SFT:
Hello and welcome to Talking Property, our CBRE podcast series where our team of experts, our clients, and industry specialists share insights into the way we live, work, and invest through the lens of commercial real estate. I'm Su-Fern Tan, CBRE's Pacific Head of ESG, and I'm your host for this latest Talking Property episode. It's the first in a planned ESG in conversation series in which we'll talk to clients about their strategies, successes, and challenges as they develop their ESG strategies, future-proof their portfolios, and focus on innovation. Today I'm talking to EG Funds Management with the Head of ESG, Ian Lieblich, Fund Manager Linh Pham on the line. I'm also pleased to welcome Sarah Mathews, CEO of the Little BIG Foundation, a not-for-profit funded by EG. Thanks everyone for joining me today.
LP:
Thank you, Sue. Thanks for having us.
IL:
Thanks for having us.
SFT:
Ian, I'm going to ask you a little later about EG's broader ESG strategies, but I was hoping that you could first tell us a little bit about EG's building good philosophy to tackle loneliness and create better connections in new development projects. We hear so much about the 'E' in ESG, but it's so good to see the 'S' also taking centre stage at EG's Flour Mill development in Sydney.
IL:
Of course, and Sarah and Linh can of course go into more detail. But broadly speaking, the building good philosophy of BIG of the Little BIG Foundation is focused on this desire to leave a legacy, to be a light on the hill, as our CEO and founder likes to say, and return good to all stakeholders, not just to shareholders. A lot of ESG strategies and, and visions are to do good in both the environmental and the social sense. And as you said, this really focuses on the social idea, the idea that by fostering connections and relationships, bringing people together across our investment portfolio, we can return good to all communities and building good for all, not just those who are either employed at EG or invested in EG or who are tenants in EG buildings, but everybody within the community that we touch.
SFT:
Thanks, Ian and Linh and Sarah, I believe you were both involved in the establishment of the Little BIG Foundation. Can you tell us how it came about?
LP:
So, as part of any residential sales campaign, most property companies would host events, markets, and anything else with, or with the purpose of encouraging people to visit the sites. And, you know, done correctly, a lot of these initiatives may also spark a conversation with a new neighbour or perhaps enable a new connection. However, what these marketing initiatives lack is that they only actually have one KPI and that KPI is to drive sales and sales is the only outcome that is measured. But you know, what if we can do two things, both sell apartments and also encourage a place where people know their neighbours, a thriving community, and not just until we've sold the last apartment, but forever and beyond. So what if we can also measure the social impact into the future? You know, selling the final apartment at our Summer Hill Flour Mill development and lockdown happen in very quick succession, and we wanted to continue the work that Sarah and the Little BIG Foundation started. And from here, Sarah really took the lead from that point onwards.
SM:
EG's always had a really big emphasis on placemaking and community building through their residential projects. And that's played out in lots of different ways over the years, whether it's meet the neighbour's events or starting farmer's markets or food festivals. But 2020 really gave the developer opportunity to pause for thought and think about social connection and loneliness. They, you know, these apartments existed because of the work that they had completed and were never intended for people to live in them 24/7 and never go within more than five kilometres from home. So, you know, it really gave an opportunity to think about the loneliness and social connection and your neighbours being your number one stop point in connection in your world around you. So, you know, that's sort of where it all started. It looks quite different today to, you know, both that sales period of community building and also that 2020 lockdown period of community connection. But that underlying theme is still strong.
SFT:
Thanks, Sarah. And the statistics around loneliness are really stark. Pre-pandemic, one in four Australians acknowledged that they regularly felt lonely, and that's skyrocketed to one and two at the height of covid. Leading Little BIG, you've had the opportunity to tackle that at the Flour Mill. So why is loneliness the focus for the Little B.I.G Foundation?
SM:
Yes, it's a good question. I guess, loneliness is interesting. It's, you know, not just that physical sense of being alone, but an emotional feeling that your social needs are not being met. And that's obviously completely subjective and different for everybody, but it's something that we're really focused on because it has such a significant impact on both your physical and mental health beyond the experience of loneliness itself. So, you know, it's been compared to smoking 15 cigarettes a day or having sort of upward of five or six drinks a day for your physical health. It's also a major precursor to more significant mental health issues. It's sort of that first stop point, and we talk a lot about the wobble. You know, everyone is going to have periods of their life where they wobble a little bit, where they feel unsteady, they go through some form of a crisis, maybe they change jobs or they change cities.
