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137 Seiten, Note: 1,2
List of Abbreviations
List of Figures and Tables
1.1 Problem Definition and Objectives
1.2 Course of the Investigation
2 Fundamentals and Definitions
2.1 Megatrends and Sustainability
2.2 Sustainability and the Real Estate Industry
2.3 Green Buildings
2.3.1 Economic Dimension of Green Buildings
2.3.2 Ecological Dimension of Green Buildings
2.3.3 Social Dimension of Green Buildings
2.4 Corporate Sustainability
3 Sustainable Property Investment Movement
3.1 Socially Responsible Investment
3.1.1 Actors and Strategies
3.2 Socially Responsible Property Investment
3.2.2 Actors and Strategies
3.3 Factors of Movement
3.3.1 Regulations and Legal Framework
3.3.2 Assessment Methods and Certificates
3.3.3 Key Actors
3.3.4 Status Quo
3.4 Drivers of Demand and Supply
4 Penetration of SRPI in European Markets
4.1 Conceptual Framework
4.6 Summarizing and Interpreting Empirical Results
4.7 Implications and Limitations of Analysis
6 Reference List
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Figure 1. World’s population levels, primary energy production, and primary energy use in comparison. No data available for energy use in the year 1970 and for energy production in the year 2010
Figure 2. Example of a framework for developing a SRI strategy
Figure 3. Distribution of SRI assets under management in Europe
Figure 4. Historic performance of the three indexes FTSE4Good Index, FTSE Global Equity Index, and FTSE Eurotop 300 Index, starting on October 30th 2008 until February 23rd 2012
Figure 5. Characteristics and role of sustainability assessment methods
Table 1. SRI assets under management distinguished by narrow (Core) and wide (Broad) investment strategies
Table 2. Comparison of total assets under management and total SRI assets under management in Europe and in the USA
Table 3. Statistical data for the three indexes FTSE4Good Index, FTSE Global Equity Index, and FTSE Eurotop 300 Index
Table 4. The potential SRPI market in Europe and the USA applying a 10-20 percent allocation of SRI assets under management to real estate and SRPI
Table 5. Ten underlying dimensions of SRPI
Table 6. Penetration of Europe’s most important and frequently used certificates and assessment methods as of March 2012
Table 7. The six factor groups influencing demand and supply of SRPI
Table 8. Countries selected for analysis
Table 9. Independent variables for empirical analysis
Table 10. Cumulated number of certified projects per country and certification method .52
Table 11. Formulated hypotheses for further analysis
Table 12. The model summary for the regression analysis shows a relatively weak explanatory power of adjusted R2
Table 13. The analysis of variance (ANOVA) shows that there is no linear relationship Sustainable Property Investments
Table 14. The coefficient analysis of the regression function shows strong impact of the variable Population
Table 15. The model summary for the regression analysis shows that the model has no statistical significance, through a negative adjusted R2
Table 16. The ANOVA confirms that there is no statistical significance
Table 17. The coefficient analysis of the regression function shows that the model has no significance
Table 18. The model summary of the regression analysis shows a negative adjusted R2 , which indicates no statistical significance of the model
Table 19. The ANOVA confirms that there is no statistical significance, with a very high f -significance at the five percent significance level
Table 20. The coefficient analysis shows high VIF indicating collinearity between the variables
Table 21. The model summary for the regression analysis indicates strong explanatory power through a large adjusted R2 value
Table 22. The ANOVA reveals the model’s large statistical significance through a very low f -significance
Table 23. Model summary for the three results of the regression analysis, through gradually removing variables
Table 24. The coefficient analysis shows a strong positive relationship of the variable GDP with the dependent variable Number of Certified Projects
Table 25. The coefficient analysis shows a strong positive relationship of the variable Adjusted Net National Income with the dependent variable Number of Certified Projects
Table 26. The model summary shows a relatively weak explanatory power of the model
Table 27. The ANOVA shows large significances of the two models
Table 28. The coefficient analysis of the regression function reveals a strong positive relationship of the variable Workforce to the dependent variable Number of Certified Projects
Table 29. The model summary confirms the model’s explanatory power
Table 30. The ANOVA indicates a strong statistical significance
Table 31. Coefficient analysis of the regression function 62 Sustainable Property Investments
Table 32. The model summary indicates a relatively low explanatory power of the model
Table 33. The coefficient analysis implies strong positive relationships between the independent variables and dependent variable
Table 34. The model summary indicates a relatively low explanatory power of the model
Table 35. The coefficient analysis implies strong positive relationships between the independent variables and dependent variable
Table 36. Model summary shows large explanatory power of the model
Table 37. ANOVA shows a strong significance of the model
Table 38. The coefficient analysis shows the individual t -significances of the independent variables
Table 39. The model summary indicates a relatively low explanatory power of the model
Table 40. The ANOVA indicates a strong statistical significance
Table 41. The coefficient analysis for the independent variable CO2 Emissions from Buildings
Table 42. The model summary for the regression analysis indicates the model’s insignificance
Table 43. The ANOVA reveals no statistical significance
Table 44. The model summary shows the model’s non-existent explanatory power
Table 45. The ANOVA confirms that there is no statistical significance of the model
Table 46. The coefficient analysis indicates that no individual variable has a significant influence
Table 47. The model summary reveals no explanatory power of the model
Table 48. The coefficient analysis of the regression function implies that the independent variable has no statistical significance
Table 49. The model summary for the regression analysis shows that the model has no explanatory power
Table 50. The coefficient analysis of the regression function reveals that no variable has a significant influence on the dependent variable
Table 51. Secondary results of regression analysis illustrate low explanatory power
Table 52. The ANOVA shows no significance at the five percent level 70 Sustainable Property Investments viii
Table 53. The coefficient analysis of the regression function shows that the variable Political Stability is significant, however with a negative relationship
Table 54. The model summary for the regression analysis indicates that the model has no explanatory power
Table 55. The ANOVA for the regression analysis confirms that the model has no significance
Table 56. The coefficient analysis of the regression function shows that the independent variable has no influence on the dependent variable
Table 57. The model summary shows a low explanatory power of the model
Table 58. The ANOVA reveals a large significance for the model
Table 59. The coefficient analysis of the regression function reveals a strong relationship between the independent variable and the dependent variable
Table 60. The model summary for the regression analysis reveals a large explanatory power
Table 61. The ANOVA indicates a strong significance of the model
Table 62. The coefficient analysis of the regression function shows that the independent variable Total Investment Volume has a string relationship with the dependent variable
Table 63. Overview of tested hypotheses, significant variables, and respective results.
