Independent UK property organisation Assissted Living Project managing director Thomas Williams joins us to discuss ethical real estate investment and the impact socially-minded investment can have.
The rise of the UK’s collective social consciousness is redefining the private investment landscape. There’s a growing appetite for investing personal wealth where it not only has positive financial return, but a positive impact on society.
According to the latest ESG Attitudes Tracker from the Association of Investment Companies (AIC), more than half (53%) of private investors consider Environmental, Social, and Governance (ESG) factors when deciding where to invest.
This shows that investors are increasingly savvy and are choosing to invest in ways that support sustainable and responsible business practices. They're not just looking for financial gains; they want their money to do good things for the world too.
Safe investment: a foundation for financial stability
Starting a 'purpose-driven' investment journey can be exciting, if not a little daunting. With any investment choice the primary consideration for the investor is usually whether it makes money. While the prospect of having a positive impact on society is appealing, most investors would agree that this shouldn’t mean sacrificing financial returns.
Investors actively seek opportunities that offer a reasonable level of certainty and a low risk of financial loss. In the realm of purpose-driven investments, safety should also not be compromised.
The good news is that investments aligned with social value are often more resilient in the face of economic downturns. Historically, socially responsible investments have demonstrated a remarkable capacity to weather market fluctuations.
In the UK, the market for socially responsible investing is expected to grow by 173%, reaching £48 billion by 2027.
Investment to tackle social problems
Investing for a positive impact has been around for a while, but it's become even more important recently.
Big societal problems like inequality, human rights issues and climate change have made people realise that we need solutions that really make a real difference. Stakeholders, including the public, influencers, shareholders, regulators, and the media, are calling for action to deal with these societal problems.
This, in turn, is placing greater demands on investment companies to be more transparent, showing that they're part of the solution and not the problem when it comes to helping tackle social and environmental issues.
In the UK, how people invest their money is changing. Corporates such as banks and pension funds are feeling pressure to withdraw from investing in industries like oil and gas. Research from Make My Money Matter found £88 billion of UK pension savers’ money goes to fossil fuel companies, including £20 billion to Shell (LON:RDSa) alone.
The campaign is encouraging people to demand that these corporates remove their investments in fossil fuel projects entirely. People want to put their money where it not only makes them more money but also helps make society better.
Property investment with purpose
Property has long been a popular investment choice. But investing in property doesn’t necessarily mean buying buildings. There are many ways you can invest in property, either directly or indirectly. There are also many ways in invest in property for social good.
According to a recent report, investments into social and affordable homes increased by an impressive 35% in 2022, totaling £5.1 billion. Another report highlights that the social and affordable housing impact funds market is increasingly seen as an attractive home for institutional capital seeking a combination of investment returns and impact.
One notable area of investment is social housing, which aims to provide affordable and sustainable housing for people in need. For example, the UK’s ageing population is expected to reach 15.2 million by 2026, a 19% increase from 2021. This demographic shift will likely drive demand for assisted living facilities, as many older individuals will require daily assistance.
Investing in social impact projects that enhance the lives of people with enduring illnesses or special needs across the UK by housing those who need it most can have a significant positive impact on society.
Unlocking REITeous returns
Real Estate Investment Trusts (REITs) are companies that own and operate income-generating real estate properties such as apartments, office buildings or shopping centres. Today, many REITs are aligning their focus with societal wellbeing. For example, some provide affordable housing for the vulnerable or healthcare to people in need, while others are trying to overcome a critical gap in the care system with the help of assisted living providers.
Simultaneously, there is a growing interest in REITs as an alternative way of investing in property without having to directly buy or manage the properties. In 2020, a report found that 38% of impact investors surveyed had invested in real estate, with 15% of those investments being made through REITs underscoring the appeal of investment that is both profitable and has a positive impact on society.
The future seems promising as socially responsible investments have shown resilience during economic downturns. The expected growth of this type of investment in the UK can only be a positive trend. The increasing appeal of REITs as an alternative to a traditional property portfolio, as well as for social good, highlights a significant change in investor preferences. It reinforces the idea that doing good is a good investment.