Maybe there's a relationship change that causes you to feel a little less connected than you were previously and, and not your best self. And if we have a community around people that can kind of just steady them through that period, then we can look at preventing more significant issues around depression and even suicidality. It's also has an economic impact for us all. So, you know, loneliness alone, not depression, not complex mental health, not schizophrenia or any interventions at that kind of end of the mental health spectrum, is costing the Australian economy $2.7 billion per annum, which was sort of a conservative estimate put out last year by Curtin University. So, you know, prevention is always better than a cure. And if we can help people steady when they're feeling that kind of wobble, then we can have a huge impact at that economic level as well.
SFT:
That's amazing. And can you tell us a little bit about the difference that that is making to residents and the local community at the Flour Mill and how you are measuring social impact?
SM:
Yes, definitely. I mean, we measure lots of different things and I think as we sort of said at the start, this is not a well worn path yet. We're still sort of figuring out social impact measurement, but we track all of our outputs. We look at the number of events we run, the number of programs we're offering numbers of volunteers and where they come from within the local community and their proximity to the physical Little BIG house, participation rates and frequency of attendance at events. And we look at all of those things because there is a lot of research showing that the more social identities that you form amongst your own life, the more kind of resilience you have and kind of strengthening of your mental health. So we look at those sorts of things, but we also look at our self-reported outcomes.
So the AIHW, the Institute of Health and Welfare, are measuring the number of days a week someone feels lonely at a national level. So we are asking that same question here and of all of our communities to get a sense of how that kind of compares to national measures and what's happening differently or similarly here. And also the number of neighbours, people know that kind of number of sense of connections they feel they have within their community. So we benchmark that against national data, we baseline it against our own data, and those are kind of the, I guess those metrics that look really great in a report. But what's really important to us is individual stories as well. It's the, you know, the couple who are new to Sydney who are, you know, starting to build relationships in the local area with their neighbours through coming along to co-working or attending speed friending.
It's the, you know, the co-parenting, you know, newly separated mum who values having a yoga class on a Saturday where they go for coffee afterwards to kind of fill in those Saturday mornings that they may not have the children with them anymore. Or it's the, the 20-something that lives in the one bedroom apartment that works from home now because we, a lot of us are doing that, a lot of businesses haven't given their employees the option to come back to an office. And so attending board games night on a Tuesday night for a couple of hours might be the only face-to-face interaction they have for the entire day. So, you know, those stories are really important to us. Of course, the other one is the, you know, the three people who visit our safe space, which is Fridays and Saturday nights. A minimum of three people who are feeling at, at risk of serious loneliness, depression, or suicide that, you know, have nowhere else to be and they can be here when they're feeling that way. So you know, those stories and how that kind of plays out, just coming into this, actually I bumped into someone who told me a new person has been coming along to the board games night for the last few weeks, and he's now started a kind of monthly movie club and a group of people are now going to the cinema together once a month outside of what we're doing, irrespective of our work. That kind of has formed a group that spans beyond the programs we offer.
SFT:
Amazing work. And Sarah, I'd love to get your views on the difference between placemaking and creating connections. Too often I think developers add some retail to a development and stage a few events as a way to tick a box, but we know it goes a lot deeper than that.
SM:
Yes, absolutely. Look, getting the retail mix right is an art form and definitely a huge part of it and it can be quite important, but I think for too long sort of councils and developers or even event planners, they're focused on that placemaking, putting on those showy events that look really great on a video and make us all feel really good about the work that we've done. But that isn't necessarily resulting in any form of connection forming. It's great for that sense of community and that sense of place, but what we've found is that events that have less than 20 people in attendance that kind of focus on a more of a niche interest area is where the kind of more deeper bonds actually form. Those are the relationships that span beyond showing up to an event and actually go out into that real world and continue into your lives. So yes, we do both. We definitely, we still put on the food festivals and we have a fortnightly market and we have a Christmas tree sale every year where we raise money for charity and people can volunteer and get involved in that as well. But things like the parents group or the life drawing classes or even speed friending is where those deeper connections are made.
SFT:
Wonderful. And on the broader topic of ESG, Linh, what are your investors focusing on when it comes to responsible investments and what are some of the questions you get asked?
