COMMENT As the government seeks to create a more equal society through its levelling-up agenda, social impact investing represents an effective way for the public and private sectors to work together and make a material difference right across the country.
Despite the hurdles – such as the lack of standardised targets and measurements, and the common misconception that generating social impact means sacrificing financial returns – a new global report by the Urban Land Institute has found that social impact investing can apply to all real estate, and it’s not as hard as you might think.
The report, Social impact: investing with purpose to protect and enhance returns, concludes that even with relatively small adjustments to strategy, real estate can deliver market-rate returns while simultaneously providing intentional social benefits to underserved people, communities and locations.
Intentional outcomes
Although approaches to delivering social impact within UK real estate can be diverse – from investment in social housing to partnerships with special-needs schools – what providers share is an overriding strategic approach that considers the potential impact of their investment activity on local communities and wider society.
Whatever the approach, developing a strong corporate social value culture is always a prerequisite to social impact investing. But once that cultural shift has been made, it is relatively easy to start considering the real estate you are building or investing in from a social impact perspective. Sometimes, generating impact can be as simple as extending the scope of the strategic view or expanding the range of stakeholders to include the community affected by an asset.
An example of a firm with a well-embedded social value culture can be found in Patron Capital, where employees are expected to be active in social value and are remunerated for their time. Patron has a specific social impact fund, Women in Safe Housing, which provides accommodation for vulnerable women and families, and it also supports two charities with time and funding.
In many ways, there is nothing new about social impact investing as an overarching approach: the built environment has always had an impact on society, and best-practice real estate investing and asset management has long focused on tailoring products and services to customers.
What is new today is the shift from unintended consequences to more intentional outcomes, with investors actively choosing to invest in and build for those from non-traditional demographics. However, since the segments of society underlying social impact strategies often represent groups of more vulnerable people, this brings added responsibility as well as potential reputational risk.
But this doesn’t need to be an obstacle: just as the industry has partnered with best-in-class operational and service providers to deliver value to its traditional clients and customers, investors and managers are now partnering with best-in-class community, healthcare and other social enterprises which have greater expertise in meeting the requirements of, and delivering meaningful benefits to, underserved people and communities.
Lendlease’s Elephant Park is one example of a mixed-use development that has sought to consult a diverse local community and respond with specific programmes.
By 2025, the scheme is set to deliver 3,000 new homes, 25% of which are affordable, plus 6,000 jobs and 50 retail spaces – as well as a range of skills and development opportunities for residents and the surrounding community. It is an interesting example of what is possible, even in a complex central London location.
Local listening
In the absence of any current frameworks and regulations here in the UK, I believe effective social impact ultimately comes down to listening to local needs and developing solutions in partnership with local organisations and people, and I will be interested to see how the Levelling Up and Regeneration Bill currently making its way through parliament might serve as an added impetus for driving social impact to underserved communities and locations around the UK.
Much like with environmental considerations, I think we will see social impact becoming best practice over time as it is integrated into all stages of the investment decision-making process.
I would encourage anyone currently grappling with their social impact strategy to take a look at our report, which presents detailed global case studies from a range of different sectors and provides a number of key recommendations. And while I recognise that this is a huge topic with a vast range of possible approaches, I would reiterate that every building has the potential to deliver social impact. Often, the best method is simply to start where you are and discover what is most important to the communities around you.
Sophie Chick is vice president, research and advisory services, at ULI Europe
