Real Zero: Developers Who Stay Post Completion, Building In A Legacy Of Good

This article was originally published in the March 2023 issue of Institutional Real Estate Asia Pacific.

Recently, Reno Sio, Institutional Real Estate, Inc’s managing director, Asia Pacific, spoke with Ian Lieblich, Head of ESG for EG Funds Management (EG), and Sarah Mathews, CEO of the Little BIG Foundation (Build in Good), a not-for-profit EG founded in 2021 that aims to advance mental health, prevent and relieve social isolation, and help people live happier, healthier and kinder lives.

Let’s start with a brief introduction of yourselves and your roles.

Ian Lieblich: As Head of ESG at EG, I manage new and existing opportunities to tackle ESG issues, ranging from climate change and biodiversity on the environmental side, to human rights and diversity on the social side, along with a significant focus on mental well-being. EG seeks to create thriving communities, fostering social connection among residents and tenants. I’ve worked in the ESG space my whole career, and it’s exciting to see new opportunities created as businesses and individuals place greater emphasis on environmental and social outcomes.

Sarah Mathews: I am CEO of the Little BIG Foundation, an organisation established by EG to focus on mental and physical well-being, addressing loneliness and social connection across EG’s portfolio. Working with EG’s asset managers and with Ian, I implement the strategies around social connection. We are given a lot of scope to trial new ideas because this is such a new space. Our first case study is the Flour Mill at Summer Hill, a completed residential community in Sydney’s Inner West. The development includes a Little BIG House, which is a community space in which we run a volunteer programme and work with local people who have ideas to create connection among neighbours. 2023 will see us commence a similar strategy within five of EG’s office buildings.

How do you link this philosophy back to the investors looking to partner with EG?

Lieblich: EG is a business that understands the importance of generating more than just financial value for its shareholders. It delivers value for all the stakeholders — investors, tenants, communities, staff, peers in the property sector, and supply-chain partners. To do this, we understand we must have a defining value that allows us to leave a positive legacy, to be a light on the hill, to lead with care. And it has to be genuine. We don’t just want to hand out a free token coffee once a week; we want to be able to engage with people in an authentic, compassionate way.

Mathews: Investors are increasingly interested in how they can create social and financial outcomes. There are a lot of factors that make up the “S” in “ESG”, but the Little BIG Foundation is particularly interested in improving the lives of the one in three Australians who are lonely. COVID-19 shone a spotlight on mental health and the importance of social connection to overall well-being. Housing factors, such as lower density, larger space of the home and access to green spaces, resulted in some individuals faring much better than others during lockdowns. Additionally, the quality of social ties was critical. Looking at office and industrial spaces, positive environments and the relationships those spaces nurture are going to be essential factors in ensuring businesses return to our assets long term.

We spend 70 percent of our days in buildings, so the real estate industry has an immense access to people and opportunity to create both social and financial outcomes.

How do you define and measure social impact?

Lieblich: Social impact is hard to measure. We look to take micro actions to create positive change across our portfolio and amalgamate them at a broader macro level, seeking to make an impact on societal issues, such as mental health, loneliness and diversity. We do this through an Input-Output-Outcome-Impact model that allows us to track and quantify the flow-on effects from seemingly small actions, such as an active parent group, as things like this add up to have a tangible impact across the community. This approach is captured through EG’s Delta Fund’s Impact Framework, which measures inputs across the portfolio, quantifying asset-specific outcomes and impact relative to a building’s tenants, community and investors.

Mathews: From the Foundation’s perspective, our approach is in our name, Little BIG — the “little” actions that have a “big” impact. Not only the micro actions Ian was talking about, but the ripple effects that can be created from those.

Kindness is a simple example. An act of kindness benefits not only the receiver but also has a huge impact on the doer. There are many studies that confirm this phenomenon.

As for measurement, we benchmark against national existing data for factors such as loneliness and participation in social groups; we capture our own metrics, such as the frequency at which people experience acts of kindness and the number of neighbours names they know; and we capture stories. When you are measuring a “feeling”, the numbers don’t tell the whole story. There is nothing like hearing the impact you have made on a micro level in someone’s life, in their own words.

How does that work to sell but still continue to service the community? Why structure it this way?

Mathews: It is a philanthropic and learning exercise at Summer Hill. Apartments sold out in 2019, so this work has been completed to build a supportive community and learn about the impact of each activity rather than to “sell”. What we have learnt is that the cost of sending a jazz band to play to quarantining residents on their balconies is very low but has a huge impact. Volunteers, when given a space and made to feel valued, can deliver a programme of events that bring people together.

