Actual Property Funding Trusts (REITs) and Environmental, Social and Governance (ESG)
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Since the 1990s, Real Estate Investment Trusts (“REITs”) have gained considerable traction as an investment vehicle due to their significant tax advantages. With those advantages, however, come complex compliance requirements under Internal Revenue Code Sections 856 and 857. Adding to the complexity, with the proposed SEC rules for Climate-related Disclosures requirements, REITs will have to disclose information about their climate-related risks, governance, and management processes.
As a result, environmental, social and governance (“ESG”) and Corporate social responsibility (“CSR”) are the fastest growing segments in asset management today, as REITs need a way to measure and report for SEC compliance.
Developing a strategy for reporting around ESG and sustainability will be crucial for REITs to gain a competitive advantage, mitigate its risks and exposure, and improve the financial performance and investment attractiveness to investors. Factors most frequently considered in companies’ CSR and ESG policies include:
| Environmental | Social | Governance |
|---|---|---|
| Energy Consumption | Diversity, Equity and Inclusion | Quality of Management |
| Pollution | Child and Forced Labor | Board Independence |
| Climate Change | Comminity Engagement | Conflicts of Interest |
| Waste Production | Health and Safety | Executive Compensation |
| Natural Resource Preservation | Stakeholder Returns | Transparency and Disclosure |
| Animal Welfare | Employee Relations | Shareholder Rights |
Real Estate Services is a cornerstone practice at EisnerAmper. EisnerAmper has an integrated cross-disciplinary team of professionals who can support REITs in developing and implementing corporate social responsibility policies or validating those environmental, social and governance procedures currently in place. We work with a broad-spectrum of clients to help them effectively manage their portfolios and real estate assets. Our team’s experience in organizational design, business performance improvement and attestation services make us uniquely qualified to serve in this capacity.
EisnerAmper’s full menu of ESG services tailored specifically for REITs includes:
Environmental, Social and Governance Services
Readiness for reporting of ESG practices Assessment of existing ESG practices under SASB, GRI and other frameworks Attestation report over ESG disclosures and metrics Forensic Analysis of Companies Claiming ESG ESG Investing / Impact Investing Real Estate Investing and Training (LEED and ESG) Corporate Governance
Corporate Social Responsibility Services
CSR and sustainability consulting Design and implementation of corporate social responsibility practices Diversity, equity, and inclusion Employee recruitment, retention, and development Philanthropy and community commitment Board education
Consulting Services
Lease and contract compliance Cost segregation studies Earnings and profits studies Transfer pricing studies Taxable REIT Subsidiary (TRS) structuring
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