On February 24, 2011, the re-opening ceremony of the renovated Deutsche Bank Towers marked the endpoint of an approximately €200 million renovation. Originally completed in 1985 and since then headquarters of the Deutsche Bank, the two 155meter-high towers underwent a three-year renovation period with a “green building” approach, resulting in a 50 percent reduction in primary energy use and emissions production (Hagge, 2009, p. 1; Hintermeier, 2011).
“Going green” has been a popular trend in the real estate industry in recent years and the renovation of the Deutsche Bank Towers is only one among many. It is only one part of a much greater movement toward social responsibility and sustainable development. Both concepts have been touted on the pages of all mainstream business magazines. Moreover, they have been successfully integrated into corporate strategies and are now considered an essential value driver.
The real estate industry is increasingly being measured by the same yardstick, as it is at the forefront of the sustainability movement. It is one of the largest producers of harmful emissions and a main consumer of resources. This is forcing real estate firms to allocate resources to the preservation of the balance between environmental, social, and economical objectives, which may affect internal and external stakeholder groups.
As a result, a growing awareness among real estate professionals is emerging that real estate can both contribute to and be affected by many of the social and environmental issues that the world’s societies are currently facing. There has been a shift from anecdotal evidence to well-documented case studies and comparative analyses, clearly indicating that sustainable principles are highly effective. A confluence of several distinct but related factors, such as government regulations, public pressure, and demands for socially responsible investments, are driving a rapid transformation of the property markets toward more sustainable construction and operation. Concurrently, demand is increasing for investment opportunities and products that adhere to the principles of responsibility and sustainability.
Real estate investing is an important part of modern economies and usually comprises a large part of the nation’s economic growth. This means that institutional property investors own a significant share of the world’s building stock, drive the market, and determine “best practice” in the planning, construction, management, refurbishment, and demolition of buildings. These investors include pension and investment funds, portfolio managers, real estate investment trusts, developers, and real estate lessors. Real estate investors can influence property-related issues either by purchasing and promoting buildings that are designed to create fewer negative and more positive impacts or by finding new ways of managing and renovating properties in existing portfolios. Therefore, real estate investors as a group form the cornerstone of the effort to mainstream sustainable buildings.
Real estate investments are usually long-term investments. Hence, for investors it is necessary to deal with long-term trends, independent of short-term volatilities and real estate cycles. Further, investment decisions have to account for long-term trends and developments in order to enable more reliable and sophisticated forecasts and decrease risk exposure. The development and provision of sustainable property investment products offers just such a major opportunity. Yet, investors have been slow to seize the opportunities - or recognize the risks inherent in a changing landscape.
Several other actors within the real estate industry - such as builders, architects, designers, engineers, governmental authorities, and researchers - have been concerned with the aspects of sustainable buildings for some considerable time, whereas those involved in the property investment markets - including investors, agents, and valuers have responded more slowly to the challenges imposed by the sustainability movement. Apparently there is an intractable contradiction between the slow market penetration of sustainable buildings and the awareness of their advantages.
The penetration of sustainable buildings into the market is a trend of great interest. Some regions see imbalances between the demand for sustainable space and the supply from the real estate market. However, some other markets balance supply and demand well. Especially in Europe, the supply of sustainable property investments is lagging behind demand and needs further attention.
Nevertheless, real estate professionals in Europe are slowly becoming aware of the possibilities of this trend. A major contribution to this development is the growing number of certificated buildings across Europe, raising the visibility of sustainability issues. Many discussions have taken place on the sense and nonsense of sustainability certificates. In spite of this, the number of certified buildings continues to increase and certification systems are continually improved. The Deutsche Bank Towers, for example, are both accredited with two certificates: the LEED and the DGNB certificate.
An increasing number of owners and developers choose certificates as an assessment method or benchmark for their building. Sustainability certificates are a testimony to improved building technologies, which are usually difficult to observe. This enhances the transparency of a building’s sustainable features and may therefore lead to increased investments. However, the number of certifications has been slow to pick up in Europe.
In response to this situation this work aims to give a detailed analysis of the characteristics of sustainable property investments. Because of the interconnectedness of socially responsible investments and sustainable property investments, this work outlines both, in order to keep in focus the various actors, historical developments, and strategies.
Moreover, this work is an exploration of possible drivers for and impediments to the diffusion of sustainable buildings. This work aims to answer the questions of what forces drive the supply and demand of sustainable property investments and to what extent. These questions are analyzed with a particularly European focus, as the current state and development in Europe differs from that of other regions.
This work is divided into three main parts (Sections 2, 3, and 4). The second section outlines fundamental terms and definitions. This puts the focus on the various megatrends humankind is currently facing and the undeniable need for sustainable action. These findings are applied in the context of the real estate industry in order to illustrate the industry’s impact and responsibility. Terms including green building, sustainability, and corporate sustainability are defined, because the definition of these terms and their use within the framework of this work is crucial to a good understanding of the issues discussed.
The third section discusses the various aspects of the sustainable property investment movement and the contemporary understanding of these aspects. For a better understanding and because of their interconnectedness, both socially responsible investments and socially responsible property investments are analyzed, focusing on the individual developments, actors, and strategies. Both movements are likewise directly compared. This is followed by a broad description of the factors of movement, by tracing back the development of regulations and legal frameworks, introducing different assessment methods and certificates, and giving an overview of the parties involved in this movement. A description of the status quo completes the picture of the sustainable property investment movement. Finally, the critical part of this work is carried out, namely the identification and discussion of various drivers of demand and supply of sustainable property investments.
The Section 4 addresses the research question: What forces drive the penetration of sustainable property investments and to what extent? The section begins with an introduction to the general conceptual framework of the empirical analysis. In order to enhance comprehensibility, the data used in the analysis is described and sources listed. On the basis of the research question and in the context of the findings elaborated in Section 2, 17 hypotheses are formulated. Also, the concept of the empirical testing and the methodology are described. Subsequently, the results of the empirical analyses are presented in detail and described. Section 4 concludes with a summary and interpretation of the findings and a discussion of the implications and limitations of the analysis.
Section 5 recapitulates the findings and gives an overview of the results. The main contributions of this work are then presented and possible implications offered. The fifth section concludes with a recommendation for future research.
In the subsequent section the relevant general framework in which this work operates in and the relevant terms are defined. This section introduces the issue of sustainability in the framework of Megatrends and with regard to the real estate industry. For further understanding, the terms green building and corporate responsibility are defined.
