Impact Investing in the Residential Real Estate Sector

University essay from Lunds universitet/Produktionsekonomi

Abstract: The investing industry has historically been built around the sole purpose to bring superior financial returns to investors. Due to the rising concern towards global social and environmental issues, investments promoting sustainable development have grown popular. Centring sustainable investments debate is the strategy impact investing. The strategy originates from more traditional ethical investment philosophies and is today the most prominent and promising approach for creating long term value. Impact investing intends to create positive social and/or environmental effects that benefit people and planet alongside generating a financial return. Real estate make up essential infrastructure for everyday life. The built environment significantly affects people's lives, whether it is at home or work. Furthermore, the industry contributes to several environmental effects, both from property development and operational activities. Thus, the real estate sector provides an exciting opportunity for impact investors to significantly contribute to a sustainable future. Therefore, the purpose of the thesis is to explain impact investing and identify relevant measures to apply when investing in real estate - focusing on the Swedish residential sector. The thesis is based on qualitative research with a triangulation methodology, consisting of a thorough literature review coupled with expert interviews concerning both impact investing and sustainability within residential real estate. The research has been multifaceted, consisting of exploratory, descriptive and explanatory components. The exploratory part included understanding impact investing, while the descriptive part explained the strategy. Lastly, the explanatory part determined causal relationships between real estate operations and impact creation. The thesis concludes that impact investing relies heavily on dedication and intention to contribute to positive social/and or environmental effects in the setting of investing. The strategy requires a comprehensive analysis to identify and target specific problems where positive impact should be inflicted. Additionally, investors must manage impact performance and report transparently on objectives, efforts and the related outcomes. Applying the impact investment strategy to residential real estate resulted in pinpointing target outcomes, methods of measuring impact and appropriate reporting approaches.

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