Making it count Foundations: How do you know you create value? 11 th September 2014

Transcription

1 11 th September 2014 Making it count Foundations: How do you know you create value?

2 Presentation Foundations/Philanthropy PwC global view. Impact Measurement What, When and How. UK interlude Combining the above. 2

3 Our view of Foundations /Philanthropy

4 Global trends The market foundations operate in is changing: Non profits and foundations that are moving from grant to lending / funding to secure greater sustainability and reduced grant dependency (typically small scale, e.g.: Shell, Esmee Fairburn, Northern Rock Foundation and Acumen) Impact Investors that have acted for some time to stimulate the market for sustainable investment on patient terms (e.g.: IFC, CDC) and are (typically) also motivated by other objectives Private funds that see the potential to secure both private and social returns (e.g. tridds, JP Morgan) and (typically) again are relatively small scale New entrants that are needing to put in place instruments and institutions that will support and develop a new market place (e.g.: Big Society Capital, GINN, TIMM) Raises the issue of future role(s) and where best to generate net additional impact. 4

5 Areas where foundations are crucial Private sector can do business without public sector s support 2 4 Economic return Private sector faces difficulties in business operation: 3 4 Public sector is required to support private businesses develop Impact funds are required to support private businesses Aid organisations philanthropic activities are required Relatively unattractive a) Cases where financial returns can be secured if market failure is corrected b) Cases where sufficient financial returns cannot be secured even though market failure is corrected 7 Market failure Social return 5

6 Foundations form an important component of the overall impact investing market place Negative* Low* Mid* High* E13(India) E 12(India) 1 E9(UK) E11(India) E10(UK) 2 E8 (Switzerland) E6(UK) E7(India) E5(India) D16(UK)** LE7(Belgium) (E) D 2 (Norway) D 1 (N/A) 5a N2(Netherland)** N1(US) 5b D6(UK) D5(Norway) SME LE1(Switzerland) LE6(Switzerland) E1(Norway)** D8(Belgium)(L) D7(Denmark) (L) LE 5(Switzerland) E2(US) ** F1(US) LE4(Belgium) D9(Netherland) LE 3(Netherland) LE 2(Belgium) (L) Target return on investment (%) Risk free rate E3(Switzerland) D11(US) ** D10(US) ** D13(Finland) D12(Denmark) D14(Belgium) (E) *High : higher than 15%, Mid:5-15%, Low:0-5% range **Target IRR D15(Norway) E4(Netherland) Note: ( )Country <L>fund 凡 例 : offering loans <E> fund offering equity Number indicates the code name of the institution DFI- D E-private fund -equity only LE- private fund loan and equity N-non profit private fund F- foundation, NGO 6

7 How might you consider measuring your value?

8 If our interpretation of trends and the role of foundations is correct: Increasing importance of understanding the relationships between market failures, economic and social (as well as environmental) impacts Need to establish consensus on what require to measure, how interpret and implications for funding and net benefit maximisation Require a common language and reporting system What should we be measuring? How should we be measuring it? What and when should we be reporting? 8

9 What should we be measuring? INPUTS Funding, staff time, volunteer time, materials cost OUTPUT Patients seen, local people employed / trained, items of equipment supplied to the community OUTCOME HEALTH Patient outcomes, patient satisfaction, reduced health inequalities ECONOMIC Local skills development & employment, productivity increases FISCAL Exchequer Benefits IMPACT (NET OUTCOMES) how much of the change is additional Increased focus 9

10 How should we be measuring impacts Sharing findings with stakeholders and responding to them, embedding good outcomes processes and verification of the report. 6. Communicating & improving 1. Scoping Clarifies the boundaries of the impact analysis, who will be involved in the process and how. 2. Mapping outcomes Developing an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes. Adding up all the benefits, subtracting any negatives and comparing the result to the investment. PwC 5. Comparing 4. Establishing impact 3. Evidencing and valuing outcomes Eliminates those aspects of change that would have happened anyway or are a result of other factors. Finding data to show whether outcomes have happened and then valuing them

11 Completed MIFUMI impact pathway Inputs Outputs Outcomes Learning Action Condition Expenditure of EUR 20,000: - Equipment - Allowances for trainers - Manuals - Training Karate lessons for girls Learn/ practice Karate Learn self - expression Knowledge about gender rights Practice Karate & demonstrate in public Defend themselves & address gender issues Report more cases of abuse Increased selfconfidence Improved physical fitness Fall in genderbased violence Higher aspirations Improved school attendance & performance Economic empowerment Social interaction Support other girls Developed social networks PwC Learning how to train others Train others and start classes in other schools Become leaders in their communities 11 11

