New Developments: Celebrating Good Governance
By Thom Amdur
4 min read
Environmental, Social and Governance (ESG) investing and lending is one of the hottest and most cutting-edge topics in the world of affordable housing finance. Equity syndicators and lenders are beginning to embrace ESG because that’s where the capital is.
The “G” category is primarily focused on the ethical and equitable standards for running a company. When ESG investors look at international investments, particularly in emerging markets that may not have strong governmental institutions or the consistent application of the rule-of-law, they naturally want to validate that their investments are not being used to support corruption, unjust wars or even genocide. Take a look at how the international economy has responded to Russia’s invasion of Ukraine and how global investors are willing to write off billion-plus dollar investments in Russia to see how the “G” is driving investment decisions. Fortunately, in the United States, and in the affordable housing community, specifically, this is an area where we receive high marks.
Governance is not just about conducting business transparently and above board with other ethical parties – it also considers how organizations prioritize equity and diversity. Over the past two years, this is an area where many National Housing & Rehabilitation Association members have invested and there are many strategies firms can use to demonstrate progress.
Most HR departments have formal anti-discrimination policies and have leaned into training on topics, like implicit bias. Some have adopted blind application processes to ensure implicit bias does not play into applicant screening. Others have adopted formal diversity goals organization-wide, including on their boards of directors, management committees and in “top earner” positions.
Many NH&RA members have partnered with organizations that build capacity for real estate professionals of color. NH&RA (and many of our members) partner with Capital Impact Partners and its Equitable Development Initiative (EDI) to provide mentoring, education and capital for emerging developers of color in Detroit; Washington, DC; and soon in additional markets. (A thank you and shout out to NH&RA’s Vice-Chair Milt Pratt of the Michaels Organization who introduced EDI and serves as a mentor.)
Other members have formalized partnerships with Project Destined, which focuses on empowering and teaching real estate fundamentals to urban high school and college students. And Project REAP’s Open Access Program, which focuses on increasing the representation of diverse professionals at all levels in the New Markets Tax Credit industry through training and fellowships.
Organizations can also be thoughtful about how they source diverse vendors and contractors. Having protocols in place to ensure that Minority- and Women-Owned Business Enterprise vendors can compete for your business can be incredibly impactful. Protocols to encourage hiring from within the communities in which we are working can also be impactful, and many Department of Housing and Urban Development developers are already doing so through the Department’s Section 3 requirements.
Good governance, particularly, equity and diversity, are moral and legal imperatives and that should be reason enough to pursue them. There is also a strong business case to be made, and that is a major part of why ESG investors are at the table to begin with. We are an industry of creative problem solvers facing intractable challenges – we need more solutions and, as it turns out, a team with diverse perspectives is better equipped to find new solutions. Furthermore, in a labor market that is increasingly tight, and where talent is at a premium, diverse and equitable business practices help organizations retain and deepen their talent pool.
Change doesn’t happen overnight, it evolves. It is not the expectation of ESG investors to restrict themselves to firms that have already achieved perfect governance. But as we move forward and the ESG space expands, investors are going to want to see that an organization has set benchmarks and that there is a plan in place to adapt better practices over time.
