as possible. In addition, we are developing questionnaires that owners can use in their tenant surveys to obtain reliable findings on satisfaction with the neighbourhood, flat or property management. Finally, we use classic key figures on fluctuations and vacancies, which are usually already collected and evaluated.
The optimisation of ecological criteria often requires high investments. This creates incentives to sell properties with a poor ecological balance. Do properties with poor social ratings face the same fate?
No, from our point of view there is no danger of stranded assets in terms of social sustainability. We are convinced that basically every property can be transformed in a socially sustainable way with reasonable effort. The most important levers here are renewal planning and management. Renewal planning determines when which properties are to be adapted to current needs and market prices. In management, decisions are made as to who will receive affordable or barrier-free living space. We have selected key figures that can be directly influenced by portfolio and asset managers. We understand social sustainability as the result of far-sighted portfolio and asset management and consistent marketing and management, and not as a property or location attribute. We are also convinced that properties with strong social qualities can compensate for environmental weaknesses.
Many owners find it difficult that innovative ideas and approaches with which they want to stand out from competitors disappear in extensive checklists and indicator sets of sustainability labels. How can this be prevented?
By separating obligation from freestyle. We pursue the same goal with social sustainability as REIDA does with ecological aspects: A few uniform key figures should make it visible and comparable how well a portfolio fulfils the mandatory programme. In addition, there are topics for which there are no standardised specifications. Fund management companies and asset managers should be free to decide and communicate how they want to ensure, for example, good neighbourhood care, good cohabitation or good tenant management. We see the “how” as a freestyle; this is where competition, creativity and innovation should play a role. In other words, we want more goal orientation and less micromanagement. In a highly regulated world, ESG should not be a tighter corset, but a springboard with which the real estate industry can prove what it can achieve with yield-oriented portfolios.
Where do you stand with the key performance indicator set?
We are currently working on concretising and validating our approach on the basis of four funds of our partners. We will present the findings and a first consolidated draft on 28 September 2023 at the symposium “Measuring social sustainability in ESG – what is it all about?” and discuss it with owners, managers and experts. Interested readers can register here . I would be pleased if we could welcome you at the HWZ in Zurich.
Source: ssrei.ch