Humankind is undoubtedly facing severe challenges, nowadays. Demographic change, urbanization, globalization, increasing mobility, digital revolution, scarcity of energy and resources, and climate change have had and will continue to have a massive impact on human life.
With regard to demographic change, on October 31, 2011, the world’s population reached 7 billion people. It is expected to surpass 9 billion by 2050 and exceed 10 billion in the year 2100 (Osotimehin, 2011; UN, 2011, p. xiii). While the greater part of the world’s population lives in less developed regions and also exhibits the greater annual average growth and fertility rate1, most of the developed countries suffer from stagnation and ageing populations2 (UN, 2011, pp. 1-11). This dramatic increase raises the question of how a large human population the planet can sustain.
Demographic change goes hand in hand with the trend of urbanization. Currently, an estimated 50 percent of the world’s population lives in cities and urban areas and this is about to increase two more than two thirds by 2045, meaning the next two billion people will live in cities (UNFPA, 2011, p. ii). These cities have not yet been build and or even planned, which begs the question when and how these cities should be built and by whom.
The two megatrends of demographic change and urbanization clearly correlate with the problem of energy and resource scarcity. In general, all human activities involve the use of energy. The availability of an energy supply is crucial for functionality, viability, the advancement of a society, and a reasonable standard of living (Grunwald & Kopfmüller, 2006, p. 83). However, access to energy resources is unevenly distributed, so that approximately one fourth of the world population does not have sufficient access to energy, especially to electricity (IEA, 2011, pp. 48-57). Moreover, other important resources are limited. This is true for everything from drinkable water and food to resources needed for production, such as metals and crude oil. With an increasing population these problems will increase as resource use increases (Linsin, Schanz, & Wenzel, 2007, p. 2). The increasing population levels and the corresponding primary energy use, and primary energy production are illustrated in Figure 1. Energy use and production has been increasing over-proportionally compared with population development, which demonstrates the problem of energy and resource scarcity.
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Figure 1. World’s population levels, primary energy production, and primary energy use in comparison. No data available for energy use in the year 1970 and for energy production in the year 2010. Adopted from “IEA Energy Statistics 2009,” by IEA, 2009; “World databank,” by The World Bank, 2012.
The worldwide accelerating economic growth, which is associated with the term globalization, has fueled these problems. An increasing number of firms, countries, and other economic actors are taking part in today’s global economy and have become increasingly connected across borders (OECD, 2010, p. 7). The world’s gross domestic product (GDP) has increased over twentyfold in the past 40 years3 (World Bank, 2010).
However, this development, in which a large portion of humankind has participated, has come at huge costs. Human activities have led to diminished natural resources and negative environmental influence. The global atmospheric concentration of green house gases4 (GHG) has increased steadily since 1750. These emissions have been and continue to be driven by the world’s economic growth (IPCC, 2007, p. 2; Stern, Peters, Bakhshi, Bowen, & Catovsky, 2007, p. xi). The evidence is overwhelming that GHGs are responsible for climate change and this points to an increasing risk of serious and irreversible impacts resulting from climate change. The Stern Review on the Economics of Climate Change claims “climate change threatens the basic elements of life for people around the world” (Stern, Peters, Bakhshi, Bowen, & Catovsky, 2007, p. vi). The consequence is the warming of the climate system, observed in an increase of the average worldwide air and ocean temperature, the melting of snow and ice, and a rising average sea level (IPCC, 2007, p. 5). The continuous increase in temperature is threatening the world population. An increased flood risk is threatening one sixth of the world’s population; declining crop yields could leave many people without the ability to purchase or produce sufficient food; and the ecosystem could be disrupted, resulting in a potential extinction of around 15-40 percent of species living on Earth. Moreover, climate change will harm predominantly the poorest countries and people (Stern, Peters, Bakhshi, Bowen, & Catovsky, 2007, pp. vi-vii).
These megatrends are inevitably connected to the need for change. This need is expressed through the sustainability movement, which commenced in 1972 with the report, The Limits to Growth, generated by the Club of Rome. The report analyzed the consequences of human activities with regard to the five trends of industrialization, demographic change, malnutrition, the exploitation of natural resources, and environmental destruction (Rottke & Reichardt, 2010, p. 29). Dennis Meadow and his research team concluded that the growth limit would be reached in the next 100 years, beginning with the publication of the report. Furthermore, given the trends observable at that time, they predicted a global ecological and hence economic collapse. Despite the criticism that the report was subjected to because of its questionable methodologies and unverified forecasts, it gave rise to an alternative way of thinking. Society became aware of social coherences, in particular with reference to methods of production and lifestyle, and of the limitedness of resources (Grunwald & Kopfmüller, 2006, p. 17).
This change in thinking laid the foundation for a whole series of public debates and conferences. Under the umbrella of the United Nations (UN), the World Commission on Environment and Development (WCED) published a report in 1987, commonly known as the Brundtland Report chaired by the former Norwegian prime minister Gro Harlem Brundtland, which identified four main problem areas: (1) overexploitation of natural resources, (2) disparity in distribution of income and wealth, (3) the increasing absolute number of people living in poverty, and (4) threats to peace and security (Hauff, 1987, p. 32). The underlying definition for sustainability, cited in most of the works and papers dealing with sustainability issues, was phrased by the commission: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs“ (WCED, 1987, p. 43). This definition comprises two elements: that of satisfying current human needs and requirements, and that of preserving intra- and intergenerational ethics (Lorenz & Lützkendorf, 2005b, p. 213; Yudelson, 2008, p. 2).
The Brundtland Report and the first comprehensive definition of the term sustainability called “firmly for economic growth, but growth with a new technological and social content” (Chase, Schmidheiny, & DeSimone, 1997, pp. 6-7). The social content is part of the so-called triple bottom line of sustainability, which balances economic, environmental, and social perspectives. In contrast to the single bottom line concept, which focuses only on ecological aspects, the triple bottom line concept accentuates equally ranked dimensions (Grunwald & Kopfmüller, 2006, pp. 41-52).
The economic dimension focuses on growth and prosperity. Economic actors, such as households, governments, and corporations, are parts of the economic process. Producing goods and services constitutes the purpose of this system, whereas consuming these goods and services plus the income generated serve to satisfy material needs. All these elements contribute to individual and social welfare, but, as all economic processes are reliant on limited resources, the ecological aspects have to be considered (Grunwald & Kopfmüller, 2006, pp. 47-48). Preserving nature and the environment, and following the doctrine of maintaining natural resources for future generations are the objectives of the ecological dimension (Rottke & Reichardt, 2010, p. 30). The social dimension of sustainability ranges from equal distribution of social goods - such as health, food, clothing, and shelter - to political rights. Furthermore, it implicates the preservation of “social peace,” which means finding a solution to distribution problems between regions, social classes, genders, and age classes as well as overcoming the obstacles to cultural integration, belonging, and identity (de Francesco & Levy, 2008, p. 73; Grunwald & Kopfmüller, 2006, p. 49).
