Anticipating Actions and Metrics for the EU Social Impact Investment Taxonomy

In partnership with the University of Leeds, EVORA have been conducting extensive research into how social impact can be measured, in anticipation of the EU Social Impact Investment Taxonomy due for release in September 2021.

The increased profile of the ‘S’ in ‘ESG’ is driving demand for a standardised and established set of key performance indicators (KPIs) and metrics, against which funds can evaluate the progress and success of their social impact policies.

The ‘S’ of ESG

Social sustainability is commonly thought of as an ambiguous topic. This has led to a considerable gap in understanding how social impact can be integrated into ESG strategy with the same clarity as its environmental and governance counterparts.

As a result of limited resources, such as a clear framework and material metrics, social impact in ESG programmes is often overlooked. The result of this, is limited engagement from organisations in how they plan for, deliver, measure and report social impact.

Since the implementation of the Public Services (Social Value) Act, 2012 in the UK, private-sector uptake of social sustainability in the built environment has been both rapid and largely voluntarily. The Act only required that local authorities consider social value in procurement. Simultaneously, UK real estate managers became leaders in the implementation and measurement of social impact programmes.

In September 2021, the EU Commission plans to publish their Social Impact Investment Taxonomy. It is fair to anticipate that uptake in social impact programmes will mirror that of the UK in 2012.

Europe, therefore, face a challenge due to a lack of practical European-focussed guidance on social sustainability.

EU Social Impact Taxonomy

The Social Impact Investment Taxonomy will provide an opportunity for European investment organisations to develop a commercial response to current socio-economic risks. By clearly considering their social impact, funds can build their sustainability profiles and attract potential further investment.

Social Impact Metrics

The EU Social Taxonomy does not currently provide a clear framework and metrics for implementing and measuring social impact. Therefore, in anticipation of the increased interest in social impact and the built environment across Europe, EVORA have worked with the University of Leeds to research how learnings from tried-and-tested social impact programmes and metrics in the UK can be applied in Europe. These may facilitate discussions within your ESG team on how to practically address interventions and reporting in areas such as:

  • Training and Education
  • Charitable Support
  • Health and Wellbeing
  • Community Safety and Security
  • Community Space
  • Tenant satisfaction
  • Sustainable Transport
  • Social Enterprise Partnering
  • Health and Wellbeing aspects such as indoor air quality

The most important aspect of these metrics is that they go beyond the use of quantifying inputs and aim to recognise people as the end users of social impact programmes themselves.

EVORA is grateful to Gemma Graham for her dedication to, and assistance with, this research.

It’s getting hot in here! Heat risk to buildings

The recent heatwave in Canada has brought into focus the real and present dangers of extreme weather conditions. Record temperatures in British Columbia, reaching as high as 49.6°C, resulted in hundreds of excess deaths and heat-related hospital visits. As early analysis shows the heatwave would have been ‘virtually impossible’ without human-caused climate change, we know to expect an increase in the frequency of such events, presenting a global challenge for the buildings in which we live and work.

In the UK, the Climate Change Committee (CCC) have recently released their third assessment of the UK’s readiness for the impacts of climate change. The Climate Change Risk Assessment (CCRA3) paints a stark picture of the widening gap between the risks posed by the UK’s changing climate and the government’s policy response. Among the highest priority areas identified by the CCC, they highlight ‘risks to human health, wellbeing and productivity from increased exposure to heat in homes and other buildings’ as requiring urgent action before the next round of national adaptation policies due in two year’s time.

What is the risk?

Average annual temperatures in the UK have already increased by 1.2°C since pre-industrial levels, and are expected to rise further. Summers as hot as 2018 (the joint hottest on record) could occur every other year by 2050, with an increasing likelihood of exceeding 40°C, according to the Met Office’s UK Climate Projections.

Without suitable adaptation measures, cities will become increasingly uncomfortable places to live – the dense concentration of buildings and paved surfaces in urban areas causes an increase in temperature relative to the surrounding countryside, known as the urban heat island effect. This will increase the number of ‘tropical nights’, hot and humid evenings that are a significant contributing factor to heat-related deaths during heatwaves.

More than 2,500 people died during heatwaves in 2020, the most of any year since records began. Continued warming, and current adaptation measures could see this figure triple in coming decades.

In the five years since the previous report (CCRA2), 570,000 homes have been constructed in the UK and under current government targets another 1.5 million will be built by the time CCRA4 is published. If buildings are not designed to cope with the increasing temperatures, there is a real risk that climate vulnerability is ‘locked in’ to our infrastructure.

What are the implications?

Of the many risks discussed in the report, the CCC singled out the risk of heat in buildings as being particularly notable for the absence of adaptation policy.

There are two years until the next round of national adaptation policies must be submitted; two years that are vital for closing the adaptation deficit. With consultations taking place in England and Wales, it is likely that policy will follow. It is therefore essential that this risk must be considered now, for both standing and development assets.

At EVORA, we can work across the entire life cycle of a project, to help deliver on better building design and operation. As well as helping to reduce the embodied carbon in the materials used in construction, improving resilience to high temperatures can be worked into the building at the design stage to reduce climate vulnerability. This could include measures such as:

  • Passive cooling measures – better shading, more reflective surfaces, and improved ventilation are often the most cost effective ways of reducing the pressures of high heat;
  • Choice of materials – through well informed decisions around the choice of materials, it is possible to create a more comfortable internal environment, whilst also reducing the embodied carbon in construction;
  • Green roofs and rooftop gardens – as well as the obvious boosts to biodiversity, green roofs reduce heat by providing shade, and through the cooling effect of evapotranspiration.