LP:
Thanks, Su-Fern. There are lots of funds labelled as ESG funds in the industry. However, based on a New York University study of these funds reviewed, although 97% of these funds had an environmental objective, only 14% had a social objective. So, you know, investors are really well-read on the measurement of environmental factors. So what Sarah and the Little BIG Foundation is working towards on social impact measurement really resonates with the investors here. It then comes down to, you know, how we break down the ES and G into quantifiable criteria, and you know, that's not always easy. I lead EG's Delta Fund, so our EG Delta ESG property fund. Sorry, that's a bit of a mouthful. And you know, one of the things that the fund has done is define the set of ESG criteria. So, you know, what we wanted to create was a fund that very much had the intention to solve environmental and social goals, which is why we launched the EG Delta fund and even with its predecessor fund in 2016. So we wanted a clearly defined set of quantifiable impact outcomes for each asset that we acquired. And then instead of benchmarking these assets against other assets in other funds, perhaps in another sector, which may be even another jurisdiction, what we wanted to do was always set the benchmark for each asset to be against its historical self. So what it was when we acquired the asset, so we can really focus on measuring the impact that we affect over time.
SFT:
And have investors responded well to this, Linh?
LP:
They have. So the initial investors of the Delta Fund actually collaborated in forming the Delta framework. So, we worked with them in defining the environmental objectives of the fund and also the social objectives of the fund. And, you know, we recognise, our investors recognise that the measurement of the 'S' in this ESG is really difficult, but we always think it's worth starting to try to measure the 'S' and then hopefully over time, you know, as Sarah and her work with the Little BIG Foundation continues, we've got a much broader sample set and much broader quantifiable and also, you know, qualitative stories that we can recount as well.
SFT:
And I wonder how this fits into the broader ESG picture for EG funds. Ian, can you speak about that?
IL:
With pleasure. Just to add to what Linh was saying a moment ago, the idea that when we're providing environmental metrics to investors, that's often quite easy to benchmark. We have a relatively good understanding and established understanding as to what a low-carbon building looks like. There are various trajectories and pathways along the pathway to zero carbon. With the social metrics, it's a lot harder, as Linh said. So what we find we try to do is use a combination of both what quantitative metrics we can and then pair them with qualitative metrics, which might be a case study or even something anecdotal. The example that Sarah gave before about a games night evolving into a movie night is really beautiful. And those are the sorts of stories that we'd love to tell investors, even if they are difficult to quantify a more tangible impact. But if we can then pair them with, you know, the amount of people who attended, growth, interactions, connections, to us, that's the best way.
And then how that fits into each is broader approach. So I mentioned that idea of wanting to be a light on the hill and leave a legacy that affects the whole community. That's broadly more true for how we operate even beyond Little BIG Foundation. What really drives us is wanting to have impact at scale. So it's all well and good for us to be doing these things as EG, but ideally we'd love to move markets, we'd love to see other developers, other property companies adopt these sorts of, I suppose, approaches to the way that they're doing this and really seeking to address these big systemic issues like loneliness and rather than just, you know, having a coffee giveaway in the lobby of an office building, have a coffee giveaway that's accompanied by a conversation and by an interaction and by a really earnest and authentic attempts to connect with people. And that's really what Sarah and her team are doing so well and so beautifully at the Flour Mill. And then what we at EG are trying to bring to our whole portfolio of assets, not just these residentials buildings. And then what we'd love to say is that impact of scale pay. So not just EG doing this, but indeed everybody doing this, and we can have more closely connected, friendly, warmer communities.
SFT:
Talking about the Flour Mill, the success at the Flour Mill, I hear that Little BIG Foundation could be expanding and moving possibly into resi or industrial and just trying to share the love when it comes to the foundation's work. This true?
SM:
Yes, that's right. We're excited. We're taking on six new office buildings this year. So we've got our primary site at the Flour Mill in Summer Hill, and we're taking, you know, working with communities in office as well now. So I guess more broadly, real estate sector might have called this tenant engagement or maybe it falls into the marketing budget or something of that capacity. And it really is that example Ian mentioned of, you know, the coffee giveaways in the lobby. We really think that's something that can be done better. You know, we're kind of investing in this area anyway. We're surveying the community, we're talking to our tenants, but are we really thinking, are we genuinely caring about them and their wellbeing and you know, how connected they are with one another in the community? And we also think those measures are, are things that can only benefit the landlord as well.
If people are more connected to that sense of place and, and you know, feel like they have friendships and genuine connection within the building, they're more likely to show up to the office every day, which is better for your tenants and better for the building's occupancy and a whole number of other factors as well. So, yeah, we're doing that through a very similar approach. So we've taken with residential, we're looking at like the local partnerships we can form in the community around that asset. We're carrying out a research piece, we're doing that tenant engagement survey, but with a focus on social connection. We can also gather the general feedback about the lift upgrades and end of trip as well for you in the process to kind of kill two birds with one stone. But we really focus on how people are feeling and what sense of connection they have, which is really already proving to be quite interesting.