The principles of sustainable development are grouped into five equity principles by Giddings, Hopwood, and O’Brien (2002), namely (1) futurity: inter-generational equity;
(2) social justice: intra-generational equity; (3) transfrontier responsibility: geographical equity; (4) procedural equity: open and fair treatment of all; and (5) inter-species equity: the importance of biodiversity (p. 194). These principles of futurity, equity, participation, and the importance of biodiversity are the idea of sustainable development and are going beyond present approaches based on monetary cost-and-benefit analysis.
The real estate industry is at the forefront of this movement and has gained much attention over the past decade. Aside from the fact that housing constitutes a basic human need and people spend approximately 80-90 percent of their lifetime in buildings, providing 5-10 percent of worldwide employment and generating 5-15 percent of the world’s GDP, the building and construction sector is vital to the country’s economy (OECD, 2003, p. 20; UNEP, 2003, p. 5). Additionally, a large share of net capital assets is allocated to real estate. For example, in Germany 85 percent of net capital is invested in properties, which substantiates the idea that the real estate industry has enormous importance (Lorenz & Lützkendorf, 2005a, p. 11). Furthermore, the built environment constitutes more than half of total national capital investment and the building and construction sector is the world’s largest industrial employer, accounting for approximately 28 percent of industrial insurable employment opportunities (CICA, 2002, p. 7).
The built environment and sustainability are closely intertwined. Not only is the construction and real estate industry directly affected by megatrends, such as those mentioned in the previous section, but it also has a direct effect on the surrounding world. In other words, the construction, use, and demolition of buildings generate significant social and economic benefits to society - but they may also have serious negative impacts (UNEP, 2007, p. 1). Moreover, buildings have a great impact on both the environment and the social condition of the population (Bruhns, 2004, p. 2; IEA & OECD, 2004, p. 9). However, “coming to grips with the building and construction sector and its many economic, environmental and social impacts can seem like wrestling with an octopus“ (UNEP, 2003, p. 3).
Buildings have the largest single share in global resource use. The environmental footprint of the building sector comprises around 25-40 percent of final energy consumption in OECD5 countries, which has increased steadily over time (OECD, 2003, p. 20). In Europe, buildings account for as much as 40-45 percent of total energy consumption. In addition, approximately 30 percent of raw materials, 12 percent of land, and 25 percent of fresh water are used to build, operate, and demolish buildings. Demolishing buildings additionally generates about one-fourth of worldwide waste. On balance, the building sector is responsible for more than one-third of global GHG emissions (UNEP SBCI, 2009, pp. 2-3). However, these estimates do not take into account the “embodied energy” from raw materials and goods, which are parts of the building itself. Embodied energy is equivalent to the energy consumed by all of the processes associated with the production of building materials and components, such as cement or windows. This includes the mining and manufacturing of materials and equipment. Roughly 10 percent of the total energy consumption of a building is embodied in materials (UNEP, 2007, p. 7). Further environmental impacts are clearing of existing flora, noise pollution, aesthetic degradation, wastewater generation, increased transportation needs, and health risks for occupants (UNEP, 2003, p. 6). The environmental impact of the building industry is expected to grow, especially in lowincome countries, which aspire to standards to high-income countries. Natural habitats and wildlife on over 70 percent of the Earth’s land surface will be destroyed by 2030 if current patterns do not change (UNEP, 2003, p. 5).
The resource use and emissions generated through all stages and by all processes in the life cycle of a building are difficult to quantify (UNEP, 2003, p. 6). This concept, which originates in the 1970s, is essential to the life cycle approach. While 80-90 percent of energy used by the building is consumed during the operational stage, 10-20 percent is utilized during the construction and demolition phase (UNEP SBCI, 2009). Modern approaches to construction should build on this point. Measures being taken to make buildings more sustainable should rely increasingly on the life cycle approach.
In the context of efforts undertaken to achieve better sustainability, probably no sector has potential equal to that of the building sector - a point that is proven in the literature (UNEP, 2003, p. 4; Yudelson, 2008, p. xvii; UNEP, 2007, p. 1). The building and construction industry is the “cornerstone of sustainability” (Lorenz, 2006, p. 65).
Implementing the principles of sustainability in the property and construction sector is of major importance for creating more sustainable communities and economies. This is reflected in the development of recent years, which has witnessed an explosion in the creation of more sustainable buildings or green buildings. The movement has the aim “to fundamentally change the built environment by creating energy-efficient, healthy, productive buildings that reduce or minimize the significant impacts of buildings on urban life and on the local, regional, and global environments” (Yudelson, 2008, p. xv). However, despite the large amount of research literature on this topic, confusion about the exact definition of green and sustainable buildings persists (Dammann & Elle, 2006, p. 402). The term sustainable building is often used erroneously to describe only the energy-efficient dimension of a building, whereas green building is sometimes also linked with the social dimension of sustainability (Cole, 1998, p. 14). For instance, insulation that reduces the operating costs of a building because of a reduced need to heat affects the economic and ecological dimension of sustainability. However, if the insulation is composed of non-environmentally-friendly material, the ecological and social dimension is diminished. Within the scope of this work, sustainable or green buildings meet the three dimensions of sustainability, in order to maintain consistency and intelligibility. Hence, they will be used interchangeably.
"Three things are needful in a building: it has to be situated in the right place, rest on solid foundations, and be built to a high specification" (Goethe, 1809, part one, chapter nine). Over 200 years ago, the world famous poet and polymath Johann Wolfgang von Goethe realized the need of highly specified buildings. Nowadays, this view has emerged into the green building movement. In general, a green building is a “highperformance property that considers and reduces its impact on the environment and human health” (Yudelson, 2008, p. 13). It impacts every dimension of sustainability, which is described in detail in the following.
The aim of the economic dimension of real estate is profit maximizing through decreased costs and rent increases on a long-term and sustainable basis. There is a multitude of literature dealing with cost-benefit studies, which provide analyses and case studies on the costs and benefits of green buildings. The financial benefits start with decreased operational costs. Since the largest portion of costs arises in the operational stage of the building, this stage offers the largest potential for cost savings (Rottke & Reichardt, 2010, p. 31). Research has shown that a decrease of up to 41 percent of operating costs is possible (Ries & Bilec, 2006, p. 263). But energy cost savings do not provide a simple answer to the creation of this market.
