Striving for the “Social” in ESG

The commercial real estate industry has been heavily dedicated to incorporating environmental, social and governance activities – ESG – into business operations and activities. A greater awareness of climate change-related hazards continues to drive the need for greener and more sustainable environments.

The “environmental” aspect of the three-pronged ESG tends to be a higher focus in ESG. But what’s not mentioned quite as much are the “S” and “G” components. In this first of a two-part series, Connect CRE spoke with CRE experts to add clarity to the social and governance pillars of ESG, what they are, and how they’re being used.


The term “ESG” was first introduced by the International Financial Corporation in its “Who Cares Who Wins 2005 Conference Report.” The goal of the conference was to pinpoint the role of ESG drivers when it came to asset management and financial research value drivers.

But one challenge is that the “S” in ESG tends to be broadly defined. For instance, S&P Global considers the “S” as reference to “factors to consider in sustainable investing,” which might include a company’s strengths and weaknesses in handling social trends and politics. Harvard University explains that “S” can refer to customers, data security issues or supply chain issues. Then there is KPMG Global’s definition that “S” stands for “a social undertaking as an operator in the social economy.”

The broad definition also is in evidence in the commercial real estate industry. Specifically, the “Social” pillar shows itself in terms of on-site property offerings, as well as how the companies, themselves, operate.

S on the Property Level

In a statement, Red Oak Capital Holdings indicated that part of its Social focus includes “lending to sponsors who are focused on delivering affordable housing to meet soaring demand in markets around the country.” With this, Red Oak contributes to “improving the planet through responsible and impactful giving,” the statement noted.

Tony Liou with Partner Engineering and Science In. also noted that his company’s Social aspects are tied to the properties with which it’s involved. “The social aspects data include how close a property is to public transit, how close it is to amenities, what are the bike and walk scores and whether there are green spaces available,” Liou remarked.

Comunidad Partners specializes in workforce and affordable housing. The company’s Catherine Lucchesi indicated that Social means quality affordable housing. Also important is social programming in Comunidad communities, like education and job recruitment. “These programs will increase resident household income, decrease household cost burdens and improve resident household wealth and equity,” she said. Furthermore, these activities include on-site supportive services to residents, like telehealth.

Liou added that property amenities, like job training and day care, can also fall under the Social category.

S on the Workforce Level

Then there is the “Social” aspect from a corporate workforce perspective. Andrew Masterman with BrightView indicated that the company’s commitment to “S” focuses on workforce diversification and a specific Diversity, Equity and Inclusion strategy.

BrightView, which designs, develops and maintains landscapes, is actively promoting managerial growth among female and Hispanic/Latino team members. Additionally, “this past year, we commissioned a material assessment to identify topics that matter most to our customers, vendors, community partners and team members,” Masterman said. He added that insights from the assessment will help support the company’s future ESG initiatives.

Another important factor is boosting employee safety. “Protecting our employees continues to be a top priority,” he said.

Pulling it Together

The purpose of ESG’s Social pillar is to improve life for stakeholders. From a commercial real estate perspective, this can mean building and maintaining worthwhile projects that add positive attributes to the community. It can also mean working toward a more inclusive workforce.

Comunidad’s Lucchesi explained that investor and customer demand, along with regulatory pressure, is encouraging real estate companies to focus on ESG strategies across the board. As a result, “the top companies in the industry will focus on the S and G pillars, along with the E pillar, when fleshing out their business objectives over the next several years,” she said.

Source: Connect CRE: https://www.connectcre.com/stories/striving-for-the-social-in-esg/