Increasingly, real estate investors are seeking out projects that not only show strong returns, but ones that also make a positive impact. Green buildings and developments that promote strong neighborhoods and good jobs are at the top of investors’ lists, and the projects that do good for the community and the planet are more and more becoming the projects that are good for business.

The field of environmental, social and corporate governance has emerged to help companies make good on investors’ wishes to use their capital responsibly. But the industry is still searching for metrics to accurately measure and report ESG initiatives. Without that framework, both ESG-centric funds and the goals they hope to achieve could be stunted.

“Real estate companies want to show investors that they are committed to social and environmental sustainability, but they don’t know the best way to highlight it,” RSM Senior Manager Laura Dietzel said. “The field is crowded with metrics, which makes it extremely difficult for investors to compare projects side by side.”

For REITs and other investment vehicles in real estate, the largest ESG concern is environmental sustainability. Commercial buildings are responsible for 39% of greenhouse gas emissions in the U.S., and as investors become more conscious of the effects their money can have on the environment, they are looking for funds that invest in projects that promote efficiency in terms of waste, water and energy, and that have low impact on their immediate environments, Dietzel said.

Portfolio managers are only too happy to work with these sustainable projects. Green residential buildings in the U.S. are able charge premiums of 9% above their competitors, while green office buildings can charge a whopping 26% more.

But the landscape of environmental ratings systems for real estate is fractured. Competing standards like LEED, BREEAM and NABERS all rate commercial buildings’ environmental impact. And beyond environmental impact, ESG metrics only become fuzzier.

“Portfolio managers might advertise that they only invest in projects that create jobs, or revitalize neighborhoods or promote gender diversity on their boards,” RSM partner Anthony DeCandido said. “Some of these claims are difficult to measure. And since it’s up to the funds or the companies themselves to self-report these metrics, investors could be getting a fairly biased view.”

A few generalized standards for sustainability have cropped up. The Global Real Estate Sustainability Benchmark assesses the sustainability of real estate portfolios, while the Sustainable Accounting Standards Board is working to spread a single set of ESG standards. But DeCandido said these metrics are slow to catch on, and boiling down the entirety of ESG to a single grade is difficult.

So, investors face a jumbled landscape of funds and trusts purporting to be sustainable, but lack the hard metrics they need to make informed decisions. Conversely, real estate funds that have made ESG investments may appear to be no different from funds that simply pull a few statistics to impress younger investors, Dietzel said.

Dietzel and DeCandido said their clients have been asking for guidance on how to connect with today’s more responsible investors. RSM is hosting an upcoming webcast on how to share and showcase ESG practices.

“Since investors today are requiring more and more transparency, there is real accretive value for businesses to strategically share their ESG practices,” DeCandido said. “And yet, there is a lack of consensus on how to do that among the asset management community.”

DeCandido said if a fund really is committed to ESG initiatives, it is in the fund’s best interest to support third-party verification and ensure that due diligence is strong enough to unearth bad behavior, encouraging responsible self-reporting and opting into the standards the real estate industry does have in place.

This feature was produced in collaboration between Bisnow Branded Content and RSM. Bisnow news staff was not involved in the production of this content.