How to perform economic impact assessment of social investments

Report 2019/

Haakon Vennemo

How to perform economic impact assessment of social investments

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Sub-Categories	Courses and lectures
Year	2019
Author(s)	Haakon Vennemo
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vista-analyse.noHow to performeconomicimpactassessmentofsocialinvestmentsSomethoughtsand suggestionsHaakon VennemoProfessor at Business School, Oslo Metropolitan UniversityCEO and Partner, Vista AnalyseVilnius, October25th, 2019

vista-analyse.noVista Analysis Company Profile•Social science consultancy foundedin 2000•25 employees•Network withothercompaniesand experts•Emphasis on economic analysis, policy analysis, and evaluations•Reports, presentations and advice•Close interaction with clients•High professional and academic standards •Independent conclusions

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vista-analyse.noBeforewestart…•Whatdo wemeanby impactassessmentofsocialinvestments?•«Social return on investment (SROI) is a concept to account for social value when evaluating investments. It goes beyond traditional economic evaluation tools, by considering value produced for multiple stakeholders in all three dimensions of development: economic, social and environmental(…)Building on the financial analysis method of return on investment (ROI), social return on investment (SROI) is a concept to account for value created, which includes not only individual shareholder profit, but also the benefits for the broader public in the social, economic and environmental spheres.” •WHO (2017) Social return on investment

vista-analyse.noBeforewestart…•Whatdo wemeanby impactassessmentofsocialinvestments?TimelineInvestment 12835467yearImpacts, and operation&managementcosts10911

vista-analyse.noBeforewestart…•Whatdo wemeanby impactassessmentofsocialinvestments?TimelineInvestment 12835467yearImpacts, and operation&managementcosts-10010101010101010911101010

vista-analyse.noBeforewestart…•Whatdo wemeanby impactassessmentofsocialinvestments?TimelineInvestment 12835467yearImpacts, and operation&managementcosts-10010101010101050 peoplejoinlabourforceMore than100 peopleobtainsignificantlyhigherqualityoflife10911101010

vista-analyse.noWhystriveto quantifythebenefitofsocialinvestments?•Benefits and costs: Comparebenefitofinvestmentto itscost•Awareness: Pullingtogetherthedifferent benefitsto thetarget groupand societygeneratesattentionand awareness•Priorities: Comparingdifferent benefitsincreasesunderstandingof whicharemore importantthanothers•Estimatingthebenefitsofsocialinvestmentgivesoversightand awareness, and is necessaryfor proper management •Butnot everythingcanbe valued

vista-analyse.noStepsin estimatingtheimpactsofsocialinvestments1.Definethescopeoftheinvestment•Content, lengthetc.2.Describethe«referencescenario», i.e. whatwillhappenwithouttheinvestment•E.g., sizeoftarget groupover time etc.3.Describeimpactsofinvestmentsand whoareimpacted, in qualitativeterms4.Quantifyimpactsin physicalunits, over time, whereappropriate. 5.Va l u e physicalimpactswhereappropriate. 6.Describequalitativeimpacts. Sometimesindicatorscanbe used7.Analyzeuncertainty8.Calculatenetpresent valueofbenefitsthatarevalued9.Comparenetpresent valueofbenefitsto netpresent valueofcosts10.Rank and recommendinvestmentoptionsbasedonnetpresent valueand assessmentofqualitativeimpacts11.AnalyzeequityimpactsoftheinvestmentSource: Vista Analyse/Norwegian GovernmentAgencyfor Financial Management (DFØ)

vista-analyse.noStepsin estimatingtheimpactsofsocialinvestments1.Definethescopeoftheinvestment•Content, lengthetc.2.Describethe«referencescenario», i.e. whatwillhappenwithouttheinvestment•E.g., sizeoftarget groupover time etc.3.Describeimpactsofinvestmentsand whoareimpacted, in qualitativeterms4.Quantifyimpactsin physicalunits, over time, whereappropriate. 5.Va l u e physicalimpactswhereappropriate. 6.Describequalitativeimpacts. Sometimesindicatorscanbe used.7.Analyzeuncertainty8.Calculatenetpresent valueofimpactsthatarevalued9.Comparenetpresent valueofbenefitsto netpresent valueofcosts10.Rank and recommendinvestmentoptionsbasedonnetpresent valueand assessmentofqualitativeimpacts11.AnalyzeequityimpactsoftheinvestmentSource: Vista Analyse/Norwegian GovernmentAgencyfor Financial Management (DFØ)

vista-analyse.noExample: Investingin preventionofdomesticviolence

vista-analyse.noImpactsofinvestmentin preventing domesticviolence•Loss oflife•Loss ofproductionwhenvictimis unfitfor work•Unfitfor rest oflife/disability•Unfitfor longperiods•Unfitfor shortperiods•Less productiveat work•Relatives’ loss ofproductionwhenvictimis unfitfor work•Qualityoflifefor victimand relatives

vista-analyse.noImpactsofinvestmentin preventing domesticviolence•Monetarycoststo victims•Coststo police, courts, welfareservices, doctors, dentists•Futurelosses as childrenofvictimsmaybecomeperpetrators•Efficiencycostofraisingpublicfundsto cover publicexpenditureand replacetaxincomefrom lost production•Compensationand disabilitybenefitsaremostlytransfers, not coststo society/benefitsofinterventions

