Putting pound signs on the economic and social benefits that come from real estate is a tricky and delicate undertaking, but land management charity the Land Trust has not shied from giving it a shot.
For the first time, the charity has this year applied metrics to its service charge locations, developed in partnership with Amion Consulting. Its findings show that around £2.3m of economic and social value was delivered from managing nine green spaces within residential developments during 2019-20. When the wider uplift in property prices is factored in, the figure exceeds £16m.
The Land Trust is measuring impact against five objectives: environment and biodiversity; health and wellbeing; education and learning; economic vitality; and community cohesion and volunteering.
These contributions are classified as either a cost saving to the public purse, or gross value added (see box).
“We are only a small charity, but we are trying to push the boundaries on social value in the development industry,” says Euan Hall, chief executive of the Land Trust. “The importance of green infrastructure has really hit home in the past three months, in lockdown. We’ve got to get the industry and the government thinking about better provision, and what [schemes] actually deliver.”
§ Health care cost savings: £57,111
§ Adults engaged in training: £9,039
§ Land management and use: £1,075,189
§ Supply chain expenditure: £121,931
§ Tourism: £115,114
§ Workforce development (GVA): £47,530
§ Workforce development (cost saving): £27,997
§ Recreational and cultural value: £732,079
§ Community engagement: £94,900
Hall hopes the estimates will raise awareness around the value of good quality green infrastructure to developers. This would in turn enhance developers’ reputations and increase willingness to invest in a business, he believes – ultimately benefiting investors and share prices.
“We want to prove that green infrastructure isn’t a liability, which is what many people see it as, but a truly positive benefit,” he adds. “Open spaces are not marketable commodities, so it’s about proving there is a value there to community and society.”
This latest effort has added to a growing momentum around social value in real estate. The Land Trust is in discussions with “a variety” of organisations to raise the agenda with the government and drive stronger links between the long-term management of green infrastructure and the planning process.
More widely, the Institute of Economic Development has recommended a universal definition for social value within construction, as well as improving Treasury guidance on monetising social value metrics, as highlighted in its latest report.
In addition, a rethink of the government’s Green Book appraisal system is on the cards, creating scope to build in aspects around social value. The Office for National Statistics is also thought to be exploring how to capture these aspects in company accounts.
Since the Covid-19 outbreak, the issue of reconciling accountants and investors, entrenched in numbers and yields, with meaningful economic outcomes has become more relevant than ever. But the lack of a combined methodology around social value metrics continues to puzzle the industry, especially when it means something slightly different to each firm.
David Partridge, chairman of Argent Related and president of the British Property Federation, says that more real estate firms are striving to understand social value because “it’s the right thing to do” – and is what customers, staff and investors want.
“If you don’t do it, you’re the one who is going to get left behind,” he says. “It’s now not a ‘nice to have’; it’s absolutely fundamental to the way we think about business.”
Partridge says that if the government’s Green Book can translate environmental, social and governance outcomes into tangible values, it will set solid guidelines for the industry. The challenge is overcoming this hurdle.
“It is much harder to measure what social impact you have,” he says. “How many people did you put through into jobs? What opportunities did you open up, what training?
“It’s not necessarily trying to find token people representations and things like that. It’s about a much more deep rooted change to the way society develops and opportunity, which we in the real estate sector need to both explore and then deliver.”
Pete Gladwell, head of public sector partnerships at Legal & General Investment Management, says that L&G is pushing developers to focus on the specific social needs in each location they operate in.
But he is keen to avoid quantifying social impact in monetary terms.
“We should strive for a way of communicating the positive impact our businesses are having on people and communities,” he says. “To do that, people, families, and communities have to be the denominator – not pounds and pence.
“If you can demonstrate that you have created 4,000 jobs, yes that’s another number, but it’s denominated by people. What you’ve done is taken the time to understand what the need is locally and demonstrated the impact on people, rather than reducing those people to a financial currency.”
These views highlight how much further the industry has to go to make social value work for investors, in a language that the City understands.
Morgan Reece, an associate specialising in economic development and social value at Montagu Evans, says: “At the moment, within the private sector, the main uses [of social value] that we are finding is with the institutional investors, as part of their ESG goals. They are the early adopters, but getting it out into the wider market is the challenging bit.”
Efforts to estimate social value in monetary terms are increasingly applied to charity and public sector spaces, but the private sector is lagging behind, weighed down by the conundrum of converting this into shareholder returns. Applying the Land Trust’s model more broadly to property firms’ investment criteria will not necessarily be easy.
But Kevin White, a partner in Montagu Evans’ asset strategy and development division, points to the possibility of adapting certain aspects.
“As property professionals, we might be able to use [such models] to bring about changes to our own investment criteria… through things like collaborative meanwhile uses, while buildings are vacant, and how to link those to something valuable for local communities,” says White.
He adds that planning could also provide a starting point for value metrics in the private sector.
“Maybe it’s the planning process where the private sector can start to put pounds and pence around social value,” White says.
“If it means planning consents are [easier] to get, or they can get better quality planning consent – higher, denser, bigger, better, but at the same time delivering social value metrics and imperatives – maybe that is how social values can be embedded into the investment process.”