At least one REIT, Washington, D.C.-based Housing Partnership Equity Trust, operates in the U.S. The REIT is managed by the Housing Partnership Network, a collaboration of housing and community development nonprofits. Several investment banks and foundations have collectively provided $100 million to invest in modest-income multifamily properties across the country.

There are also opportunities abroad. London-based Bridges Ventures finances elder care homes, environmentally sustainable properties and affordable housing. Brussels-based KOIS INVEST has a fund that invests in affordable housing in Belgium, while Monterrey-based venture capital firm IGNIA finances affordable housing and health-care services in Mexico.

Green Gables
While social impact real estate is gaining in popularity with investors, so is eco-friendly real estate. Investment opportunities in the green segment of the real estate market are largely driven by global trends in demographics, urbanization and redevelopment, increasingly rigorous energy efficiency mandates for commercial and residential buildings and tenant demand for sustainable offices and homes.

“The free market is now concerned about green and socially responsible policies. Landlords have to serve their tenants,” says Paul Adornato, a research analyst at BMO Capital Markets.

While there are almost no pure-play green real estate funds, many real estate companies do report sustainability measures and energy-efficiency improvements. “Most of the REITs have some sort of green policy. It’s a normal way of doing business today. Their investors care and it’s a good way to save money,” says Adornato.

Last summer, two publicly traded commercial REITs raised $700 million to invest in green real estate development and retrofit projects. Regency Centers (NYSE: REG) and Vornado Realty Trust (NYSE:VNO) launched bond placements of $250 million and $450 million, respectively.

Impact investors concerned about mitigating carbon emissions and resultant climate change are investing in modifying buildings to decrease their energy use. Buildings account for about one-third of the world’s energy consumption and greenhouse gas emissions, according to a 2014 report from the United Nations Environment Programme Finance Initiative (UNEP FI) Property Working Group, “Unlocking the Energy Efficiency Retrofit Investment Opportunity.”
The estimated investment opportunity in energy-efficiency-commercial-building retrofits ranges from $231 billion to $300 billion per year globally by 2020, says the report. Investing in a 30% improvement in commercial building efficiency would result in an IRR of 28.6% over 10 years, according to UNEP FI.

Academic studies and UNEP FI data demonstrate that both commercial and residential eco-certified buildings provide investors with considerable advantages over comparable non-certified properties. “On average, statistical studies have found office rental price premiums for LEED or Energy Star certification of 3% to 6%, occupancy premiums of approximately 10%, and sales price premiums of 10% to 13%,” says an April report by the Rocky Mountain Institute, “How To Calculate And Present Deep Retrofit Value: A Guide For Investors.”