Keys to Impact Investing Success

With the past few years largely characterized by the high cost of living and market uncertainties, amplified social unrest and inequity, and a global pandemic, impact investing has become increasingly appealing as a way to contribute to solutions to some of society’s most prevalent issues—all while achieving stable returns.

In fact, the impact investing market on a global scale is projected to nearly double its 2023 volume of $495.82 billion by 2027, according to the most recent Impact Investing Global Market Report.

While investments in various types of real estate can contribute to positive environmental and social change and realize strong returns, multifamily properties offer the greatest opportunity for investors who are interested in improving lives, supporting efforts to address climate change, and generating stable returns. 

Why is this? Over the course of our lives, we will spend more time and more income in our homes than any other property on earth, and for 40 million Americans, that home is located in an apartment building. Simply put, if investors want to make an impact, the best place to start is where people live.

By investing in multifamily properties, capital can be leveraged to provide key foundational support for individuals and families that creates a positive social impact through access to quality housing that is affordable based on their incomes, as well as services that further support their wellbeing and economic health. Further, these investments also present a large opportunity to improve inefficiencies in energy and water usage and reduce greenhouse gas emissions.

Seeing investors embrace impact investing is a promising and exciting indication of what lies ahead, but there are still many challenges to overcome.

Show me the data

For instance, in ESG Investor’s coverage of BNP Paribas’ ESG Global Survey 2023, it was noted that 71 percent of respondents cited “inconsistent and incomplete data” as a reason for limited adoption of ESG and impact investing, which is a 17 percent increase from two years prior.   

The good news is we are already seeing large strides made toward more transparency, defined standards, and clarity regarding how to monitor results to ease these concerns and encourage more impact investment in the multifamily real estate sector.

Last month, the International Well Building Institute and GRESB announced a strategic partnership in response to increased expectations and interest in the social component of health and sustainability.

Additionally, the Multifamily Impact Council recently published The Multifamily Impact FrameworkTMwhich represents the first and only industry standard of common impact principles and reporting guidelines for multifamily properties in the U.S.  With the help of our members and advisory board (including IWBI and GRESB), the framework was created to increase the flow of global impact capital into the U.S. rental housing market by:

  • Making it easier for impact investors around the world to invest in the U.S. multifamily sector by establishing an industry standard for defining and measuring impact in our rental properties;  
  • Helping property owners build their own impact strategies that match investor expectations and based on a common set of impact principles, minimum requirements, and reporting guidelines;
  • Building credibility for impact investing in the U.S. multifamily sector by maintaining a framework that is evidence-based, aligned with global impact standards, and freely available for organizations to download, adopt and provide feedback.

A principled approach

The first principle of our framework is affordability, as it is the foundation of any impact strategy. According to the National Low-Income Housing Coalition’s most recent Out of Reach report, the national one-bedroom Housing Wage, or the hourly wage a person working full-time needs to earn to afford a one-bedroom apartment, is $23.67—more than three times the federal minimum wage, and significantly more than what is comfortably attainable for many families with children, people with disabilities, and low-income seniors. Additional principles include housing stability, economic health and mobility, resident engagement, health and wellness, climate and resiliency, and diversity, equity, and inclusion. 

By focusing on these core principles, capital providers and owners can make more informed investment decisions that:

  • Improve the lives of the people who call these properties home;
  • Reduce greenhouse gas emissions by improving energy and water efficiencies;.
  • Deliver strong and stable rates of return via the social impact dividend of lower vacancy costs, higher occupancy rates and lower utility bills.   

All stakeholders—residents, investors, local governments, communities, owners, operators, service providers, and others—can benefit from a common and transparent approach to defining and measuring impact investments for multifamily housing. The Multifamily Impact Framework was built for this purpose, and we look forward helping increase the flow of impact capital to support more affordable, sustainable, and equitable rental housing throughout the United States.

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