“But I mean, can you honestly say that you would put a monetary value on dignity?”
That was the astonished question I was asked by an audience member during a spirited debate at the recent Trialogue CSI conference about whether corporate social investment should continue to focus on straight grantmaking, or find other funding models for development work.
Neither my affirmative answer to this question nor the incredulous looks I got was anything new to me, nor would be to my team at UCT’s Bertha Centre. Marrying the disparate worlds of traditional finance and that of development work is our job, but it’s a new approach to many in the social development world.
It sees our Innovative Finance team work with governments, corporates, foundations, NPOs, entrepreneurs, communities and everyone in-between in researching, developing and testing new types of financing to channel capital to organisations and initiatives that produce the greatest social, environmental and financial value for SA.
We want to assign monetary values to seemingly ephemeral qualities like dignity during death or hard-to-measure outcomes like cognitive development in young children. Why do we think that should be done, and is it even possible?
The answer to the first question is that we desperately need to. When corporations make decisions on how to allocate capital among business departments, they consult reams of data to understand the returns projected and the impact of that capital invested on the rest of the business. Well-run companies ultimately determine where to invest based on a multitude of data points and reallocate as the data changes. What if CSI spend could also be allocated in a way that used reams of data around effectiveness of programmes and institutions?
Currently, many service providers in development (often NPOs) are excellent conduits for investments in education, health and community development, but they are rarely able to fully measure their impact due to the lack of a true interest from funders in properly understanding project outcomes (as opposed to inputs, which are much easier to measure).
An example of this was on show at the conference when CSI executives of Vodacom and Anglo American Platinum bravely took the stage and admitted that they had commissioned deep impact assessments of some of their projects for the first time in decades. This is in itself astonishing as they spoke of R180 million disbursed in these projects. Even more shocking was that the assessments showed no positive impact for those programmes.
Some argue that an increase in monitoring and evaluation (M&E) spend can solve this issue, but this is only a piece of the puzzle. Until impact metrics are embedded in how CSI money is distributed, M&E will continue to be a side effort by even the best NPOs.
What could embedded M&E look like? One option is an impact bond. These are not really bonds at all, but contractual agreements that make use of risk capital from private investors to pilot a social intervention.
Outcome funders, like the government or corporates or foundations, commit to repaying the capital plus returns to the private investor if and only if the developmental intervention succeeds. We’ve been working with the National Treasury, the Western Cape Government and the City of Cape Town for the past two years to help develop impact bonds as an “outcome-based procurement” option.
How would this work? In the Western Cape, we are working in early childhood development (ECD) because investment in ECD has an incredibly high social return. Decades of studies have shown that developmental interventions at early ages can positively impact individuals for the rest of their lives.
With our partners, we’ve designed a rate card that includes a list of indicators – such as decreased maternal alcohol consumption, decreased stunting and cognitive development – that effectively measure whether a child is flourishing.
Outcome funders can tender for services based on these outcomes. Service providers (NPOs) will be able to bid for funding based on outcomes instead of line-item based funding, giving them flexibility and upfront funding. Investors can invest in these NPOs by providing this upfront funding and if the NPOs are able to produce the desired results, investors receive a return on their investment. Independent M&E specialists monitor project progress and verify whether the outcomes mean that funders should make payments.
Innovatively, these outcome funders can be governmental, alongside corporates and other funders, thus increasing the amount of investment into ECD, and embedding the measurement of outcomes into the distribution of capital.
By putting a monetary value on, say, the reduction in child growth stunting, we are allowing NPOs to work towards their ultimate goal – a healthy child, where funders only provide financial support when these interventions work. That’s why we believe that Impact Bonds and other innovative financing mechanisms offer corporates (and other funders) a significant opportunity to improve how their CSI and other development capital is distributed.
As for whether it’s possible to put a monetary value on dignity during death or on a decrease in stunting, I think I’ll refer to Madiba on this one: “It always seems impossible until it is done”.
Originally published in the Business Day, by Aunnie Patton.