You know, 60% of office workers are lonely on a regular basis, which is significantly above general national averages and particularly interesting because people who are full-time employed and in that kind of middle of life cohort are generally the most protected against loneliness. You know, we see higher rates of loneliness among young people and those who are retired. So people coming into an office every day where they don't feel a sense of connection or a building where they don't feel a sense of connection is a really interesting area and a really risky area as well. So we're thinking about what kind of moments we can embed in those days. It's not necessarily a food festival or a free coffee, but you know, maybe using some of those traditional ideas, tying them with some of these things we've learned in the residential space and kind of creating a program that does more for tenants than some, you know, a free yoga class that you can't quite make on your busy schedule and your lunch break anyway.
SFT:
Yes. And creating these types of great social outcomes is just so important. But Linh, in our industry, there's also the need to deliver financial outcomes for investors. Is it possible to invest in our communities and still make a profit?
LP:
Done correctly Su-Fern, the answer is yes. So as part of the Delta Fund, we actually have a dual objective, and that's both to deliver a financial outcome alongside the ESG outcome. And, you know, unlike many other funds in the industry, our performance is measured against both factors. Which is why it's really important that we measure, you know, the 18 objectives that we've set for ourselves, including the social objectives as well. So what we need to do is think about, you know, what are the smart solutions rather than the expensive solutions. So like both Sarah and Ian mentioned before, our programs don't involve expensive giveaways or extravagant events and, you know, everything that we do is done with the help of the foundation and it's volunteers, the communities, the tenants, because you know, at the end of the day, establishing those communities, it has to be grassroots and it can't be curated, you know, by a few people. So we really want people to be involved, we want people to share their experiences. All we need to do is make it a little easier for them to do so.
SFT:
Thank you, Linh. Now Ian, just to end off the podcast, what are some of the big plans that EG has for ESG? Do you have quite an innovative strategy plan?
IL:
Big question, but one that we're glad you asked. So obviously a big focus on all the work that Sarah is leading through a Little BIG and wanting to create that connection between our community members. One of the other big pieces of work we're doing is on climate change and working towards reducing emissions to zero, not in the, I hesitate to say traditional sense because net zero targets have certainly been around for less than a decade, but not that way. We are aiming instead for what we're calling a real zero carbon target, and that's based on this desire for greater data and technology to underpin our carbon accounting and monitoring. So traditionally when building owners have measured the carbon footprint of their building, they've taken the total energy used from electricity, any natural gas burned on site, any diesel used on site, and they've made one annual calculation sort of multiplying that by the emissions factors that the government gives.
The problem with that is that it assumes that every kilowatt-hour of electricity has the same carbon content. And the way that our grids currently are with a lot of solar coming on board during the day, wind being intermittent, coal being intermittent as it comes on and offline, is that every kilowatt-hour of electricity doesn't have the same carbon content. So a more sophisticated data driven approach allows us to look at the carbon content of electricity every 15 minutes as opposed from once a year. That gives us about 35,000 data points instead of one. What that means is we can start to look at when we are using energy in addition to how much energy we're using, which is to say that if it's a sunny day, there's a lot of sun in the sky, a lot of solar power being generated. We want to be encouraging our buildings to use more energy because it's going to be cleaner. When that sun sets sort of around 6:00 PM, we want to start to be a little bit more stingy and really focus on energy efficiency in these periods.
So it's a question of as to when we're using energy as opposed to how much, and then that unlocks new opportunities to reduce carbon, doing things like demand management load shifting, and 24/7 renewable energy procurement. So we're not dependent on buying credits, be they carbon offset, solar renewable energy certificates. So it's a project I'm really, really excited about. Almost as excited as I'm about all Little BIG work that Sarah and co. are doing. We've got a white paper out; we've just released an ESG report that includes some baseline reporting. So if you want to reach out and my details, I don't think there are too many Ian Lieblichs on the internet, so if you search that, that's I before E, except after C of course, I'm happy to dish out more information and of course have that conversation because we're very excited about that piece of work.
SFT:
Thanks, Ian. That sounds amazing. And we'll be sure to put links on the podcast page as well. Thank you so much for your time.
IL:
Thanks Su-Fern. Thanks for having us.
SFT:
I absolutely love what you've done with Little Big House and the focus you have on delivering great social outcomes as part of your ESG strategy. Thanks for tuning into this latest episode of Talking Property with CBRE. If you'd like this show and want to check out more, visit
cbre.com.au/talking-property or subscribe through
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Apple Podcasts. Until next time.
