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  • Samuel Vionnet

From impact valuation to investing for purpose

Dernière mise à jour : 31 mai 2023

The coming decades will be defined by our current social and environmental challenges: climate change and loss of biodiversity, rising inequalities, and migration and diversity challenges, to name only a few. Allocation of capital and philanthropy must play an essential role in supporting emerging solutions and organisations, both businesses and social purpose organisations (SPOs), focused on addressing societal challenges. This capital needs to be allocated in the most efficient way to deliver the highest positive societal impact, informed by relevant impact metrics.

However, there is still considerable confusion around the concept and measure of societal impact, and unfortunately, very few applications quantify it in a relevant, comparable and consistent way.

The investment and private sectors historically applied a much less rigorous approach when it comes to measuring non-financial performance compared to financial performance, and the social sector has often taken intentions and goodwill as a proxy for evidence of impact. This leads to a lack of capacity to efficiently understand and address social challenges through social innovation and social entrepreneurship.

...the social sector has often taken intentions and goodwill as a proxy for evidence of impact.

We acknowledge the significant work others have done, but there is still a need

for more research and development in this field, now more than ever. Investors and

businesses need to aim collectively towards improved methods and standardisation in

impact assessment, to a level of rigour equivalent to financial accounting.

This paper aims to contribute to this objective by sharing the insights from our journey and proposing new innovative ways to capture the societal value of organisations. Wilstar and Valuing Impact envisions that this paper will be a useful reference for both the community leading the developments in this field and the many stakeholders (impact investors, businesses, social entrepreneurs) interested in understanding and measuring their impact on the society alongside their financial results.

This paper aims to address the current limitations of impact assessment and valuation by using a new and innovative impact valuation method, based on the definition of a unique and advanced impact metric that reflectsd the well-being of individuals or groups of individuals. The advantage of such an impact indicator is reflected in its relevance, comparability and consistency in the assessment of all activities of organisations. We deployed the impact framework to the entire portfolio of Wilstar, providing a dynamic view of its impact across investments, value pathways, present and future time, and impact across stakeholders. We demonstrate the relevance of the approach by comparing it to more traditional output indicators used widely such as number of beneficiaries as illustrated in the figure below.

Figure - Comparison between traditional output measured and societal impact results.

Comparison between traditional output measured and societal impact results

The insights of the impact valuation results support the activities of Wilstar in its due diligence or compliance processes, raise awareness, inform strategies and support more widely decision making. Understanding social and environmental externalities contributes to enhanced competitive advantage, provides a basis for identifying profitable opportunities, and assists in reducing risk in a challenging investment environment. It also assists in quantitatively aligning the purpose of an organisation with its performance measurement.

We reported the results of this study into an innovative financial reporting format, the "integrated value reporting” which is using a parallel reporting between financial capital, natural, human and social capital. The full integrated income statement table is available in the report. Balancing our economic development, our legacy, and our contribution to society and addressing social and environmental challenges requires an integrated accounting of value using relevant and comparable societal impact metrics. This paper proposes a way forward, demonstrating the value it created for Wilstar in advancing its strategy and societal value. We believe that access to objective information and data will be crucial for supporting long-term value creation and ensuring a long-lived legacy in line with younger generations’ aspirations.

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