Calculating Cost of Social Issues for Impact Investment
15 February 2016 at 6:42 pm
A new guide to improve impact investment strategies through greater understanding of the cost of social issues has been released.
A Practical Guide to Understanding Social Costs: Developing the Evidence Base for Informed Social Impact Investment, by Deloitte Access Economics with the Australian Advisory Board on Impact Investing, was developed to help the social sector demonstrate the outcomes that are achieved and the costs to deliver better solutions.
The lead report author from Health Economics and Social Policy at Deloitte, Lynne Pezzullo, said many organisations struggled to define outcomes, and even fewer knew whether they were successful.
“The difficulty in advancing impact investment is centered on understanding the true cost of social issues,” Pezzullo said.
“This guide shares practical tools for organisations to work through what can be often be a daunting task of calculating the cost of particular social issues so that a better understanding can be developed regarding the willingness to pay to address those issues.
“Without a shared understanding of the true costs of a social issue, we can’t begin the conversation about how to best direct investment, prevent poor outcomes and save significant costs into the future, including to governments and private investors.”
The guide, which includes two examples of teen motherhood and homelessness, can be applied in a number of ways, including understanding the social cost of a particular issue to inform realignment of investment, or understanding where the greatest costs are incurred across a range of social problems.
Chair of the Australian Advisory Board on Impact Investing and Chair of Impact Investing Australia, Rosemary Addis, said the guide was part of the strategy for growing the market for investments that deliver a measurable social impact in addition to a financial return.
“Impact Investing Australia welcomes this guide which is a terrific step in building understanding of the cost of complex social challenges,” Addis said.
“We hope it will contribute to greater openness about the costing of social issues to enable more focus on investment in more innovative, efficacious and preventative social and environmental programs.”