There is a widespread perception that green buildings are substantially more costly to build than conventional buildings (Kats, 2003, p. 2). The literature mentions approximately 2 to 10 percent, depending on building type, quality, and standard (Florance, Miller, & Spivey, 2008, pp. 395-396; Fuerst & McAllister, 2008, p. 3; Kats, 2003, p. 3; Kats, Alevantis, & Mills, 2003, pp. vi-vii). However, there is such a wide variation between buildings, that a generalized statement is hardly possible. Nevertheless, research studies have shown that the present value of reduced operating costs alone is sufficient to cover potential construction cost premiums (Kats, 2003, p. 4).
Additionally, it is shown that green buildings are capable of generating higher rents. Some of the first evidence of this came from an American study by Nevin and Watson (1998), who found that investments in appropriate measures do appear to be reflected in rents (p. 409). Again, it is not possible to generalize the findings due to the heterogeneity of real estate. Yet, significant positive impacts on rents can be observed, which range from 1.8 to 11 percent (Benefield & Wiley, 2010, p. 240; Chegut, Eichholtz, & Kok, 2012, p. 27; Eichholtz, Kok, & Quigley, 2008; Florance, Miller, & Spivey, 2008; Fuerst & McAllister, 2008; Fuerst & McAllister, 2011, p. 46; Harrison & Seiler, 2011, p. 562). Furthermore, green buildings usually have lower vacancy rates and may therefore also serve as a unique selling proposition, making them more interesting than otherwise comparable conventional units (Florance, Miller, & Spivey, 2008, p. 4).
The aforementioned results are accompanied by higher market values and higher sale prices. Green buildings exert a positive impact on sale prices of between 3 and 25 percent (Bienert, Boazu, Popescu, & Schützenhofer, 2012, p. 462; Eichholtz, Kok, & Quigley, 2008; Fisher & Pivo, 2009, p. 18; Fisher & Pivo, 2010, p. 265; Fuerst & McAllister, 2011, p. 67). Moreover, value stability is increased (Lorenz & Lützkendorf, 2005a, p. 14).
However, monetization and quantification of economic advantages is hardly measurable. Most of the above-mentioned research studies should be used with great care, because they are bound to specific model projects or small samples in specific time periods, which do not represent the whole stock of buildings. Real estate is, in its heterogeneity, barely comparable; an objective pricing is not possible (Bienert, et al., 2009, p. 8). The market is rather characterized by subjectivity and a dependency on individual cases, but nonetheless general trends are observable (Bone-Winkel, Schulte, & Focke, 2005, p. 22; Jackson, 2009, p. 104).
The question arises, how sustainable price premiums for green buildings will develop in future. Assuming that the benefits outweigh the costs, a short-run price premium for green buildings is suggested by theory. This is due to the fact that demand for conventional buildings is decreasing. However, in the long run price premiums are contingent upon the level of market penetration and changes in regulation and technology (Fuerst & McAllister, 2011, p. 46). This means the price premium on green buildings will erode over time, mainly because it will eventually yield one supply function by becoming the norm. Differences will still exist, but conventional buildings will experience increased price discounts. However, the price premium for green buildings will most probably disappear (Fuerst & McAllister, 2008, p. 9).
Further, “going green” may have a positive influence on the corporate image. Buying or leasing green space can send a signal of social and ethical awareness to customers and clients. This may enable the corporation to charge higher rents or sell at higher prices (Eichholtz, Kok, & Quigley, 2008, p. 6).
Currently, the ecological dimension of green buildings focuses on energy efficiencyrelated topics such as improved energy security6 and a smaller environmental footprint through technical measures (Ciochetti & McGowan, 2010, p. 8; Gromer, Lützkendorf, Rohde, & Schäfer, 2008, p. 27). Decreased energy consumption leads to decreased environmental impact. It is common to speak of energy efficiency as being about “doing more with less,” not “doing without” (Guy, 2012). The degree of savings depends on the measures applied to the building itself. Theoretically, a zero-emissions standard is achievable for almost any building. However, this is usually economically not feasible. Yet, research has shown that minimal measures lead to a large decrease in environmental impact.
Saving energy is beneficial not only to the environment, because, as Lovins (2005) states, “using energy more efficiently offers an economic bonanza - not because of the benefits of stopping global warming but because saving fossil fuel is a lot cheaper than buying it” (p. 1). It is necessary to create ideological mechanisms to make it possible for the profit motive to coexist with the ideology of saving the environment and helping humanity.
Consequently, the ecological dimension of sustainability when it comes to real estate is not only intent on energy efficiency. It is also about (1) resource efficiency, meaning husbanding of natural resources such as wood and metals; (2) prevention of pollution, meaning contaminating materials, bad indoor air quality (IAQ), or noise pollution; (3) harmonization with the environment, that is, preserving the natural landscape and unobtrusive integration; and (4) integrated and systemic approaches, such as environmental management systems, with which to reliably assess environmental impacts (Beard & Roper, 2006, pp. 93-94; Levine, et al., 2007, p. 416).
Studies have appraised a technical potential to save 18-54 percent of GHG emissions, whereas 12-31 percent were perceived as economically feasible. All in all, approximately 29 percent of the emissions projected to be produced by 2020 can be avoided cost effectively (Levine, et al., 2007, pp. 409-415).
Moreover, sustainable materials increase the chance of a comparable longer building lifespan through the use of long-lasting material in the construction process (Billand, 2009, p. 5; Eichholtz, Kok, & Quigley, 2008, pp. 6-7). This results in the possibility that wastage and resource use will be decreased even more.
Regarding the social dimension, research activities have focused for the most part on health and productivity issues. For example, the IAQ is to a large extent determined by the materials incorporated in the building process. As people spend approximately 90 percent of their time in buildings, IAQ is a critical factor. Green buildings enhance IAQ, compared with conventional buildings, in which the concentration of pollutants is usually 10 or even 100 times higher than outdoors (Kats, 2003, p. 6; Levine, et al., 2007, p. 416). Fewer toxic materials, low-emissions adhesives and sealants, paints, carpets, and composite woods, along with indoor chemical and pollutant source control contribute to a better living and working environment (Ries & Bilec, 2006, p. 260).
Regarding the work environment, green buildings can help to increase the productivity of employees in offices, even if the relationship between employee productivity and building design is complicated and hard to assess (Eichholtz, Kok, & Quigley, 2008, p. 6; Levine, et al., 2007, p. 417; Miller, Pogue, Gough, & Davis, 2009, pp. 81-82). Nevertheless, the advantages are reached primarily through decreased absenteeism and an “overall positive feeling about the environment” (Ries & Bilec, 2006, p. 261).
