Putting the ‘S’ into ESG: social value economics in real estate - key discussion takeaways

Rob Bentley

Contact Rob Bentley, Director
robert.bentley@benoy.com

Sam Fox

Contact Sam Fox, Associate Director
s.fox@pragmaUK.com

Our second Benoy + Pragma Futures round table event brought together a dynamic group for a wide-ranging discussion on the subject of ‘social value economics in real estate.' Here, co-facilitators Rob Bentley, Director at Benoy, and Sam Fox, Associate Director at Pragma, reflect on some of the key talking points and takeaways.

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Within urban development ESG evaluations, the environmental’ focus is strong. But the social’ dimension sits outside most regulatory frameworks. So, how do we ensure the delivery and measurement of social governance? How do we balance commercial and social value? How, in short, do we put the S’ into ESG

'From a public sector perspective, it’s about doing the right thing for your communities. If you create a nice new shiny building, but society around you is falling to pieces, that building is not going to be shiny anymore; it’s not going to work'

Shifting perceptions of value’

COVID-19 has shifted perceptions of value’ and opened people’s eyes to social inequalities. In the past two years, we’ve seen a greater appreciation of the importance of community, compassion, wellbeing and family. As Eime Tobari, Social Value Strategist and founder of COCREATIF, observed, the pandemic has really helped the general public and industry to focus on the social aspect.” The real estate industry in particular, said Tobari, has had to reassess relationships with customers and tenants” from a health and wellbeing perspective.

In the context of urban design, Anton Comrie, Senior Associate Director at Benoy sister landscape design practice, Uncommon Land, said social value needs to be about inclusivity. It’s about how you make places that are representative of everyone,” said Comrie. Sometimes the commercial drivers run roughshod over the social, or certain voices become too inflated. So we need equity in design and a balanced view of things.”

Other definitions of social value focused on stimulating employment; tackling homelessness; catering for the disadvantaged; and creating buildings, places and spaces that give back to the community. In fact, the terms community value’ and community wealth’ were proposed as alternatives to social value’, with a view to capturing a wider range of impacts and implications. 

According to Nalin Seneviratne, Director of City Centre Development at Sheffield Council, building community resilience” is one of the key drivers of the social value agenda. But such resilience, he said, can only be achieved through relevant and responsive design schemes:

From a public sector perspective, it’s about doing the right thing for your communities. If you create a nice new shiny building, but society around you is falling to pieces, that building is not going to be shiny anymore; it’s not going to work.”

Embedding social value into project preconditions

If inclusivity is the goal, how then do we ensure equal representation in urban design and development? One way, suggested several participants, drawing on examples from around the world, is to embed social dimensions into project tender requirements. 

In the US, explained Alex Avery, CEO of Pragma, the Federal Aviation Authority (FAA) insists that airports have to have, within their retail offer, a certain percentage of businesses from disadvantaged and low income backgrounds. It’s a condition of operation”. While targets vary depending on the authority, these stipulations mean you get a good mix of tenant representation”.

In Johannesburg, South Africa, developers once capitalised on development sweet spots to the detriment of other areas, providing zero social returns. But now, said Anton Comrie, there has to be a certain amount of social housing in every project”.

It’s an approach that has been adopted in the UK as part of Sheffield’s Heart of the City redevelopment programme. The best example we have,” said Nalin Seneviratne, is Leah’s Yard, a Grade 2 listed building that was literally falling to bits. We decided we would judge project bidders in terms of social value rather than financial. Yes, we were still interested in the rent, but what were they going to bring to the party in terms of social value?”

The Leah’s Yard bid framework encouraged a strong focus on business diversity and skills throughput, on start-ups and apprenticeships. Diversity and demographics were key,” said Seneviratne, with project bids assessed on their potential to attract new people from a range of social backgrounds. The winning bid, from non-profit organisation Sheffield Technology Parks, promises to create a wealth of opportunities for local entrepreneurs. And by building social value metrics into project preconditions, Sheffield Council have created a successful and replicable model for UK redevelopment schemes. 

Costs and consequences

Would an increase in KPIs help to build a compelling business case for social value? Is it the case that only by adopting a private sector commercialism, with succinct business plans and economic valuations, will socially oriented programmes enjoy longevity and success?

The group cautioned against trying to assign financial value to social dimensions. Eime Tobari suggested that the financial valuation of the social’ was becoming a minority mindset, with broader interpretations now prevailing. Indeed, focusing on the cost of failing to engage with social value was put forward as a more fruitful line of thinking, as Nalin Seneviratne concluded: 

More than trying to put a pound sign on social value, we should focus on investment risk and how we monetize the risk of project failure. Because if you’ve actually failed to address the social issues, there will be a cost.

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Breaking down barriers

A example from Oslo detailed a public lido created as part of a masterplan, where commercial success has been enhanced through an additional focus on social value. The lido is free to the public and sited in a location where people from less affluent areas are able to access it, helping it to become a truly community-led destination. 

Overall, there was universal agreement that breaking down barriers within urban environments is key to social value creation. Encouraging people from less affluent areas to experience and feel connected to the nicer parts of town’ is vital to creating community cohesion and integration. 

'More than trying to put a pound sign on social value, we should focus on investment risk and how we monetize the risk of project failure. Because if you've actually failed to address the social issues, there will be a cost.'

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