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

Making it count

Foundations: How do

you know you create

value?

www.pwc.com

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Presentation

 Foundations/Philanthropy – PwC ‘global’ view.

 Impact Measurement – What, When and How.

Our view of Foundations

/Philanthropy

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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.

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Areas where foundations are crucial

Private sector can do business without public sector’s support

Private sector faces difficulties in business operation:

Public sector is required to support private businesses develop

Impact funds are required to support private businesses

Aid organisations philanth- ropic activities are required

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 1 5 6 2 4 3 Relatively unattractive 7 8 1 2 3 4 5 6 7 8 Market failure Economic return Social return © 2014 PricewaterhouseCoopers LLP

6 Low* Target return on investment (%) Mid* High* E4(Netherland) LE4(Belgium) LE 3(Netherland) LE7(Belgium) (E) LE 5(Switzerland) E8 (Switzerland) LE6(Switzerland) E3(Switzerland) E1(Norway)** D6(UK) D 2 (Norway) D8(Belgium)(L) D7(Denmark) (L) D12(Denmark)

D14(Belgium) (E) D15(Norway)

N2(Netherland)**

D13(Finland)

D16(UK)**

Foundations form an important component of the overall impact investing market place

N1(US) D9(Netherland) Negative* D 1 (N/A) D5(Norway) SME LE1(Switzerland)

*High : higher than 15%, Mid:5-15%, Low:0-5% range **Target IRR E13(India) E 12(India) E11(India) E6(UK) E7(India) F1(US) D11(US) ** E2(US) ** E10(UK) E9(UK) D10(US) ** LE 2(Belgium) (L) E5(India) 1 2 5a 凡例： Note： ( )Country

<L>fund offering loans <E> fund offering equity Number indicates the code name of the institution

E-private fund -equity only

DFI- D

LE- private fund loan and equity N-non profit private fund

F- foundation, NGO

Risk free rate

© 2014 PricewaterhouseCoopers LLP 5b

How might you consider

measuring your value?

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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

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What should we be measuring?

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How should we be measuring ‘it’?

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What should we be measuring?

INPUTS

OUTPUT

OUTCOME

IMPACT

change is ‘additional’

Increased

focus

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PwC

How should we be measuring impacts

1. Scoping

2. Mapping

outcomes

3. Evidencing

and valuing

outcomes

4. Establishing

impact

5. Comparing

Clarifies the boundaries of the impact analysis, who will be involved in the process and how.

Developing an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes. Sharing findings with stakeholders and responding to them, embedding good outcomes processes and verification of the report. Adding up all the benefits, subtracting any negatives and comparing the result to the

investment. 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. 10

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PwC

Completed MIFUMI impact pathway

Expenditure of EUR 20,000: - Equipment - Allowances for trainers - Manuals - Training

Inputs Outputs Outcomes

Learning Action Condition

Karate lessons for girls Learn self - expression Learn/ practice Karate Knowledge about gender rights Higher aspirations Social interaction Learning how to train others

Practice Karate & demonstrate in public Defend themselves & address gender issues Report more cases

of abuse Improved school attendance & performance Support other girls Developed social networks

Train others and start classes in other schools Become leaders in their communities Economic empowerment Fall in gender-based violence Increased self-confidence Improved physical fitness 11

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Examples of our Work

Future ecological impact of 3 million extra trees at maturity

Additionality:

High

Greenhouse

Future impact of 250 more individuals in education or employment

Additionality:

Medium CO2 absorption

27,010

tonnes per year

O2 absorption

14,600

tonnes per year Green cover area

580

square kilometres per tree lifetime

Rain water harvesting

9,125

million litres per tree lifetime Top soil preservation

18.25

million tonnes per tree lifetime

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

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More Examples !

Potential outreach of 1 additional tournament in Sierra Leone

Additionality:

Medium

Special Olympics

Potential impact of improved funding and communications approach Additionality: Low Number of players

540

270

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

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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

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Impact Assessment Indicators

Stage Sample Indicators

Output The number of nutritional foods produced at a production facility

Outcome The number of pupils who consumed the nutritional foods produced at the facility and whose nutritional status improved due to consumption

Impact

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).

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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)  3 Global Impact Investing Rating System _(GIIRS) GIIRS members 

4 Measuring Value of BCtA Initiative, A Result _{Reporting Framework} Business Call to Action (BCtA)   5 Development Outcome Tracking Systems _(DOTS) International Financial Corporation _(IFC) 

6 Measuring Impact Framework 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 

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TIMM is about understanding the totality of impact

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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

A brief interlude – a lesson from

the UK?

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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

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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 Commissioners Foundations/ Investors Providers © 2014 PricewaterhouseCoopers LLP

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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

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Key Metrics and Messages: Public Sector

Metrics

Messages

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Net Social Impacts

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Public Exchequer Benefits

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Cashable Savings

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Price point or intermediate

payments

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Working Capital : Liquidity

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Objective measurement protocols

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Risks v Returns

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Demonstrating better impacts

compared to alternatives

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Translating these into financial

benefits to the public purse

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Agreeing/Bidding for PBR

outcomes

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Convincing investors

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Convincing government

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Commercial contract

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How best to spread risk

23 © 2014 PricewaterhouseCoopers LLP

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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.

© 2014 PricewaterhouseCoopers LLP. 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.

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Useful sources of UK reference material

1) PwC webcast – overview of social impact measurement

http://www.pwcplayer.co.uk/playpresentation.php?presid=560&ftheme=ent_pwc_3&fr amewidth=1020&frameheight=650

2) Green Book – UK Government guidance for appraisal and evaluation

http://www.hm-treasury.gov.uk/d/green_book_complete.pdf

3) Social Return on Investment Guide – step-by-step guide with examples

http://www.sroi-uk.org/publications-uk/doc_details/241-a-guide-to-social-return-on-investment-2012

4) Big Society Capital’s social impact pages

http://www.bigsocietycapital.com/social-impact

5) UK Government guide to social impact bonds

https://www.gov.uk/social-impact-bonds