Additionally, the social dimension constitutes not only health and productivity issues, but also aesthetic integration into the environment and complacency in the building. The former requires an understated and seamless fit with the environment and the neighborhood; the latter is ensured for example through automatic ventilation and temperature control, increased natural lighting, and dust reduction through efficient filtration (Kats, 2003, p. 6; Lützkendorf, 2007, pp. 6-7; Levine, et al., 2007, pp. 416418).
Corporations are of crucial significance for implementing sustainable development. Resource use, environmental pollution, and the nature and extent of the use of production functions are colligated with the corporations’ actions or forbearances, investment decisions, product developments, processes of production, and the dimensions of research and development. As a consequence, corporations are not only attributed to an economic interpretation, but also to a leading role for environmental protection and responsible acting and are liable for social balance and coherence (Grunwald & Kopfmüller, 2006, p. 107). These issues merged into the term social responsibility (SR).
An ever-increasing number of corporations either realize or are publicly forced to change attitude. The consideration of the issues of sustainable development and social responsibility became a part of modern management practice. These developments lead to corporate social responsibility (CSR) evolving to a core issue in business (Roberts, Rapson, & Shiers, 2007, pp. 388-389). Despite the excessive amount of literature available on this topic, the terms associated with sustainability issues are somewhat loosely defined and are responsible for inconsistencies and misunderstandings (Plimmer, 2009, p. 3).
Literature shows that the concept of CSR has strong links with corporate governance (CG) and corporate citizenship (CS). The common themes evolving from the literature on CSR are (1) activities concerned with all business operations, (2) going beyond in nature, (3) being mostly voluntary in nature, (4) integration of social and environmental concerns into business operations, (5) meeting responsibilities to all stakeholders, (6) objective concern for the welfare of society, and (7) maximizing positive effects and minimizing negative effects of company’s operations. CG, on the other hand, is commonly understood as the pursuance of objectives to create value and provide accountability and control systems with the risks involved, and the responsiveness to the rights and wishes of shareholders and stakeholders. In other words, CG can be defined broadly as the systems and processes put in place to achieve the company’s objectives, and CSR can be explained as the demonstration of the company’s commitment to reduce impacts related to activities, mostly including effects on social, ethical, and environmental (SEE) criteria (Roberts, Rapson, & Shiers, 2007, pp. 393-394). Besides that, CS is regarded as systematic social and civic commitment, which takes an extended social responsibility. The three areas, CG, CSR, and CS, are subareas of Corporate Responsibility (CR), which is regarded as collective and global term (Landgraf, 2010, pp. 116-117).
The most eminent area of CR in terms of sustainable development is CSR. Yet, the question arises, how sustainable the CSR movement really is. Edgerton (2007) sees no difference between sustainability and CSR in practice. Corporations are using the terms interchangeably and referring, when discussing CSR, to social and environmental consequences of investments and corporate activities (Kimmet, 2009, p. 473). Hence, all dimensions of sustainability are covered. Nevertheless, Roberts, Rapson, and Shiers (2007) claim, “the lack of an all-embracing definition of CSR and subsequent diversity and overlap in terminology, definitions and conceptual models are said to have hampered academic debate on the subject” (p. 390).
Corporations bow to an integral sustainable reflection of all business activities. Moreover, CSR is not perceived as costly and unnecessary, but recognized as more beneficial than costly (Friedemann & Büchner, 2010, p. 78). This is shown in numerous studies and surveys (McKinsey, 2007; Union Investment, 2011). Corporations committing to CSR, usually try to benefit from this commitment through providing material to help participate in their CSR process, such as regular reports. The reporting duty on the progress and current status of CSR in corporations are commonly selfimposed by corporations. A standardized reporting scheme does not exist, though. In this regard, the Global Reporting Initiative, which is a private initiative, established a standardized and comprehensive sustainability-reporting framework, which is already widely used (Global Reporting Intiative, n.d.). AccountAbility is a further example, of among other services providing assistance for organizations setting up a CSR report (AccountAbility, n.d.). The corporation’s benefits of publishing reports include an enhanced public image and hence increased interest in the corporation.
Multilateral organizations foster the awareness of CSR and SEE criteria, respectively. Besides the two reporting frameworks above, the International Organization for Standardization (ISO) developed a guidance on SR, which is relevant for both, private and public organizations, and is based on international consensus among expert representatives (ISO, n.d.). The standard is intended to serve as a guideline and provide a universal basis for introducing and implementing SR into organizations. Further examples are CSR workgroups and initiatives from organizations such as UNEP and UNEP Finance Initiative (UNEP FI), or the World Business Council for Sustainable Development (UNEP, n.d.; UNEP FI, n.d.; WBCSD, n.d.).
Eventually, corporations play a significant role in mainstreaming the sustainability movement. The various strategies and forms of incorporating sustainability measures differ, but nonetheless they are increasing awareness and publicity.
CSR impacts on all business activities including investment policies. Such policies and investment practices can be grouped under the term Socially Responsible Investment (SRI), and specifically for the real estate industry Socially Responsible Property Investment (SRPI), sometimes also referred to as Sustainable Property Investment (SPI) and Responsible Property Investment (RPI). These trends are driven by and are closely linked to the efforts undertaken by the global community to achieve more sustainable development. In the following, the nature and process of CSR implemented through the investment process is analyzed and major differences in characteristics and history are presented.
SRI is an element of CSR. The connotations embraced by those two concepts, SRI and CSR, are very similar, as both aim to combine financial concerns with environmental stakeholding and ethical considerations (Wen, 2009, p. 313). Mansley (2000a) defines SRI as “investments where social, ethical or environmental factors are taken into account in the selection, retention and realization of investment, and the responsible use of the rights (…) that are attached to such investments” (p. 3). The terms social, ethical, responsible, socially responsible, sustainable, and others, are used in a multitude of overlapping and complementary ways to approach the SRI field (Woon, 2009, p. 3).
Shareholders are becoming increasingly aware of the possibilities and are calling for corresponding products through the use of their shareholder rights in order to have a positive impact on development (Lützkendorf & Lorenz, 2010, p. 195). A framework for this is, for example, provided by an initiative in partnership with UNEP FI and UN Global Compact, called Principles for Responsible Investment (PRI) (Figure 2). Other examples are the Responsible Investment Guidelines formulated by the European Social Investment Forum (EUROSIF).