12 Examples of our Work Project GreenHands Future ecological impact of 3 million extra trees at maturity CO2 absorption 27,010 tonnes per year Green cover area 580 square kilometres per tree lifetime O2 absorption 14,600 tonnes per year Rain water harvesting 9,125 million litres per tree lifetime Top soil preservation million tonnes per tree lifetime Greenhouse Future impact of 250 more individuals in education or employment Productivity gain to the economy 2,619,214 a year from higher employment Exchequer savings from Jobseekers Allowance 133,000 a year from less claimants Savings from crime costs Savings from crime costs 40,559 a year from lower juvenile crime Additionality: High Additionality: Medium 12

13 More Examples! Play 31 Potential outreach of 1 additional tournament in Sierra Leone Special Olympics Potential impact of improved funding and communications approach Number of matches 270 per tournament Number of players 540 per tournament Number of spectators 5,000 per tournament Target a new range of donors including development agencies and banks (i.e. African Development Bank, Inter - American Development Bank) Form 5 to 10 strategic partnerships with development or relief organisations, such as CARE International Form 5 to 10 strategic partnerships with development or relief organisations, such as CARE International Additionality: Medium Additionality: Low 13

14 What and when should we be reporting Issue Current model Future model Reporting scope Legal ownership and control Value chain Dominant driver Financial, past Strategic, holistic, future Timeframe Short term Short, medium and long term Detail Long and complex Concise and material Trust Narrow disclosure Greater transparency Information construct Silos Integrated Performance Financial capital All capital intellectual, human, social Source: International Integrated Reporting Council 14

15 Impact Assessment Indicators Stage Output Outcome Impact Sample Indicators The number of nutritional foods produced at a production facility The number of pupils who consumed the nutritional foods produced at the facility and whose nutritional status improved due to consumption Overall education level and literacy rate is improved as the nutritional status improves in the area. Improved awareness on health and nutrition as the nutritional status of pupils improved. Spill-over effects to other development issues (from health to education). 15

16 Impact Assessment Indicators...continued Impact assessment methods Organisation Stages Output Outcome Impact 1 Impact Reporting and Investment Standards (IRIS) Global Impact Investing Network (GIIN) 2 Global Reporting Initiative Guideline Global Reporting Initiative (GRI) Global Impact Investing Rating System (GIIRS) Measuring Value of BCtA Initiative, A Result Reporting Framework Development Outcome Tracking Systems (DOTS) 6 Measuring Impact Framework GIIRS members Business Call to Action (BCtA) International Financial Corporation (IFC) World Business Council on Sustainable Development (WBCSD) 7 Poverty Footprint Framework Oxfam 8 Baseline Form for new projects DFID Business Innovation Facility (BIF) 9 Social Return on Investment (SROI) Roberts Enterprise Development Foundation (REDF), New Economic Foundation (NEF) 10 Progress out of Poverty Index (PPI) Grameen Foundation 16

17 TIMM is about understanding the totality of impact 17

18 Lessons learnt to date in impact measurement Understand why you want to undertake an impact assessment Define a set of hypotheses in relation to your actions and their potential effects Balance between data, open and closed questions to test these hypotheses Recognise that you will not always have only positive impacts be open-minded and objective If possible, develop a logic chain to test whether you are generating impacts and the relationship between outputs, outcomes and impacts Focus on the counterfactual Question attribution Understand net, rather than gross impacts 18

19 A brief interlude a lesson from the UK?

20 Payments by Results Radical change in commissioning landscape Better service delivery and outcomes (e.g. Early Intervention ) Significant exchequer benefits that are cashable Alternative forms of finance available to fund providers New market 20

21 Payments by Results Payment by Results provides a mechanism for aligning the interests of foundations, investors, providers and commissioners to deliver enhanced social outcomes to a specified target population. Target Population Providers Commissioners Foundations/ Investors 21

22 Payments by Results Pre-conditions There is an identified social need In addressing this need other providers either independently or jointly with the public sector could potentially deliver better and new social outcomes These outcomes may have public exchequer benefits in terms of cost efficiencies and/or cashable savings relative to status quo/alternatives Alternative delivery therefore provides potential value for money outcomes There is sufficient interest from social investors to fund providers There is agreement by a commissioning body that if future outcomes are delivered investors will receive a financial return There are potential contractual routes to bring together commissioners, providers and investors 22

23 Key Metrics and Messages: Public Sector Metrics Net Social Impacts Public Exchequer Benefits Cashable Savings Price point or intermediate payments Working Capital : Liquidity Objective measurement protocols Risks v Returns Messages Demonstrating better impacts compared to alternatives Translating these into financial benefits to the public purse Agreeing/Bidding for PBR outcomes Convincing investors Convincing government Commercial contract How best to spread risk 23 23

24 Thank you! This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No republication or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. 24

25 Useful sources of UK reference material 1) PwC webcast overview of social impact measurement amewidth=1020&frameheight=650 2) Green Book UK Government guidance for appraisal and evaluation 3) Social Return on Investment Guide step-by-step guide with examples 4) Big Society Capital s social impact pages 5) UK Government guide to social impact bonds 25