Demonstrating social value—the positive impact that real estate investment and development can have on communities beyond financial returns—is increasingly becoming a priority for city leadership, real estate owners, investors, and developers. However, a lack of definitions, standards, and tools to manage and measure social value is holding back further investment.
As a result, ULI has been working in collaboration with a select group of corporate members to produce a “roadmap” for social value measurement that identifies the obstacles, gaps, frameworks, and tools that are available to set targets, manage and measure social impact, and examine best practices already applied from across the real estate industry.
The background to the research project was presented at a session of the 2021 ULI Virtual Europe Conference by Sarah Forster, chief executive officer and cofounder of the Good Economy, who is an author of a ULI report coming out in March 2021.
“The purpose is really to develop a better and more shared understanding of social value creation across the real estate industry,” she said, adding that the U.N.’s sustainable development goals had been the starting point. “They are goals around how to tackle poverty and inequality and build a more prosperous world. We recognized that real estate development happens in places, so social value creation is about place-based impact. It’s about impact that benefits local people and communities.”
Early on, Forster said, the team identified several issues that were hindering the delivery of social value, the first of which was systemic.
“It was the recognition that our current political, economic, and business culture has perhaps become less civic minded or more commercially minded,” she said. “Very often when we look at real estate, we look at it through a financial value lens, through property values, through yield. And social value really needs a lens where we’re valuing social outcomes, not just financial value.”
The sheer complexity of the property industry was also identified as a stumbling block. “The real estate industry has many actors, from planners and developers through to designers and investors,” Forster said. “It also requires a lot of working between the public and private sector. And what we found is very often there were sort of fragmentation and lack of alignment of what was even understood and intended through social valuation across the life cycle and the value chain.”
In addition, the group realized that social value is too often understood in numbers, an approach that fails to understand the less tangible benefits that development can bring. “In some cases, the focus is very much on measuring things that are very measurable and tangible now, rather than looking towards more longer-term outcomes, such as how we can build more inclusive places that really benefit everyone.”
In order to overcome such barriers, the group identified a series of areas for action. Firstly, it is vitally important that the public sector—whether national, regional, or local government—take the lead on providing a vision for promoting social value and developing an appropriate policy response. Secondly, Forster said, corporate leaders need to ensure that the creation of social value is integral to their business models.
Then there is the need to measure social value and make the whole process transparent and accountable. “We talked about different tools to measure it depending on whether you’re a developer or you’re acquiring existing assets,” Forster said. “There are different tools out there that can really help you integrate social value considerations and metrics into your activities.”
Education and training also are vital, the group identified—understandably, perhaps given that social value is a relatively recent talking point in the industry. “There are a lot of people who perhaps don’t have a deep understanding of social issues or community engagement,” Forster added. “So, there’s definitely an opportunity for more professional development on social value creation.”
Finally, the researchers found that the industry could benefit from greater collaboration on social value. “Every organization has a role to play in social value creation, so it requires collective effort, collective innovation,” Forster said. “A lot of our case studies show how different public/private partnerships have been formed to deliver more affordable housing or designs that really benefited local places in a very creative way.”
That is the theory, but in reality there is no magic formula for embedding social value in the real estate industry, according to Christine Babkine, director of corporate social responsibility at Ivanhoé Cambridge.
“I don’t think there’s a secret or a magic formula,” she said. “I think it turns around stakeholder engagement, understanding what stakeholders’ expectations are. Each asset and each geography is different. So, there is no one size fits all, unfortunately.”
However, Babkine did stress that, no matter the circumstances, measuring impact is hugely important. “In our reporting, we track data related to health and safety, well-being, tenant engagement, and community engagement,” she said. “But over and above that, our approach is that you can’t do it alone. It’s a dialogue with your stakeholders.”
She added: “As an investor, Ivanhoé Cambridge is involved in every stage of the investment process. Asset management is where we probably spend the most time in our business, so that’s where we build relationships with our partners. Our asset managers have a dialogue with them to see how we can work together to improve our different performances.”
At this point, the moderator asked what she described as the “golden question”: Does the approach cost Ivanhoé Cambridge more money? “What would be the cost if we didn’t do it?” asked Babkine in response.
“We want to invest in social purpose with the intention of creating value in our portfolio. We also believe that having those preoccupations, those intentions, will make our assets more resilient over time. Because we’re long-term investors, we truly believe in those principles. We like to say a sustainable investment for us is a profitable investment.”