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Figure 2. Example of a framework for developing a SRI strategy. Adapted from “The principles for responsible investment,” by PRI, n.d.
The UNEP FI and the PRI provide a framework for investors within which to consider social, environmental, and corporate governance issues in their decisions (Pivo, 2008b, p. 22). Thus far over 1,000 parties have signed the principles, which have accumulated over US$30 trillion in assets, representing 20 percent of the world’s capital (PRI, 2012, p. 1). It is a voluntary program that encourages best practice in environmental, social, and corporate governance (de Francesco & Levy, 2008, p. 84).
Various investment strategies concerning SRI have been observed. Sullivan and Mackenzie (2009) identify four main forms of SRI activities and order them by reference to the level of direct intervention by the investor, ranging from direct action to indirect pressure (p. 13). The first approach listed is engagement, sometimes also referred to as shareholder engagement. In this approach, investors use the rights attached to their investments to influence the company’s actions. These can be voting rights or the possibility of discussing company policies with the company’s directors. The second approach to SRI is screening. This is the process by which an investor filters the possible investment targets either positively or negatively, to choose investments by steering the investment company either toward or away from investment targets. For example, a company may positively screen investment targets, which are focusing on green technology, whereas it can also negatively screen for tobacco firms and neglect investing in them. The third approach is best-in-class, which is based on the idea that, irrespective of the business area, companies, which mind SEE factors, tend to be more successful and better managed than competitors. That allows the investing corporation to engage in all business sectors, and hence facilitate a better portfolio diversification and risk reduction. However, this approach does not ensure that investments meet all criteria of sustainable development and responsible investment. The last approach is enhanced analysis. In this approach, drivers such as social mores, consumer attitudes, and government policy, are assessed qualitatively and quantitatively, in order to estimate the fair value of investments. Investments are not made if the fair value is below what is observable in the market, and consequently, investments are made if the fair value or future worth is estimated to be greater than the price (McNamara, 2009a, pp. 7-8). Community investing is another approach. It is common among US investors, who make capital available to local and municipal organizations that are not able to gain financing through the capital and financial market. In turn, these organizations are then able to provide loans and financing to lowincome earners, or to support public health care, elder care, or childcare (Lorenz & Lützkendorf, 2005a, p. 5).
Traditional SRI investors mainly used to be special retail funds and value-based organizations, such as religious groups or environmental organizations. However, recently the scope has expanded to include most commercial entities and organizations (Wen, 2009, p. 313). Nowadays, the main actors on the SRI market are private and institutional investors, financial institutions, funds, agencies and service providers. SRI is dominated by institutional investors and high net-worth individuals (HNWI), who together account for 70 percent of the SRI assets under management in the US, and 94 percent of the SRI assets in Europe (Nelson, 2008, p. 8).
SRI has grown into a global movement. In Europe7 for example, as of December 2009, total SRI assets under managements had reached €5 trillion8, which equals to a growth rate of approximately 95 percent over two years or over 430 percent from 2005 (Table 1). The growth of the SRI market overhauled the growth of the conventional market. Growth rates of 114 percent for monetary SRI funds and 33 percent SRI bonds for the years 2007 to 2009 are facing relatively low growth rates of 4 percent and -5 percent, respectively, of the mainstream market (EUROSIF, 2010, p. 10).
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Table 1. SRI assets under management distinguished by narrow (Core) and wide (Broad) investment strategies. Adapted from “EUROSIF Annual Report 2003,” 2003; “EUROSIF Annual Report 2006,” 2006; “EUROSIF Annual Report 2008,” 2008; “EUROSIF Annual Report 2010,” 2010, by EUROSIF; and own calculations.
Narrowing the scope to Core SRI, meaning investments following the strategies of positive screening and best-in-class, the total assets under management account to €1.2 trillion. This equals a growth rate of approximately 135 percent over two years and over 1,000 percent since 2005 (EUROSIF, 2010, pp. 11-12).
According to the European Fund and Asset Management Association (EFAMA) (2010), the total assets managed in Europe amounted to €12.8 trillion as of December 2009 (p. 35). This would suggest that the total SRI assets represent approximately 10 percent for Core SRI and 39 percent for Core SRI plus Broad SRI of the asset management industry in Europe.
However, one part of this huge growth can be explained by special factors, such as the conversion of some existing investment vehicles into SRI vehicles. Moreover, additional market data coverage is evolving and therefore blurs the findings. Nevertheless, the category of SRI appears to be increasingly important.
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Table 2. Comparison of total assets under management and total SRI assets under management in Europe and in the USA. All currencies are in Euro terms; US$ figures are converted to Euro with the 2009 European Central Bank average exchange rate (US$ 1.00 = € 1.3948). Figures in brackets are in original currency. Adapted from respective reports “Trends Report: Report on Responsible Investing Trends in the U.S.,” by USSIF; respective reports “EUROSIF Annual Report,” by EUROSIF; own calculations.
European investors engage in SRI through different strategies, which is why the European SRI market is not homogeneous and therefore difficult to compare. This is even more problematic, when comparing the market data with markets outside Europe. Foe example, the US American SRI market seems already relatively mature, compared with the European (Table 2). This is not only true in absolute numbers, but also in the share of SRI relative to the total number of assets under management. As of December 2009, the SRI share increased to 12.18 percent in the USA, whereas Europe offers only 9.37 percent. However, it is evident that the European SRI market has greater momentum.
A large share of Europe’s SRI market growth comes from the UK, which is recognized as taking the lead in this rising field. Almost 80 percent of UK pension scheme members are required to operate a social investment policy. Moreover, all trustees of occupational and local government pension schemes are required to state their policies with regard to social, environmental, and ethical considerations, which builds up even more pressure to implement SRI and CSR policies (Wen, 2009, p. 309). As a result, the UK SRI retail market accounts for approximately 50 percent of the total European SRI retail assets, incorporating the majority of EU assets (Figure 3) (EUROSIF, 2010). The other 50 percent of Europe’s Core SRI assets are primarily Norwegian, Swedish, Dutch, and Danish.
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Figure 3. Distribution of SRI assets under management in Europe. Adopted from “European SRI Study,” by EUROSIF, 2010, pp. 22-53.
The facts just outlined emphasize the development of and soaring interest in SRI. The issue of growing SRI markets is based on, among other things, the growing awareness that ignoring SEE concerns when making investment decisions can be financially risky. As a result, organizations are increasingly incorporating SRI programs as an element of their risk management.
