Bringing the User Back in the Building

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An Analysis of ESG in Real Estate and a Behavioral Framework to Guide Future Research

Investors are currently obliged to take environment, social, and governance (ESG) issues into consideration as part of their fiduciary duty. As such, it becomes increasingly important to identify sustainable investments that also hold financial value. A sector where this is especially underdeveloped is real estate. This has a lot to do with the obfuscated conceptualization of ESG. The article identifies key gaps in the literature and practice and provides a framework to further the understanding of how ESG factors can add societal and financial value in the real estate sector. A key premise of the article is that the user in the building is grossly overlooked. Drawing on insights from behavioral social science and environmental psychology, the paper explains the role of the user in improving buildings’ ESG, also taking into account the investment value. To conclude, the article makes the case that the transition to user-centered smart real estate is the solution to improving both the environmental (E) and social (S) sustainability of buildings, as well as their investment value. Therefore, practitioners and academics are encouraged to critically evaluate and contextualize the ESG framework they are using as well as the extent to which users are considered and smart technology is employed.