Global Definitions Database
Access, learn and discover all terms related to the non-listed real estate sector.
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Additionality
The positive impact that would not have occurred without the investment. Real Estate impact investment strategies may ensure additionality by creating additional affordable housing, social housing, healthcare or education or by investing in real estate to improve its environmental performance.
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Affordable Housing
Affordable housing refers to housing units that are affordable to buy or rent by the low-income section of a society (for example, whose income is below median household income). Affordability is defined with a maximum percentage of gross income which may differ from country to country and also depending on whether this is a percentage of net, gross, individual or household income.
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Impact Investing
Impact investments are investments made with the intention to generate positive, measurable social and/or environmental impact alongside a financial return. Additionality and intentionality are key factors of impact investing. For Real Estate, social impact for example, might occur through developing or providing affordable housing, social housing , healthcare or education units when there is a lack thereof or using one of the SDGs as an impact theme. Furthermore, environmental impact can for example, be achieved by improvement in energy efficiency as a result of sustainable building investments.
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Impact investing metrics
Impact strategies will have specific performance metrics related to the socialor environmental impact that they are addressing. These metrics will be monitored alongside and in a similar fashion to financial performance metrics and help investors manage toward success. They are estimated, measured and monitored over time to give an indication of the performance of the investment in a given area of impact. Qualitative social impacts that cannot be easily measured can be measured through quantitative proxies. Investments will have to meet these social or environmental criteria as well as satisfying financial investment guidelines. For example, a Real Estate impact metric might be the percentage of units delivered that are available at an affordable rent.
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Impact Measurement & Management
Measuring and managing the process of creating social and environmental impact in order to maximize and optimize it. An impact measurement and management framework will be developed at the outset and will exist to test the achievement of the social and / or environmental impact goals associated with the strategy. An external independent party would ideally be appointed to assure or verify the annual statement of impact measurement and also to comment on the extent to which the impact strategy is meeting the initially identified social or environmental need.
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Intentionality
An investor’s intention to have a positive social or environmental impact through investments is essential to impact investing. These impacts are defined as part of the strategy and investments are assessed against social or environmental impact criteria as well as financial return thresholds.
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Social Impact
The European Commission defines 'social impact' as the reflection of social outcomes as measurements, both long-term and short-term, adjusted for the effects achieved by others, for effects that would have happened anyway (dead-weight), for negative consequences (displacement), and for effects declining over time (drop-off). (see http://www.europarl.europa.eu)
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Sustainable Development Goals (SDG)
Also known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. The SDGs were launched by the UN and member states in 2015 and target achievement of various social and environmental development challenges by 2030. They have become an important communication framework for impact investors to align and signal commitment to specific global development areas, and are increasingly being used by investors to mobilize and allocate new capital to one or more the goals. There are 17 SDGs, each focussed on a different area of need. Impact investment strategies may focus on at least one of the SDGs. For Real Estate, an impact investing fund would typically be linked to the SDG 1: No poverty, SDG 3: Good health and well-being, SDG 4: Quality education, SDG 6: Clean water and sanitation, SDG 7: Affordable Clean Energy, SDG 11: Sustainable Cities and Communities and SDG 12: Responsible consumption and production.
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