Impact investment index© - overview of process and contextual background

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Measuring the impact and return on investment for corporate and community investment.

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Impact investment index© - overview of process and contextual background

  1. 1. Measure impact and return oninvestment for corporate and community investment Reana Rossouw Next Generation Consultants
  2. 2. Current Trends & Practices• Monitoring & • Impact Assessment Evaluation – Focusing on outcomes – Focusing on project and results of outputs implementation – Focuses on theory of – Focuses on delivering change outcomes – numbers – Confirms project design – Focuses on achieving and scope as well as program objectives deliverables – Focuses extensively on – Measures impact over numbers – quantitative various dimensions outcomes
  3. 3. Objectives• For the donor/investor: • Development Sector – Increased efficiency, knowledge – Funders and non-profits often and impact use the words “evaluation” and – Cost savings “impact” loosely, stretching – Improved data quality these terms to include any type of report on the use of funds or – More knowledgeable funding the results they achieve. decisions – Many evaluation professionals, – Greater credibility however, distinguish between – Ability to benchmark against measuring performance peers (monitoring inputs, activities, – Improved coordination and and outputs); measuring strategic alignment outcomes (near-term results); – Shared learning and continuous and evaluating impact (long- improvement term changes that are attributable to the grantee’s activities).
  4. 4. What is the difference?
  5. 5. Why the pressure to measure?• The debate on impacts and return on investment are playing out in three arenas: – In private foundations and corporate CSI/CR divisions • Aiming to be more strategic about their philanthropy, grant making and social/community investments – In nonprofit organisations in response to pressures from corporates, foundations and government – • To be more accountable for the investment received and program outcomes expected – Among international development organisations such as bilateral government agencies and non governmental organisations (NGOs) • Seeking to improve development effectiveness and lessen dependency on grant/development aid
  6. 6. Variety of purposes• One can and should use cost and impact data to make funding allocation decisions across program areas • You can compare programs once you get in the sector of global health, but you cannot compare global health vs. arts vs. education vs. sport.• One can and should use cost and impact data to make funding decisions within program areas • It is not about building a unifying measurement across domains, but to build a conceptual framework of having the biggest impact across a Rand value unit. So it is not about comparing health to education to sport or the arts, but to determine which program yields the highest return for the most effective use of resources
  7. 7. Three Primary applications• Prospective – Looking forward to determine whether or not the projected costs and benefits indicate a favourable investment• Ongoing – Testing assumptions and projections along the way in order to aid course correction• Retrospective – Looking back to determine whether or not it was a favourable investment given the costs incurred, in order to inform future investment decisions
  8. 8. What do we want to achieve?• To provide evidence• To demonstrate performance• To prove accountability• To show program effectiveness• To demonstrate value• To contribute to a community’s self- sustainability• To empower communities and funders• Ultimately - to alleviate and eliminate poverty
  9. 9. Impact Value Chain - Our FormulaHierarchy Inputs Outputs Outcome Impacts ReturnsDefinition Resources Goods and Expected changes Ultimate (long- Direct or indirect invested (e.g. services in access, usage, term) effect of business money, skills, generated by the behaviour or the intervention benefits/ value etc.) use of inputs performance on a key generated by (short-term) (medium-term) dimension of the activities/ development programs/ (e.g. living interventions standards) (long- term)Quantitative Value of Number of % change – Students finding Number ofIndicators investment, schools, number access to health employment, graduates hired number of hours, of volunteer, services, people with skills by company, % number of books, number of education, finding change in hours teachers, government employment grievance, students infrastructure, complaints pass rates received by companyQualitative Stakeholders Perceptions of Beneficiaries Quality of links to Changes inindicators satisfaction with schools, reporting benefits local employment community / the programme educators, and application of opportunities, customer/ learners, skills, education perceptions of employee improved socio perceptions economic status attributable or opportunities directly/ indirectly to CSI
  10. 10. The Next Generation ModelInputs Outputs/Outcomes Impacts• How • Community Benefits • Community Impacts • Cash, time, in kind, • Qualitative • Business Impacts management costs • Quantitative• Why • Dimensions of impact (10) • Community Relations, • Business Benefits community investments, commercial initiatives• Where • Geographic Location• Who • Stakeholder Engagement• What • Focus Areas
  11. 11. Impact Assessment – HOW?
  12. 12. Dimensions of Impact – WHAT? How do we calculate? 1. We count each and every stakeholder group 2. We count each and every impact 3. We distinguish between community and business impact 4. Get to a figure: X:Y
  13. 13. Impact Measurement
  14. 14. Program Logic Model
  15. 15. Fundamental Questions What impact and return were we looking for? – Internal Rate of Return – i.e. For every one Rand spend what are communities or the business getting? How would we determine ROI?Is it financial or social or socio – economic return? WHO IS ANSWERING THE QUESTION? DONOR or the DEVELOPMENT PARTNER?
  16. 16. Edcon
  17. 17. Transnet
  18. 18. Rand Water
  19. 19. BHP Billiton Meyerton
  20. 20. Typical ScorecardBHP Billiton Richards Bay - ED