vista-analyse.noSomemonetarycoststo victims•Medical expenses•Medical doctor•Dentist•Physio•Psychologist•Medicines•Escape and hide•Ta x i / t r a v e l•Seekingintermediatehousing•Costofintermediatehousing•Personal belongings•Costofmoving/reestablishinghome•Broker’sfees•Annoyance•Bank and insurance–accessto household account•Emergencysocialsupport•Lawyer, police•Changeofschool, kindergarden•Changeofjob/applications•Changetelephonenumber•Inventory and materials•Clothes•Dishes, cutlery, decorations•Furniture and appliances•Repairs/vandalism•Changeoflocks, windows

vista-analyse.noEstimatingtheimpactofinvestmentonnumberofbeneficiariesand impactoneach•A benefitconsistsof•Numberofbeneficiaries•The impactoneach•The valueofthatimpact•To estimatethenumberofbeneficiariesand impactoneach:•Literaturesearch•«Impacttransfer» from similarinvestments•Expert opinion•Scenario analysis•UncertaintyanalysisMay be themost difficult

vista-analyse.noEstimatedannualcostofdomesticviolencein Norway, 2010Type ofcostPer personNumberAnnualcostin billion NOK, 2010Costsofpublicresources15-30 00075-150 0002.0-2.4Loss oflife27 000 000190.5Production loss adults (mostlywomen)100-300 0006-80001.1-1.4Futureproductionloss, children50-150 0008-22 0000.7-1.9Pecuniarycostsand welfareloss ofvictimsand familiesNot valuedCostsoffutureviolenceNot valuedTo t a l valued4.5 –6.0

vista-analyse.noExample: Interventionsto improvethewelfareofpeoplewithAutismSpectre Disorder(ASD) and To u r e t t e ’ssyndrome

vista-analyse.noBenefit estimationreliedonscenarios•«Veronica is 32 yearsold and twoyearsagoshegotthediagnosisAsberger’sDisease. Shewastransferredto a localpsychiatricward, whichsometime later arrivedat thediagnosisAutismSpectre Disorder. For workrelatedissuesshewasreferredto theemploymentofficefor furtherassistance. •Veronica hada previousjobas a librarianthatdidn’tworkout. Shehadnowbeenonsicknessleavefor a year. Veronica hada desireto returnto thesame occupation, butin a different setting. At theemploymentofficeampletime wasused to monitor Veronica’sabilityfor work. The conversationsuncoveredseveralissuesthatwereimportantfor her employmentto workwell: Shemasteredsometasksbetterthanothersand neededwritteninstructionsand fixedrules. •During thefirst threemonthsofher newpracticeas employedVeronica hadunemploymentbenefitas wage. A specialistfrom theemploymentofficemonitoredher progress and her workhoursweresteadilyexpandedand more taskswereallocatedto her. Veronica becamemore and more comfortablein her roleat thenewlibrary. Afterthreemonthstheemployerand theemploymentofficeagreedthatsheshouldhave 50 percentwage, and thatit shouldincreaseover thenexttsixmonthsifimprovementcontinued. •Aftersixmonthstheinterventionwasclosedand Veronica wasback at work. This time shehadfixedtasksand a fixedroutineto her workday. Sheloves her work. Sheenjoysdiggingup informationthatcustomersask for –shehas a goodcommandoftheliteratureand theroutinesat her office. Her immediate leaders arefamiliarwithhowinformationis best presentedto her and her demandsfor facilitation.»

vista-analyse.noBenefit estimationreliedonscenarios•Veron ica worksas a librarianfor 34 years. Wecomputethediscountedvalueofannualwage, payrolltaxand socialexpences. •Shecontributesa netpresent valueof1,3 million euros.•In additionand equallyimportant, her qualityoflifeimproves.•Her successstory is due to theunemploymentoffice, butalsoto previousinterventions. Interventionsmaycostat least1.3 million euros beforecostsoutweighbenefits.

vista-analyse.noExample: CBA ofelectronicmonitoringofprisoners

vista-analyse.noElectronic monitoringofprisoners in Norway•For sentencesup to 120 days•By application•Non-violent offences•Prisoners must documentpaidor voluntaryemployment•Offenderand victimshouldlive far apart

vista-analyse.noImpact100 Euro per prisonerMonetizedbenefitsIncreasedemployment35Costsavingscomparedto ordinarydetention29Lowermarginal costofpublicfunds9SUM Monetizedbenefits73Non-monetizedbenefits++Risk ofrecidivism++Utilityoffamily+++Utilityofvictims0Public senseofright and wrong-Schoolingofprisoner0Contributionas unpaidlabour++Qualityoflifeofprisoner++Impactondelaysin detention++OverallNet benefitto societyover 7,300 euro per prisoner

vista-analyse.noLessonsfor Lithuania•Impactassessmentofsocialinvestmentis a methodologythathas manyqualities, butis not easyto do well•Detaileddata collection, and a solid frameworkarerequired•Twodifficultchallengesareto estimatehowmanywillbenefitfrom an intervention, and theimpactoneachbeneficiary•Somesuggestionsand exampleshave beenpresentedin thetalk

vista-analyse.noAčiū!Haakon.vennemo@vista-analyse.no+47 911 36 716