A large body of credible sources indicates that there are no financial disadvantages, and in some cases there are even positive financial effects associated with the adoption of SRI and CSR policies. Neutral findings were presented by a study of 40 funds in seven European countries, revealing no significant evidence of out-performance or underperformance (Wen, 2009, p. 315). When it comes to positive findings, research has shown that socially responsible activities can have a verifiable affirmative impact on the present value of a firm’s cash flow (Godfrey, 2005, p. 796; McWilliams & Siegel, 2001, pp. 125-126). It is also shown that an adoption of SRI and CSR policies has a direct impact on portfolio returns through stock price changes (Gordon & Hebb, 2005, p. 2029).
Analyzing the performance of indexes also shows the positive performance of SRI. For example, Schröder (2003), in a review of literature and indexes on the financial performance of SRI funds and stocks in comparison to conventional funds and stocks, concluded that SRI does not show weaker returns relative to other assets (p. 23).
Figure 4. Historic performance of the three indexes FTSE4Good Index, FTSE Global Equity Index, and FTSE Eurotop 300 Index, starting on October 30th 2008 until February 23rd 2012. Adopted from Hudak & Timms, personal communication, March 7, 2012.
This is also shown in the decreased risk associated with SRI. We can compare the development of the FTSE4Good Index, which is an index provided by the index company FTSE, measuring the performance of companies that meet CSR standards, with the FTSE Global Equity Index, which covers over 8,000 securities in 48 different countries and captures 98 percent of the world’s investable market capitalization, and the FTSE Eurotop 300 Index, which represents the performance of the 300 most highly capitalized and publicly traded corporations in Europe. The FTSE4Good Index reveals a lower and more moderate volatility, and also shows higher returns and outperforms the European index (Figure 4 and Table 3) (Hudak & Timms, personal communication, March 7, 2012). However, it underperforms compared with the global index, due to the fact that the emerging markets, such as China, Brazil, Russia, and India, are driving the larger proportion of growth in the FTSE Global Equity Index (FTSE, 2012).
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Table 3. Statistical data for the three indexes FTSE4Good Index, FTSE Global Equity Index, and FTSE Eurotop 300 Index. Time series ranges from October 30, 2008 to February 23, 2012. Adopted from Hudak & Timms, personal communication, March 7, 2012; own calculations.
Notwithstanding the conflicting results of some literature regarding the performance of SRI, Lützkendorf and Lorenz (2010) assume that the full range of environmental, economic, and social advantages of such investment policies is not fully expressed in the investment volume (p. 213). This is due to the fact that the traditional approaches to investment analysis are usually not capable of capturing external benefits and costs. Hence, investment volumes have not yet fully incorporated the trend of SRI. Nevertheless, the fact that SRI and CSR methods clearly outperform conventional methods of investing will gain further acceptance.
Another factor influencing the performance of corporations committing to SRI is the supposition that SRI has a positive influence on the company’s social image and corporate reputation. This may have an effect on the company’s financial performance and the maximization of shareholder value through the preservation of corporate value and the positive influence of SRI on stakeholder loyalty (Wen, 2009, p. 313-314).
In 2000, Mansley (2000b) predicted that property would join the SRI debate because it lies at the frontline of many social and environmental concerns (p. 170). The issue of growing awareness as in SRI is also perfectly true for the property industry. That is why the notion of socially responsible property investments (SRPI) has recently emerged, which equivalent with the notion sustainable property investments (SPI) Most of the literature quotes Pivo and McNamara (2005), who define SRPI as maximizing the positive and minimizing the negative social and environmental effects of property investing and ownership (p. 129). This definition implies that responsibility is not only levied on those who invest in property, but also those who own property and are concerned with the management of property.
In contrast to SRI, SRPI is a relatively new topic in the literature, which has a significantly shorter history (Roberts, Rapson, & Shiers, 2007, p. 395). It is reported to be the “real estate’s latest movement” (Haughney, 2006). Generally speaking, SRPI represents the application of investment strategies and corporate processes derived from SRI to the real estate industry. SRPI changes the perception of property from a commodity to emphasize social and sustainability-related characteristics as essential to property’s value and acceptance. Hence, activities and developments relating to SRPI are also driven by and closely linked to the efforts of the society to achieve more sustainable development (Lorenz & Lützkendorf, 2008, p. 483).
However, Kimmet (2009) challenges the sustainability features of SRPI (p. 472). This is because the terms sustainability and sustainable development have been over-used and exhaustively defined, leading to the fact the terms are used to describe “anything that has some sort of future” (Hopwood, Mellor, & O'Brien, 2005, p. 40). In practice, sustainability in SRPI tends to be most commonly used to describe physical and economic lines, resulting in “green washing” (Kimmet, 2009, p. 471). The social aspects of sustainability are mostly ignored and significantly less developed, at least in the context of the real estate industry. But the social aspect is the main advantage of the concept of SRI, which implies that humans matter at least as much as the environment and economics. This flawed approach can also be observed with the replacement of the notion SRPI with the term responsible property investments (RPI), dropping the “social” part of the original term and losing an important aspect of the term SRPI. This superficial simplification hides whom the investors are responsible to, namely society (Roberts, Rapson, & Shiers, 2007, p. 397). Moreover, sustainability in the context of the built environment applies almost exclusively to green buildings and extensively refurbished properties, ignoring the large “unsustainable” stock of buildings.
1 5.7 billion out of 7 billion people or 82 percent of the world’s total population are living in less
2 The more developed regions are changing annually 0.44 percent on average and have a fertility rate of 1.66 children per woman, which is under the replacement-level of 2.1. The replacement-level is the level that needs to be sustained in order to ensure that a population replaces itself (United Nations, 2011, p. 11).
3 The world’s GDP at purchaser’s prices was US$ 2.8 trillion in 1970 and US$ 63.1 trillion in 2010. This equates to an increase of 2,183 percent (World Bank, 2010).
4 Green house gases are gaseous elements, which are claimed to be responsible for climate change. Main components are carbon dioxide (CO2), methane, and nitrous oxides (IPCC, 2007, p. 3)
5 Organisation for Economic Co-operation and Development (OECD)
6 Energy security means less dependency on fossil fuels or sources of energy.
7 Nineteen distinct European Markets: Austria, Belgium, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Netherlands, Norway, Spain, Sweden, Switzerland, and United Kingdom
8 According to EUROSIF (2010) the figure also includes assets under management, which fall in the category of Broad SRI. Broad SRI is, in contrast to Core SRI, often considered to represent the “mainstreaming” of SRI, which means basically a simpler negative screening and exclusion process of investment alternatives. Core SRI, on the other hand, focuses only on positive screening, negative screening with three or more criteria, and best-in-class.
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