Scaling Social Value

Author
Lisette van Doorn

As chief executive of ULI Europe, van Doorn is responsible for the development of the Institute’s activities across the region, including its renowned pan-European conferences and over 250 local meetings and events across 14 countries. She is also responsible for the ULI Charitable Trust, which raises money to advance ULI’s mission and philanthropic activities across Europe. Van Doorn joined ULI from LIRE, her own consultancy business, which advises international institutional real estate investors and fund managers on strategy, organisational optimisation, and portfolio structuring. Prior to this, van Doorn was country manager for CBRE Global Investors where she managed a €1.6bn portfolio of assets in Italy and fund manager of two shopping centre funds (€1.3 billion) with assets in Spain, Portugal, and Italy. Before joining CBRE Global Investors, van Doorn was founding chief executive for INREV, the European association for Investors in Non-Listed Real Estate Vehicles for four and a half years. She started her career at ING Investment Management, where she held account manager and assistant controller positions before being made managing director of research & strategy for ING Real Estate Investment Management Europe

Social value––what is good for society––is rapidly increasing in importance not only for businesses generally, but also more specifically in the real estate investment industry. As stewards of the built environment, the real estate industry clearly has a role to play in shaping places where society thrives.For (integrated) investors, developers, and operators of student accommodation, there is an incredible opportunity to lead the way when it comes to driving social value.

In various projects that ULI has undertaken over recent years, industry players indicated increasing concerns around issues such as social equity, inequality, and housing affordability. Many players have already started addressing the broader topic of social value, and the industry is moving towards a wider range of non-financial impact measures, including environmental and social metrics to assess the holistic value of real estate. Whereas addressing environmental sustainability has been further advanced with measures like energy neutral buildings or the use of circular materials, there is a long way to go before we can say that social value has been realized. Defining and measuring social value is complex because no place or end user is the same. Impact is often experienced in a subjective way, and often only achieved in the long run. In response to these challenges, ULI embarked on a journey to develop a shared and better understanding of how to create, define, optimise, and measure social value across the real estate industry. Our report, “Zooming in on the ‘S’ in ESG”, offers guidance on how to navigate and use existing frameworks and tools to measure social value. It also sets out a roadmap to enhance the real estate sector’s contribution to social value creation.

Rather than starting from scratch, the industry can build on and learn from initiatives already happening. Alongside an increasing focus on ESG, impact investing has risen across financial markets. Impact investments are made with the intention of generating measurable social and environmental impact alongside financial returns.

Impact investing has an important role to play in driving change but, ultimately, prioritising social value creation requires a cultural shift within the industry. It is about mainstreaming social value creation so that it becomes an integral part of all development and investment decisions. Leaders in social value creation believethat any costs in enhancing social benefits will help reduce risk and lead to more attractive, long-term risk-adjusted returns and sustainable value creation.

Leadership here applies to both the public and private sectors. Firstly, this means that government at all levels has to provide a clear vision, and establish sustainable development objectives and priorities for social value creation in urban development. As social value creation is place-based by definition, the needs are best defined locally and co-created by local government in close collaboration with citizens, community organisations, and local businesses.

Secondly, from a private sector perspective, leadership is regarded as the most important driver of social value creation in commercial organisations. It drives organisational culture, values, strategy, and ultimately, the extent to which social value creation is taken seriously as a business priority.

In addition, to scale social value, there is a clear need for a shared understanding of social value (impact) measurement, management, and reporting across industry stakeholders. Many impact assessment tools already exist as highlighted in ULI’s report, which provides a practical assessment of more than 100 tools available, in addition to bespoke tools and approaches used by many organisations to fit their specific objectives. To encourage social value creation, the industry needs to more effectively use these tools ,more transparent measurement, and more consistent reporting frameworks with external audits

Innovation, education, collaboration, and knowledge-sharing are all critical to driving change. As well as innovation in governance and policy, areas to focus on include the design of new business and financial models that embed long-term social value creation, the development of new investment products and the use of technology for spatial analysis and data collection.

Professional bodies will have an important role to play in knowledge-sharing and influencing the development of education and training programmes.Integrating social value across all levels requires a critical review of the fundamentals of investment theory and of the dominant methods of evaluating and pricing investment opportunities.

In summary, Covid-19 is a wakeup call. While the pandemic has brought major challenges to the industry, it also opens up opportunities to rethink how to connect real estate development and investment to local, place-based needs.

ULI aims to inspire the real estate industry to make informed decisions about how to invest and deliver social value to have a lasting, transformative, and positive impact for communities worldwide.

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