Further to this, through our partnership with Moody’s 427, we are able to incorporate physical climate risks, including those posed by increasing temperatures, into our SIERA platform. This enables our consultants to analyse physical risks on an asset-level basis. This detailed information can then form the basis of best-practice climate resilience measures across a real estate portfolio.

If you would like to know more, speak to our experts today: info@evoraglobal.com

Is the sustainability report the right place for storytelling?

Firstly, what is storytelling? 

Storytelling is how people naturally communicate. Within your sustainability report, it is a means of communication, using narrative techniques surrounding employees, the organisation, the past and visions for the future, social bonding and work itself, to build in the reader a new point-of-view or reinforce an opinion or behaviour. Storytelling tools include using anecdotes, case studies, typography, colour, illustration, data visualisation, photography, interactivity, video and even gamification.

Arguments for.

Reporting, by nature, is somewhat dull. Getting stakeholders to read your sustainability report is the biggest obstacle in reporting. Many companies keep packaging their reporting year-on-year in dense corporate documents, relying on stock templates, generic letters from the CEO, and pages and pages of text. Too often, large amounts of time, money and effort is spent on a report that very few people care to read.

These reports are not interesting to look at. They do not showcase a company’s brand and personality. And neither do they make the reader feel invested in the company or the work it does.

Why? Because they simply state numbers, charts, and straightforward facts; they don’t tell a story.

When companies are trying to advocate what they do through a report, data is integral to make convincing arguments. However, studies show that if you share a story, people are more likely to be persuaded. When data and stories are used together, audiences are moved both intellectually and emotionally.

And who doesn’t love listening to a good story? 

Storytelling helps companies connect with their stakeholders, forming an emotional connection to increase brand loyalty. An essential part of content marketing, storytelling are useful techniques that craft communications in the most engaging way to capture the reader’s attention and make them excited about what you’re doing. Stories are even noted as being 22 more times more memorable than facts alone

Sustainability reports can be a great avenue for powerful storytelling; creating inspiring stories and sharing data in more creative and engaging ways, ultimately demonstrating that real, tangible efforts are being made to make a company’s operations and portfolios more sustainable.

“There have been great societies that did not use the wheel. But there have been no societies that did not tell stories.”

Ursula Le Guin, novelist

Arguments against.

A report acts to serve as a purpose for the communication of two key aspects:

  1. An explanation of how sustainability is being managed to create long-term value. 
  2. Data (evidence) to support these claims.

Do readers want to spend time ploughing through dense, formal corporate reports to get to this information? 

Storytelling techniques strike emotive chords, and it can be argued that reports utilising these could be misleading in that they may not necessarily fully reflect a sustainability record. The report might even be choreographed to deflect attention away from areas where a company isn’t succeeding.

There is sometimes a disconnect between the information that these readers are looking for and what companies actually provide (PWC and others have been looking at this for several years). Investors and analysts have a limited interest in the majority of the content that ends up in a sustainability report. 

The opposition would argue that there is no role for storytelling in sustainability reports, which should focus solely on the business case. Instead, storytelling should be confined to website content and social media streams.

Conclusion

Removal of storytelling in its entirety from the annual sustainability report seems extreme and unjustifiable. 

Successful sustainability communications should always provide specific audiences with information that focuses on what’s most important to them – and presents information in ways that resonate. This may mean shorter, more impactful reports using imagery to illustrate effectively. 

Some companies are also looking at taking a “modular” approach to reporting, with a centrepiece summary document supported by a variety of supplementary resources, including infographics, impact fact sheets or reports on specific themes. This approach could provide the required content in a clear bitesize manner, where the stakeholder can select material to meet their individual needs. EVORA advises caution in this approach of separating out sustainability information intended for different end-users in multiple reports and communications. Publishing information on a company’s ESG risks and opportunities and information on a company’s sustainability performance across separate reports may not serve investor needs and risks signalling that information on a company’s sustainability performance is not material for investors. In addition, multiple communications may hamper the ability for a company to present an overarching vision and strategy and could lead to inconsistent sustainability information.

The issues of materiality and external assurance are useful to give storytelling elements credibility and validity in accurately reflecting a company’s approach to sustainability. More specifically, stories employed in sustainability reports should reflect the concerns of a wide range of the company’s stakeholders and that the more general themes that such stories illustrate are externally assured. At the more everyday level, companies might also give consideration to selectively using such sustainability stories in social media posts.

Using storytelling in sustainability reporting doesn’t need a mega budget or substantial resources. There are many fantastic examples out there that are brilliant, bold and inspiring, but also quite simple. Align with an appropriate reporting framework to ensure transparency. And beyond this, be brave, be honest, share your brand story, demonstrate your impact and connect to your reader.


References

Jones, Peter ORCID: 0000-0002-9566-9393 and Comfort, Daphne (2018) Storytelling and Sustainability Reporting: An Exploratory Study of Leading US Retailers. Athens Journal of Business and Economics, 4 (2). pp. 147-162. doi:10.30958/ajbe.4.2.2

This article was originally published on GRESB Insights.