We can now begin applying these learnings to commercial spaces, focusing on tenant engagement and retention. We can also work through the development phases on new builds, which will support sales campaigns. It’s something we think all developers and all asset owners should be thinking about: If people continue to exist in your buildings, even when you don’t own them, do you have an obligation and an opportunity to impact their well-being? We think so.

Lieblich: The word “obligation” is not so much a risk as it is an opportunity to have an impact, to create a legacy whereby with those good relationships with the tenants ripple outwards to the community. We are trying to have impact at a scale where we take small actions and create big impact from them.

What are the lessons you have learnt from this residential experiment? Are there some tweaks that are in the making?

Mathews: We have learnt the importance of local ideas and engagement. Subsequently, a key part of what we do is to establish a committee of volunteers, bringing to light people’s ideas that can benefit social connection in their own community, and we champion those people; we help clear any roadblocks. Maybe it is a parent group, for instance. One of the big challenges for new parents is being tossed into this new period of life without necessarily knowing anyone nearby going through the same things. To have a network of people around you to support you and ask questions of is hugely valuable. But most of the time, those groups don’t have a space to meet, and one of the barriers to a parent group being able to continue is access to a space. We can provide that. We have a parent group at Summer Hill that is very successful and popular. We ask our volunteers to think hard about the design of that experience — whether it’s just access to a good coffee or a dental hygiene talk, we design experiences that promote lingering, talking and connecting.

Lieblich: In the case of an office asset, one of the best ways to have impact is to identify “sustainability champions”, or people who have, in addition to their main work or talents, a passion about climate change, waste and recycling, or reconciliation. The conversation, “Hey, we are going to run an initiative to talk about mental health or to talk about climate change”, is a lot more powerful when it comes from a colleague than when it comes from a building landlord. We work with businesses to identify and empower ESG champions, giving them the tools, the resources, even the social licence to invite other building tenants into a positive initiative.

What is the regulatory legislative environment in Australia like? How is the government moving social issues forwards?

Lieblich: If you imagine a bell curve of companies, you have some companies leading and doing great work on human rights and diversity, you have some on the opposite side who are unaware or indifferent, and then you have 80 percent in the middle. That is the area where legislation and regulation can have the biggest impact. By bringing out legislation that mandates companies report on modern-slave risks, particularly within the supply chain — not just from their immediate suppliers, but from their suppliers, down to tier 2, tier 3 and tier 4 suppliers — you ensure there is a transparent and firm enough reporting structure that can capture those risks. Then you can make sure you are only purchasing items — be it marble, timber, cement aggregates — from suppliers compliant with the modern-slavery legislation.

Another area where regulation is evolving is climate change. With a change in government, Australia is finally catching up to the rest of the world in mandating emissions reductions from its biggest polluters, improving its carbon-credit scheme and creating a structure for standardised, consistent climate disclosure. Given the constant focus from investors on this key issue, a unified approach from the public and private sectors is key to making the carbon reductions needed to reach the Paris Agreement’s 1.5°C temperature target.

What do you see as the challenge for making progress with climate-change issues?

Lieblich: One of the challenges is the saturation of commitments in the market with the growing concern of greenwashing. It’s getting difficult for investors and consumers to differentiate between authentic climate commitments that are actively reducing emissions, and those that are not and might be considered “greenwashing”.

We have launched a new carbon zero target we call Real Zero. A lot of property companies have ‘net zero’ carbon targets, but we wanted to do better. We believe climate change is also a social issue because you have the most marginalised and vulnerable communities being the most exposed to a threat that wasn’t of their making. Many of the net-zero targets are predicated on purchasing carbon offsets or renewable-energy certificates. Companies that pursue this approach are able to simply write a cheque for enough offsets, or for renewable-energy certificates, to call themselves ‘net zero’, even if the business has not changed in significant ways, and even if they continue to burn fossil fuels to run the business. This isn’t addressing that social issue, and it is not an authentic response to the environmental issue at hand. That is where our Real Zero by 2030 target comes in. We have set a target to be ambitious and to encourage creative and innovative responses. Even if we don’t realise the target, we would rather get 80 percent of the way there by 2030 than just write a cheque and call our funds ‘net zero’ tomorrow, through offsets. We hope to shift the way not just our buildings use energy, but how the whole country uses energy, helping to reincentivise the business case for solar power and removing dependency on gas.

Mathews: As asset owners, we will all leave a legacy. The physical structures we create will exist well beyond our personal lifespans. EG wants its legacy to be places people love, communities that are stronger and more resilient, individual connections, moments and memories, and a positive change in the world — and the Little BIG Foundation helps achieve that.