  21. 21. Typical Scorecard – SED - HealthStakeholder Groups Qualitative Qualitative Total Impacts Total Impacts Impacts CommunityPatients 10 15 25 Impact =Doctors 6 9 15 204Nurses 8 6 14Department of Health 4 3 7 TotalGovernment 8 7 15 BusinessStudents, care givers 8 9 17 Impact =Universities 8 7 15 33Local Clinics 8 7 15CBO’s, NGO’s 7 9 16 Final score –Other Funders 7 6 13 204:33Immediate local 9 9 18communities Question –Local Authorities 6 7 13Communities along rail 13 9 22 did theline (secondary) programTransnet 17 16 33 deliver highR20 million is invested annually and the program has been impact andrunning for more than 10 years. It reaches 15 million people (pa) high return?in rural areas – and provide access to primary health care tothese communities – so what is the impact?
  22. 22. Typical Scorecard – Rating and Ranking
  23. 23. Typical Scorecard –Quality of Life Impact
  24. 24. Typical Scorecard - Spend
  25. 25. Community What we measure Qualitative impact and return Quantitative impact and returnimpact andBusiness ReturnSocietal Value Higher levels of skills and education Level of education Pass rate increases University access Graduation rates Increased availability or accessibility to employment Applicability of skills to other jobs Employment rate Income generation Improved health Reduction of lost work days Cost of treating disease Reduction in medical expenses Greater economic resilience Wage growth per individual Household wealth and disposable income Contribution to GDP and tax Distribution of wealth Number of new businesses Enhanced environmental quality Changes in health Improved access to natural resources Increased quality in natural resourcesBusiness Value Increased revenue – new customers, new products, Market penetration, entry, new markets, price differentiation/ extended use of existing services premium, innovation, demographic changes Reduced Costs and increased efficiency Decrease in production costs, operational costs, sales and marketing costs, exposure, access to natural resources Building intangibles – Improved customer Customer perception, survey, satisfaction – employee satisfaction, perceptions, increased customer satisfaction, talent recruitment and retention, skills development, availability and enhanced brand value, increased supplier quality of labour, media value and mentions, increased security of relationships, added value to investors, increased supplies employee recruitment, retention, satisfaction Managing risk – reduced risk to the business, BBBEE credentials, licences, physical asset security, raw materials reduced risk to the community – reduced regulatory security, enhanced stakeholder engagement and dialogue, reduction risk, enhanced licence to operate in activism, boycotting, strikes, increased sales and tenders
  26. 26. Rand Water – HIV & ME Impact over time
  27. 27. Rand Water – Frances Vorweg - Impact across economic, social and environmental aspects
  28. 28. Some stuff we have learnt• Sponsorship, Donations and infrastructure programs CAN deliver high impact and return• Bursaries do NOT necessarily deliver high impact and return -• ANY resources CAN be measured – books, wheelchairs, buildings, time – cash and non-cash• Both Socio Economic Development and Enterprise Development programs can be measured - equally• The same project can deliver varied results for different funders – HIV & ME, Dreamfields• How and on what you spend the money (inside the program) has a direct influence on the impact and return• The strategy and focus areas has to clearly define the return and impact required• Sustainability has to be clearly defined for exit and completion• Indicators have to be developed, agreed, and documented as part of the contractual phase• Internal monitoring and external evaluation processes has to be established and adhered too - Impact Assessment does not replace evaluation and monitoring• Impact can be measured over time as well as the triple bottom line
  29. 29. Other important stuff…• The type of service provider (NGO) and the level of service provider (sophistication) does have an impact on the outcome of the assessment• You have to consider the impact of the impact assessment on so many levels – As a result of our work we can now categorically state that most programs: • Have only short term impact • Those that have medium term impact are not necessarily sustainable • The long term impact is mostly social or socio economic only as opposed to economic impact which really contributes to poverty alleviation!• It is possible to determine impact and return – And the real value lie in independent, verifiable, assurance of CSI expenditure, program results, outcomes and impact
  30. 30. What I now know…• We all have impact – but it is not necessarily measurable and sustainable impact – Do we want economic or social impact? – By implication social impact help people right now – but may not help them in the future – which renders the project/our intervention UNSUSTAINABLE – Sometimes it is our own (CSI Practitioner’s) fault we don’t have higher impact as we decide what, who and how to fund/not to fund – The most sustainable projects/programs with the highest impact have social, socio economic and ECONOMIC impacts i.e. the number of jobs created – Sometimes there is negative impact – i.e. dependencies are created – Mostly there is only short term impact – again which makes our interventions UNSUSTAINABLE
  31. 31. Above all else: Measuring impact is importantMeasuring the right things is difficult Measuring impact is possible
  32. 32. What next? • Impact Investment Index: III • Levels of impact – shallow, deep, integrated – weighting of impact
  33. 33. Towards Best Practice• The Seven Principles • The Seven Stages – Involve stakeholders – Establish the scope – Understand what and identify the key changes stakeholders – Value things that – Map the outcomes – matter identify the indicators – Only include what is – Look for evidence material – Establish the impact – Do not over claim – Calculate the impact – Be transparent – Report the outcome – Verify the result – Share the learning
  34. 34. Workshop• What constitutes • How will we measure current practice? impact and return?• What are the • How will we report on challenges to impact and return? measuring impact and return • How will measuring currently? and reporting on impact and return• What do we need to do to change? impact our work and the industry?
  35. 35. Contact• Reana Rossouw• Next Generation Consultants• Specialists in Corporate Sustainability and Integrated Sustainability as well Socio Economic Investment and Development• Tel: (011) 258 8616• E-mail: rrossouw@nextgeneration.co.za• Web: www.nextgeneration.co.za• PLEASE NOTE: THIS PRESENTATION IS PART OF A LARGER BODY OF RESEARCH!• THIS INFORMATION IS COPYWRITED AND THE INTELLECTUAL PROPERTY OF NEXT GENERATION CONSULTANTS

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