Legal & General Investment Management’s real estate arm plans social value score for investments

LGIM Real Assets, the £24.9bn (€28bn) real estate and infrastructure arm of UK fund giant Legal & General Investment Management, has made a commitment that 20% of its commercial property holdings will have a “social value score” over the next four years.

It is part of a broader strategy at listed insurer and asset manager Legal & General to be more transparent about its investments and the broader value it generates for society.

Graham Precey, Head of Corporate Responsibility at L&G, explains: “We are one of the first finance institutions to publish our investment map. That’s everything we own as a business on our balance sheet. It wasn’t our idea, we saw what Triodos [the Dutch ethical bank] was doing [an online map showing where its lending is ] and we wanted to be the first asset management/insurance company to do that as well. So that was the first proof point for us. To say this is where we are in your community. The real stuff like renewable assets and property.”

Now, as part of a £15bn UK infrastructure programme, where it plans to regenerate in big cities, it wants to calculate the “social value” of the commercial properties it owns.

Precey says: “Our ideal model for a place is to employ people, invest in infrastructure and indirectly invest through social investments. And we want to prove that what we are doing really has a value to the place in which it sits.”

For example, a £225m investment in the regeneration of Cardiff Central Square in Wales has also seen L&G employ 2,000 people in the city and it has a social investment portfolio in the area through its SE ASSIST programme.

L&G is working with UK-based consultancy Social Value Portal to develop a social value score.

“What you want is two numbers,” says Precey. “What is the economic value? And what is the social value too? So I imagine a world in the future where a customer investing in the fund that has those buildings can know the value of their fund and the social value of that portfolio too.

“We have committed in the next four years that 20% of our commercial property will have an economic and social value published so that people can see that, and also the environmental impact and the footprint too.”Alongside a social value score, L&G has also committed to a “social value charter” for communities in which it has investments.

“It will say, over the long term, what L&G is going to create. It’s a contract with the community which they can hold us account to. We expect people to monitor it.”

L&G is also considering looking at the social value of its lifetime mortgage business, says Precey. It allows homeowners over 55 to release equity from their properties.

“We are looking at what people release the money for and the knock-on effect that has on their lives and what social value does it create. So for example people release money from their properties because they’ve got debt, so there is a mental health knock-on effect.”

A recent L&G survey found cash raised by releasing equity from homes put £7.1bn into the UK economy last year.

Guy Battle, chief executive of Social Value Portal, says: “The interesting thing is, these products weren’t designed to have an impact, but with an understanding of where the impact is you may find a lot of investments do more good in society than one thinks and by measuring it you may do even more.

“To be able to judge your investment on two numbers. I think that could be a game-changer in how investment decisions are made.”

Debbie Hobbs, Head of Sustainability at Legal and General Real Assets, says the social value methodology will not be proprietary; rather it will belong to the Social Value Portal, who will likely make it open source.

Hobbs says: “We are starting to see first movers innovate in this space but if you can agree on a methodology we can differentiate ourselves with what we are doing. It’s really important to be transparent about the methodology.”

She adds: “This really comes down from Nigel Wilson, our Group CEO. He has a strong ethos that we are custodians of long term capital in the UK and therefore that comes with a responsibility.”

Wilson recently spoke at a reception to mark the launch of an industry-led report on social impact investing in the UK, saying the capitalist model has to justify itself to a “very sceptical audience”. Last year, he chaired a UK government-led review on mission led business.