Insights from the GRESB & IWBI Social Sustainability Roundtable series

Throughout the course of this year, IWBI teamed up with GRESB to host a series of industry roundtables focused on investor engagement on social sustainability. Aligned closely with the “S” in ESG, social sustainability is the practice of managing and optimizing an organization’s impact on its people, community, and broader societal systems. 

Real estate companies were often early adopters of social sustainability practices, frequently focusing on occupant experience and community engagement. This was motivated by and reflected in studies showing the potential for value creation and risk management (e.g., JLL’s often-quoted 3/30/300 “rule” about the ratio of utilities/rent/payroll). Investor awareness and interest followed more recently. This is in part due to a lack of engagement tools to guide productive dialogue between investors and fund managers on issues related to social performance, health, and well-being.

The GRESB & IWBI Social Sustainability Roundtable series will inform the development of resources to guide more effective engagement on social sustainability, including:

• A social sustainability dashboard that communicates the real estate industry’s social performance based on data that is currently gathered by the GRESB Real Estate Assessment 
• Process guidance for limited partners and general partners on how to incorporate social performance into investment engagement  

Roundtables were held in New York, Sydney, and London. They provided insight into an industry in transition. There is growing recognition of social sustainability’s importance. There are also remaining challenges related to standardization and measurement. 

Here is a look at some of the top insights gathered by these roundtables:

• Market maturity on social sustainability varies significantly—with investors focused on regulatory compliance and risk mitigation and leading managers focused on positive social impact and value creation.  
• Cultural and regulatory differences affect the understanding of social sustainability across regions. 
  • Some market participants believe that that addressing environmental (E) and governance (G) issues automatically covers social (S) issues. Evidence and experience shows that this is not the case (e.g., research from the Harvard School of Public Health). 
  • Regions such as the US are just now becoming familiar with the term “social sustainability”, while others such as Australia and the UK are more focused on “social value” and “social impact.” 
• Despite research documenting clear financial benefits—such as 4.4–7.7% rent premiums associated with healthy buildings—many investors and fund managers remain unaware or skeptical of the proven returns from strong social performance.

• Social performance disclosures can be more challenging and complex than their environmental counterparts. 
• Some social metrics are straightforward, such as occupant satisfaction or access to health care. Other metrics are more challenging, e.g., those requiring information about the social and economic context of a project.
• Effective social performance metrics will likely require a degree of standardization and customization to site-specific factors and circumstances. The result is a more dynamic set of measures and benchmarks when compared to prevailing environmental metrics. 
• Market participants need to recognize that causal attribution for social benefits are more complex than for other issues, reflecting contributions from many sources over multiple time scales.  These are not insurmountable, but they are a challenge. 

• The GRESB Real Estate Assessment already captures metrics related to social performance, providing immediate opportunities for engagement. Roundtable participants recommended an initial focus on measurable building attributes that impact tenant satisfaction and retention—including air quality, amenity access, and community programming. 
• Select traditional financial performance indicators can be used as proxies for social performance, such as occupancy trends, tenant retention rates, and satisfaction scores. 
• Existing environmental tracking systems can be leveraged to capture social co-benefits. For example, investments in air quality improvements deliver both environmental returns (energy efficiency) and social returns (occupant health), allowing teams to build on established ESG frameworks. 

• The real estate market is seeing a clear shift in how social performance affects asset value. Properties with strong social metrics—particularly around occupant health and community engagement—have demonstrated better resilience and financial performance. 
• Across the global market, there is wide variation in understanding of the risks and opportunities associated with social sustainability which will lead to varying abilities to properly manage social performance. 
• Regulatory exposure and risk also varies widely across regions. Investors not actively engaged on social metrics risk exposure to underperforming assets and may miss opportunities to invest with managers who are creating value through effective social strategies.
• While measurement remains complex, investors can begin with existing data points that affect returns:
  • Direct value drivers: occupancy rates, tenant retention, operating costs
  • Leading indicators: tenant satisfaction, amenity usage, community engagement
  • Risk metrics: vacancy patterns, regulatory compliance, social license to operate

Stay tuned for additional insights and new data describing the real estate industry’s social sustainability performance. In the meantime, learn more about social sustainability and social value through resources that were highlighted during the roundtables: 

• A common language on social sustainability | Property Council of Australia 
• Social value in the built environment | Discussion paper from Green Building Council Australia and Hassell
• Investing in health pays back | Campaign from IWBI on the financial ROI 
• Leverage WELL to advance social sustainability | IWBI
• Historic look at the GRESB Health and Well-being Module 

Look out for roundtables in 2025.

This article was written by Kelly Worden, VP of ESG and Social Sustainability at International WELL Building Institute and Chris Pyke, Chief Innovation Officer at GRESB.  

References:

“Workplaces that work: for your employees and bottom line.” JLL. Accessed November 27, 2024.

“Energy-efficient buildings can be hazardous to health.” Harvard School of Public Health. Accessed November 27, 2024.

Sadikin, Natasha, Irmak Turan, and Andrea Chegut. “The Financial Impact of Healthy Buildings: Rental Prices and Market Dynamics in Commercial Office.” SSRN. Accessed November 27, 2024.