NOTED: ESG Impacts to Healthcare RE Investment

Environmental, social, and governance (ESG) considerations have become increasingly important in the real estate investment community. In healthcare real estate, ESG factors have emerged as critical drivers of investment decisions. ESG factors can impact investment returns and play a significant role in shaping the future of healthcare real estate.

ESG in Healthcare Real Estate

Healthcare real estate has traditionally focused on the physical aspects of healthcare, such as:

• medical offices
• hospitals
• long-term care facilities

However, the rise of ESG has led to a shift towards more sustainable and socially responsible practices in healthcare real estate. This will, in turn, have a positive impact on the future of your investment. When you are developing your ESG strategy, there are several things to consider.

Environmental Considerations

Environmental considerations are becoming more critical in healthcare real estate. Sustainability has become a key focus for investors and building owners in the healthcare sector. As a result, investors are looking for buildings that have been designed and constructed to meet environmental standards.

Leadership in Energy and Environmental Design (LEED) certification
LEED certification is a recognized standard for sustainable building design, construction, and operation. Buildings that achieve LEED certification are designed to minimize energy and water consumption, reduce waste, and promote sustainable materials. LEED-certified buildings are more energy-efficient and have lower operating costs, which can lead to higher returns for investors.

Annual reports of the environmental impact of health systems moving forward will be important for any real estate investment. You will be ESG investing.

Social Considerations

Social considerations are also becoming increasingly important in healthcare real estate. Factors such as accessibility, affordability, and inclusivity are key drivers of investment decisions. Investors are looking for buildings that are accessible to all patients, regardless of their physical ability or financial status.

In addition to accessibility, investors are looking for buildings that provide a high-quality patient experience. This can include amenities such as comfortable waiting areas, private patient rooms, and access to natural light.

The social impact of lowering carbon emissions and greenhouse gas emissions is just part of the ESG issues to consider.

Governance Considerations

Governance considerations are critical in healthcare real estate, particularly in the current regulatory environment. Investors are looking for buildings that comply with all relevant regulations and are managed in a responsible and transparent manner.

Investors are also looking for buildings that have a strong track record of compliance and risk management. This includes measures such as robust cybersecurity protocols, strong data privacy policies, and effective crisis management plans.

The following governance considerations are important to keep in mind:

Regulatory Compliance
Healthcare real estate investments are subject to strict regulatory requirements that vary by jurisdiction. It is important to ensure that the properties comply with all relevant regulations, such as:

• building codes
• zoning laws
• healthcare facility regulations

Quality of Care
Healthcare real estate investments are ultimately designed to provide high-quality care to patients. Therefore, investors must assess the quality of care provided at the properties they are considering investing in.

Risk Management
Healthcare real estate investments can be risky due to their complexity, regulatory requirements, and the potential for legal liability. Investors should have a robust risk management plan in place to mitigate these risks. This is especially true when you integrate ESG considerations into your existing asset management database.

Stakeholder Engagement
Healthcare real estate investments often involve multiple stakeholders, including patients, healthcare providers, and government agencies. Investors should engage with these stakeholders to ensure that their investment aligns with their needs and priorities.

Ethical Considerations
Healthcare real estate investments can have significant ethical implications, such as access to care and affordability. Investors should consider these ethical implications when making investment decisions.

Transparency and Accountability
Healthcare real estate investments should be transparent and accountable to stakeholders. Investors should ensure that the properties they invest in have appropriate governance structures in place.

Impact of ESG on Healthcare Real Estate

The impact of ESG on healthcare real estate can be significant. Investors who prioritize ESG factors can benefit from lower operating costs, higher tenant retention rates, and better long-term investment returns.

Lower Operating Costs
Investing in sustainable buildings can lead to lower operating costs in healthcare real estate. Sustainable buildings are designed to minimize energy and water consumption, which can lead to lower utility bills for building owners.

In addition, sustainable buildings are often constructed with materials that are less expensive over the long term. Sustainability reports will highlight these materials, such as energy-efficient lighting and HVAC systems.

Higher Tenant Retention Rates
Investors who prioritize social factors such as accessibility and a high-quality patient experience will see major benefits. Patients who have a positive experience are more likely to return to a healthcare facility for future visits. This leads to higher occupancy rates and more stable cash flows for building owners.

Better Long-Term Investment Returns
ESG factors can also lead to better long-term investment returns in healthcare real estate. Sustainable buildings are often more resilient to market downturns and can provide stable cash flows over the long term. This is a key factor in the financial performance of your real estate investment.

Conclusion

ESG factors have become increasingly important in healthcare real estate. Environmental considerations and governance considerations are critical drivers of investment decisions. Investors who prioritize ESG factors can benefit from lower operating costs, higher tenant retention rates, and better long-term investment returns. If you’re interested in learning how Fischer Solutions can help with tracking ESG factors, click here to request a demo TODAY!