Social impact: a help or hindrance?

Ask the general public what they think of the property industry, and the chances are they will view it as full of fat cat developers making flats smaller than taxis, creating schemes that isolate local communities under the guise of regeneration, and making places for wealthy people while ignoring the needs of the rest of society. It’s safe to say that the industry has an image problem. A recent survey by the British Property Federation found that only 27% of people held a favourable view of the property sector, with 69% believing it is an industry that favours the wealthy. One way of combating this is to show more widely the philanthropic side of the industry and its social impact work. There are plenty of examples of property companies with initiatives that have ramifications far beyond their bottom line. Manchester’s developer Capital & Centric, winner of the social impact award at this year’s EG awards, has excelled in this space, with projects including putting on concerts to raise money to tackle the city’s homelessness crisis. But the industry’s approach, and opinions, on social impact work can differ, as EG’s panel on the topic at its Future of Real Estate summit revealed. Inclusive capitalism EG editor Samantha McClary opened the panel with a quote from Blackrock chief executive Larry Fink’s 2018 open letter to corporate chief executives, in which he warned that companies can lose their way if they focus purely on profits. “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the licence to operate from key stakeholders,” wrote Fink. “It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.” Is Fink right? Should property, as a business, be motivated by factors other than the balance sheet, such as social value? Bill Hughes, head of real assets at Legal & General, said he was on board with Fink’s message. “I think that corporate organisations can very easily put their head in the sand and lose sight of what they’re there to do, and focus exclusively on shareholder profit, for example, and be very narrow in their thinking.” Hughes added that L&G is “upfront and explicit” in what the company holds as its sense of purpose: to exercise “inclusive capitalism”. This means, according to Hughes, remembering that, although the business is motivated by delivering returns for shareholders and investors, it should not operate in isolation from the society and communities which it affects. Examples of such “inclusive capitalism” include providing affordable housing and offering shared ownership homes. Marcus Hulme, social value director at developer Places for People, said his business is focused on delivering social value as an output in everything it does. Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the licence to operate from key stakeholders – Larry Fink, chief executive, Blackrock Hulme added that this approach extends to focusing on the business supply chain to ensure there are jobs, apprenticeships and employment opportunities open to all. Judith Everett, chief operating officer at the Crown Estate, echoed the importance of ensuring that your supply chain practises what you preach. “It’s about setting ourselves high standards, working with the supply chain to get them to instigate [social value work].” Canary Wharf Group is one developer that knows just how critical working with local communities is when building major developments such as its Docklands estate. Plans for the development once sparked outrage among local communities, who referred to the estate as “the death knell” for the east end of London. Former dock worker Peter Wade led a funeral procession around Docklands to demonstrate just how strongly the local community and stakeholders opposed the scheme. But instead of running from the controversy, Canary Wharf Group embraced it, eventually hiring Wade as their head of community. Wade worked with the developer for 17 years. “We said: ‘let’s change mindsets here’,” said Martin Gettings, Canary Wharf Group’s head of sustainability. “This is not about a big development. This is about those becoming part of the community.” Social impact work should not just be a business pursuit on the side, in Gettings’ opinion. “Yes, it’s about metrics and yes, it’s about demonstrating the value of it,” he said. “But really, it’s about new social contracts with the communities we’re operating in. We really need to rethink how we integrate these contracts into our [businesses].” Working with, not against, the community was fundamental to Canary Wharf’s success. “We couldn’t have developed over the last 30 years if, from the very beginning, we didn’t integrate community into the heart of everything we are doing,” Gettings said. ‘Corporate wokeism’ Many of the panellists agreed that social impact work is fundamental to removing the distinction between the “haves” and the “have nots” – especially when the public perceives property to care only about the interests of the wealthy. However, GL Hearn development director Alistair Parker took a different view. “I think many of us get slightly nervous where organisations that should be driven by the financial markets find a wider range of objectives to serve,” he said. “This sounds very good and very plausible. But the difficulty for many of us is that it sounds wonderful, but how do you measure it?” L&G’s Hughes argued, however, that if there is a distinct separation between those who are wealthy and those on the breadline, the result is a society that will not function. “My answer is that if you are a long-term investor, then you need to do something that is enduring and lasts for a long time,” he said. “I don’t think you can just be about making money, building shiny buildings and walking away. I don’t think that ever works and it certainly doesn’t work now – you’ll be challenged on that, and quite rightly.” However, is L&G at an advantage on delivering on social impact? As an investor focused on long-term capital, it is not under pressure to post returns quickly. “You may call it an advantage, but I call it a burden as well,” Hughes responded. “L&G has got a reputation which in the eyes of most is net positive. But that means we have to be held accountable for what we do.” And it is clients, not just wider society, holding property companies accountable for how little or how much social impact work they are doing, DAC Beachcroft senior partner Virginia Clegg said. “I think we have to really realise that we work in a world where people are prepared to ask, very openly, about what businesses are giving back to society, judgments and decisions we’ve made […] We know that our clients increasingly ask of us about inclusion, our social purpose. “People will make buying decisions about developments off the back of those sorts of questions. We will be pulled by our customers, owner-occupiers to have delivered developments that are responsible as they come out of the ground and make an impact.” Asked whether social value will recalibrate profit, Parker said that this would be “nonsense”, explaining that adding social value makes business sense only because it is desired by the market. “We have a system that clearly delivers that kind of regeneration people want and are willing to pay for,” he said, adding that it is “transparently obvious” when people’s requirements change – for example, trying to sell a flat without a focus on sustainability now, he said, would not be successful. To move beyond providing what the market wants, according to Parker, turns into a “political question” – a space that he argued the industry should not become involved in. “We all have strong views and opinions on what should be done. But to put that at the heart of the business I’m involved in […] is for me, dangerous. It has the characteristics of corporate wokeism.” The panel Virginia Clegg, senior partner, DAC Beachcroft Judith Everett, chief operating officer, Crown Estate Martin Gettings, group head of sustainability, Canary Wharf Group Bill Hughes, head of real assets, Legal & General Marcus Hulme, social value director, Places for People Alistair Parker, development director, GL Hearn Chair: Samantha McClary, editor, EG To send feedback, e-mail lucy.alderson@egi.co.uk or tweet @LucyAJourno or @estatesgazette