Housing REITs Launch ESG Innovation-Focused Fund

Multifamily REITs Essex Property Trust and UDR have announced the first closing of a new fund focused on ESG to be managed by RET Ventures 

With $80 million of investor capital commitments, the fund will seek to support ESG solutions for the housing industry, including technologies that improve both the environmental and social outcomes of new developments and existing properties.

The fund’s goal is to broaden the sector’s approach to ESG, addressing climate change and environmental risks as well as social issues, such as housing affordability, building health and safety, and resident well-being. 

It will start out by tackling building design, reducing energy usage and carbon emissions, efficient waste management and ESG data collection and reporting.

Technology Solutions Lead the Way

RET Ventures said that in recent years, it has seen strong growth in technology solutions that utilize design to address ESG directives. 

“This could be next-gen construction solution such as Juno, one of our portfolio companies — the way Juno buildings are designed has led to better construction timelines/economics (and subsequently more affordable and energy-efficient properties),” says Christopher Yip, Partner at RET Ventures.

.Other areas of interest include technology that incorporates the whole-life carbon footprint of a property, which will become critical for new builds going forward. 

“Owners and investors need to know the true cost/impact of their design decisions over the entire lifecycle of the property,” the Yip said. “We are also looking at a potential investment that would allow owners to utilize design recommendations that would improve the mental and physical wellness of residents.”

SmartRent, Conservation Labs, Passive Logics Energy Efficiency

RET is actively evaluating solutions to reducing energy usage and carbon emissions, including platforms that focus on improving energy efficiency and subsequently improve operating costs.

For example, its portfolio company SmartRent utilizes IoT such that residents can avoid leaving their AC running while away. Additionally, Conservation Labs identifies leaks to save water, and Passive Logics platform identifies how to optimize broader building systems (lighting, heating-cooling, etc.) through a next-gen BMS. 

“We anticipate that these systems eventually will create an ecosystem of tech that will not reduce an asset’s carbon footprint but will also enhance broader grid resiliency,” according to Yip.

Logistics Help Waste Collection Routes

With efficient waste management, similar to other industries, “this is an area in which we have seen technology displace or support existing vendors that have historically been slow to innovate,” he also said.

For example, with the adoption of broader urban logistics, engines recycling entities will better optimize waste collection routes, improving their underlying economics and enhancing resident/community buy-in.

RET has already invested in an enterprise solution for ESG tracking — Measurabl — “but we continue to evaluate solutions that support and improve the data aggregation process at the property level, driving clear and achievable decarbonization plans that will better inform upstream investors and lenders.

Combining Sustainability and Financial Returns

Corey Merrill, Partner, head of ESG practice at MGO, tells GlobeSt that ESG’s definition of value is evolving and “investors are continuing to look for sustainable impacts and insights alongside financial returns.”

This housing impact fund provides a vehicle to meet both needs because it is one that showcases the interconnectedness of the environmental and social pillars of ESG.

“Cutting-edge financial products and investment vehicles such as this fund help communities and other stakeholders as they seek to tackle two of the greatest challenges of our time – climate change and economic disparity.

“Countless research projects have shown that climate change disproportionately affects our must vulnerable communities — and funds such as these are designed to promote innovation and support to those communities that need it the most.”