STRATEGY
SOCIAL RESPONSIBILITY
At Good Success, we call this overall concept “being a conduit, not a bucket,” because Community Go-Givers strategically work to permit positive growth to flow through their companies and continue into the wider market rather than catching that growth and trapping it like water in a bucket. The result is greater market stability and a better foundation for growth.
certain types of investment properties or regions with “problematic” industries, such as tobacco. On the other hand, more action-oriented investors will identify a goal and a target community in which to invest, such as we have done at Good Success with our passion project, #FlippingGary. Our goal with this project is to shine a light on Gary, Indiana, so that other investors will see the potential in the city as a 21st-century hub for the Midwest. As long as we keep the economic growth of Gary at the forefront of our investment strategies, our projects prosper right along with the town itself. TWO TYPES OF RETURN, ONE BOTTOM LINE Because socially responsible investing yields two types of return, social impact and financial gain, inves- tors may struggle to gauge returns early on. One of the best ways to gain clarity is to refine your definition of SRI to focus mainly on community investment. Answer some simple questions about any potential real estate deal to determine if it fits the parameters of your SRI goals.
DEFINING RETURNS ON SOCIAL RESPONSIBILITY
Now that we have established that socially respon- sible investing, or SRI, can be really good for your bottom line as well as your conscience, it is time to lay the groundwork for defining the quality and quantity of these returns. First, we must understand what SRI really means. The concept of SRI has been around since the mid- 1700s, when Quakers living in Philadelphia decided not to participate in the slave trade. Over time “social investing” became more clearly defined as avoiding business practices and industries that could harm populations involved in the industry. Depending on the investor, this highly subjective definition might involve only placing capital in sustainable housing initiatives, avoiding tobacco- or liquor-based industries and as- sociated investments, or (more productively) investing capital with an eye toward the growth and improvement of a community. This last take on SRI is probably the most likely to consistently yield fiscal returns, although many in- vestors consider the emotional returns of making social investments as important as monetary ones. An investment that does not generate positive returns will, at some point, become unsustainable. This makes it vi- tally important for real estate investors concerned with SRI to also be concerned with the long-term viability of a project. Otherwise, the benefits of that project will be limited in lifespan and could leave the community even worse off when the project fails. SOCIALLY RESPONSIBLE REAL ESTATE CAN BE TRICKY When it comes to making socially responsible and financially viable investments in real estate, every investor must decide what constitutes SRI for their investments. For example, investors simply seeking to feel positive about their investments or to make a statement about a particular industry may opt to avoid
Making a Positive Impact with Real Estate YOU CAN INVEST IN COMMUNITY WITHOUT SACRIFICING RETURNS.
by Tom Olson
• Will this investment create a better living environ- ment for the people in the community?
eal estate investors know how devastating it can be when you let your emotions take over a deal, and nearly every investor has at least one experience during which they make poor decisions based on emo- tion. Typically, those decisions have a human element that makes them particularly complicated. For exam- ple, if a tenant has not paid rent for several months, should you start the eviction process even if you know they are struggling? This dilemma often becomes an emotional struggle that relates to our concepts of so- cial and community responsibility. As real estate investors, we are prone to viewing our properties in a highly individual fashion and making “one-off” decisions about them rather than operating in a consistent, goal-oriented fashion. However, the results when any investor or group of investors acts with a coherent, cohesive goal to benefit a community can be staggeringly positive. THE CASE FOR IMPACT INVESTING In June 2018, Morningstar released research indicat- ing stocks with the best long-term performances tend- ed to score higher than competitors on environmental, social, and governance (ESG) metrics. In fact, Morgan Stanley’s “socially conscious” index has outperformed R
the S&P 500 in nearly every time frame since its incep- tion in 1990. If an often-erratic platform like Wall Street can establish a track record like that, it is no surprise that impact investments in real estate can accomplish far more in far less time. For example, research from the Urban Institute on revitalizing neighborhoods, recom- mends “community development consisting of a broad set of activities to improve…neighborhoods in ways that benefit their established residents” as the best route to economic revitalization. The researchers placed particular emphasis on the importance of constant self-evaluation and account- ability in the community investment process. The team recommended investors “evaluate their own progress… rigorously,” making results available to investors and the public. This matches models like Good Success’s “Community Go-Giver” events, which are intended to spotlight positive aspects of the Gary, Indiana, commu- nity and recognize businesses and individuals actively involved in community revitalization. The Community Go-Giver organization holds its members accountable for commitments made with the goal of improving the local economy. The result has been positive returns for investors in Gary and an overall stabilizing trend in the local housing market.
• If successful, will any associated development or reno- vations improve the property values in the community?
• Am I supporting a defined need in the community by making this investment?
Your answers should align with your stated goals for positive change in your target community. This is often referred to as “impact investing” because your goal is to have a positive impact. As a real estate investor, keeping your SRI goals simple, positive, and actionable will ultimately yield the best returns on both the social and financial sides of the equation. The Good Success mantra, “Work to Have to Give,” plays out perfectly when SRI is done right because the more economic revitalization a com- munity experiences, the more resources are avail- able to help that economy continue to grow. •
Tom Olson is the founder and president of Good Success, Good Suc- cess Mastermind, and the annual Community Go-Giver event in Gary, Indiana. Read more from Tom about the economy, the real estate market, and small-business success strategies at GoodSuccess.com.
60 | think realty magazine :: january / february 2020
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