28th July 2020
In the second of a series of blogs, Land Trust Head of Business Development, Trevor Adey, discusses the importance of being able to measure the value of green spaces and says that developers who think about a broader set of values will continue to attract investors, build stronger reputations and create and preserve better places.
When I was at middle school a new local shop opened on the sprawling housing estate where we lived. It was very big news at the time.
In a stroke of marketing genius that you’d pay advisors thousands of pounds for today, the owner ran a competition at the local school (ours) to choose the name for this new mecca of the community.
We were only young, and mischievous, so most of the entries were rubbish, along the lines of ‘Mirandinha’s shop’ (cult hero – Google him), ‘Free Sweets’ or ‘We R Closed’. The eventual winner was ‘Value You’, which the owners claimed inspired the name they actually opened with of ‘Valley View’. I remember thinking the whole thing was a bit of a con; and the name they ran with was also wrong, as Valley View was also a nearby street, and the new shop wasn’t on it, so it should not have been allowed to be called Valley View anyway! Anyhow, they sold sweets and pop, so I quickly moved on.
My middle school competition rival was thinking of ‘value’ many years ago and won a prize. Value feels increasingly important in the development and housing sector today. I don’t mean value in only a narrow price sense. Thinking about value in today’s world requires a much broader appreciation of value, values and ESG and is becoming increasingly important to investment decisions. Those who embrace it will deliver much greater value in the long term.
Today, most financial institutions are assessing the Environmental, Social and Governance (ESG) performance of their investments. This is in part driven by the new FRC UK Stewardship Code, launched in October 2019, which requires all signatories, including asset owners and asset managers, to take ESG factors into account when making investment decisions. The new Code sets high expectations of those investing money on behalf of UK savers and pensioners ‘to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.’
New real estate and infrastructure fund investors have entered the market too, some of which are committed to ‘impact investing’ strategies, requiring them to demonstrate how their funds deliver both financial returns and net positive environmental and social impact.
The direction of travel shows that ESG is growing in importance amongst investors. If applied genuinely, pivoting a business to deliver broader value, or ESG, need not hinder financial value and overall performance (profit). In fact, I’d argue that businesses which think only of value in the narrowest sense of ‘what profit margin can I make’ will quickly find themselves outstripped by those who take a broader view of ‘value’.
Where it gets more difficult is in measuring that added value, as there is currently no consistent approach to assessing the ESG of new developments.
Measuring economic value
Measuring the economic value for housebuilding has long been a key pillar of a well argued planning case for new housing development. There are plenty of other really good examples of calculators. Linked In has helped me out with some great recommendations, including Lichfields Evaluate, Savills Calculating how development helps to deliver social value and others.
Generally, as a sector though, I think most analysis focusses on the bricks and mortar benefits, which can overlook the value that is created by the greenspace on new developments, which can be difficult to quantify.
Measuring the value of greenspace
But as Bob Dylan once said Times, they are a changing. The Land Trust has been measuring the economic and social value delivered through the management of its residential service charge sites for a few years, using its social value model developed with Amion Consulting. Last week the Trust revealed that in 2019-20 nearly £2.5 million of economic and social value was created from the management of the green spaces around its service charge sites (LT social value 19-20).
I was also interested to see the recent launch of the Greenkeeperuk tool which seeks to ‘more fully understand the contribution green infrastructure – be it a single park or portfolio of provision – is making to urban life…’ and to ‘more fully understand and measure the social, environmental and economic benefit urban greenspaces are delivering’.
Measuring social value
Another good example looking at ESG in a broader sense is the recent work by the UK Social Housing Group, facilitated by The Good Economy, who have produced a White Paper to ‘build a sector standard approach for ESG reporting’. Peabody and Centrus brought together a working group including housing associations (Clarion, Optivo, Sovereign, Guinness Partnership and Home Group); Investors (Insight Investment, M&G, Legal & General, Natwest, Pension Insurance Corporation and The Housing Finance Corporation); organisations concerned with growing the impact investment marketplace (Big Society Capital; Impact Investing Institute); and service providers active in the sector (Savills and Trowers & Hamlins).
The report recognises that measuring social value – or the non-financial impacts – of the social housing sector has gained increasing attention over the past five years. It proposes 10 themes and 45 criteria for ESG reporting by housing associations. The ten core themes are:
The report is a big step forward in the debate. I don’t think one single standard will ever fit the bill for the development and housing sector as a whole. Ever more innovative and sophisticated ways of assessing ESG will come to the fore over the next few years. Considering the wider benefits of good quality greenspace, ongoing management and legacy should be key amongst them. Look out for a further blog post coming soon on ways that well managed greenspace can deliver economic and social value.
In the development sector, today, value has a broad range of meanings and looking beyond the narrow monetary value of a deal or a development is increasingly a bare minimum expectation. ‘Value (to only) You’ is too narrow a way of thinking and won’t win any prizes today. It is also a rubbish name for a shop (not bitter!). Rather, developers who think about a broader set of values will continue to attract investors, build stronger reputations, create and preserve better places, and deliver greater returns in the long run.
28 July 2020
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