The Importance of Social Criteria for Responsible Property Investment: A Swiss View on the Market Success of Sustainable Real Estate Funds

Recently, effort was undertaken to define criteria for sustainable property investment (L¸tzkendorf and Lorenz, 2007; Moffat and Kohler, 2008; Pivo, 2008). One form of sustainable property investment are sustainable real estate funds, which are now at the stage of market introduction. The problem is that many sustainability rating systems for real estate funds still do not adequately integrate social sustainability. Also the market acceptance of sustainable real estate funds is largely unknown. The building stock is not only a prerequisite for the immediate satisfaction of basichuman needs. It is also a framework condition for higher-order needs, including developing the capabilities of residents or realizing social justice and sustainable lifestyles (cf. Barr and Gilg, 2006; Georg, 1998; Rawls, 1999; Sen, 2001). We performed a two-step study with institutional real estate investors and real estate fund suppliers in the German-speaking parts of Switzerland. Focus groups (N = 15), along with an e-mail-based questionnaire study (N = 68), were used to define and assess sustainability criteria for real estate funds in respect to their importance for market success. We also investigated the key financial stakeholdersë market acceptance of sustainable real estate funds. About three quarter of the responding institutional investors are willing to invest in sustainable real estate funds. Criteria for sustainable social infrastructure must inform ecological and economic assessments of real estate funds in order to avoid risks for ecology, socialmilieu, and return.There is a need for sustainable urban development that meets the demands of sustainable real estate funds (cf. Scholz et al., 1996, 1997). Besides ecological impacts, sustainable real estate investments have to consider the cultural sphere of human-environment systems (cf. Scholz, in prep.; Scholz and Binder, 2004). As a consequence, there is a need for sustainability learning of key stakeholder groups (cf. Hansmann et al., 2003). These results may inform the design, assessment and marketing of sustainable real estate funds.