If you ask about social value and real estate investment, the business often cited as one of the leading lights is L&G.
“The authentic thread I’m looking for in our investments is how are we improving the lives of people, families and communities through this investment. We don't have a numerical definition or a very technical definition of social value; instead, if the investment doesn't stand scrutiny to this principle, then we shouldn't be doing it.” Pete Gladwell, L&G
If you ask about social value and real estate investment, the business often cited as one of the leading lights is L&G.
Pete Gladwell is Group Social Impact & Investment Director at the insurer and pension provider, which stewards £1,400 billion of capital on behalf of over eight million people. He says that the nature of their business in providing pensions means there is already an element of social value from their investments.
But the work the firm does to ensure their investment delivers societal impact goes much further than that. The search for the ‘authentic thread’ of social value is there from the start when assessing investment opportunities.
“Just as we will look at potential returns that come out of an investment, we will also look at the kind of social impact the investment will have,” he says.
It’s important to match the right capital to the need, something he says so-called “impact funds” don’t always get right.
L&G funded homes for homeless families in Croydon, and aside from improving the lives of 50 families, saving money on bed and breakfasts, it also generated £400,000 of revenue for the council. But that sort of investment isn’t suited to all funds.
Investment that adds social value can often be much better suited to long-term, low-risk investment funds, rather than short-term, high-risk, high-return funds run by private equity and hedge funds.
Contrary to the opinion that the more social good you do, the less returns you get, he says it can benefit longer-term returns. For example, L&G’s investment in Poole has helped re-engage the local community with the town centre, and that increase in activity has had a positive impact on footfall and income.
So when assessing an opportunity and its potential societal impact, how does L&G measure success?
“I feel really, really strongly that social value can't be distilled to a pound or a number,” says Gladwell. “There are lots of people in the industry who love to think that we will be able to distil it all down to data.
“And in doing so, we lose the very essence of humanity that social value is all about, it becomes a numbers game.”
He says some measurements will be quantitative, but some will be about knowing L&G is doing the right thing and having a positive impact on a place that can’t be quantified with numbers.
“We look for substantiation to back that up social impact, so it's not just someone going to the investment committee and saying, ‘Oh trust me, this is something really nice’. We look at what adds weight to that argument.”
Substantiation might include factors such as looking at the specific needs of an area and whether the investment will address that need, delving into the environmental metrics, and ensuring the request for investment is locally-driven.
This approach comes from hard lessons learned from being caught between two camps – those who want everything to be commercial and quantified and those who only want qualitative.
While L&G might be a leader in social value, there are still challenges in delivering on the business’ social value aspirations.
Gladwell says: “It's one thing for us to embed social value into our investment process, but there's an interesting question for L&G and the industry about what we do with the huge portfolios we already hold. Initiatives such as the one in Poole are about generating social value from the ownerships we already have.”
He points out that the property industry between it owns most of the cities and towns across the UK. “And we all know some of those town centres are struggling, so rather than treating that purely as a commercial problem, don’t ignore that there is also social value to be unlocked.
“If we're really going to embrace social value for me is not about trying to come up with some combined numerical metric about social value, is that we, as an industry, are proactively stepping up and delivering that impact at scale. When society entrusts £1,400 billion of its pensions and savings to our organisation, it puts the responsibility on us to take a lead.”
