More Than A Profit? Measuring the Social and Green Outcomes of Urban Investments December 11 th 2007 Cambridge, MA Lisa Hagerman Labor & Worklife Program, Harvard Law School Oxford University Centre for the Environment Sponsored by the Rockefeller and Ford Foundations

Institutional Investors in Targeted Investing  Banks, insurance companies, foundations  Public sector pension funds over $12 billion  Transparency of returns both financial and social key for growth of industry and flow of institutional capital  Simplify social reporting $ invested © 2007 Hagerman

Financial returns  Fixed income, equity real estate and venture capital  Risk-adjusted returns against benchmarks  Benchmarks  Fixed income: Lehman Aggregate Bond Index  Real Estate: NCREIF (National Council of Real Estate Investment Fiduciaries) Property Index  Venture Capital: Thomson Financial Venture Capital Index © 2007 Hagerman

Moving beyond the financial  You Manage What You Measure  Kaplan and Norton’s Balanced Scorecard move beyond financial to measure customer perspective and innovation  Beyond traditional financial regulatory systems  International Organization of Standardization (IS0)  ISO certification in environmental management  Create an equal level playing field in a particular industry © 2007 Hagerman

Extra-financial language  Outputs or Outcomes  Tangible effects investment has had in the area  Measurable, quantifiable, positive results for: Employee, Community, and the Environment  Impacts  Long term results - broader societal or economic change measured years after program completed  But for? factor would economic changes have happened anyway regardless of the investment?

Social and green outcomes  Employee outcomes: jobs and living wage, health insurance, profit sharing programs  Community outcomes: export-oriented sales, tax revenues  Green outcomes:  Business: clean-tech, recycling, company energy saving  Real estate: transit-oriented, LEED-certified, EPA Energy Star, global green, greenfield acres saved

Models of partnerships measuring social outcomes 1.For-profit fund manager & nonprofit advisory services 2.For-profit fund manager requires company side letter and reports outcomes to investor 3.For-profit fund manager contracts with investor to provides outputs, consultant hired to evaluate outputs 4.Foundations/Investors/Funds/Research Centers/Gov’t partner to obtain and evaluate data 5.Investors (e.g. foundations, pension funds) may track through internal targeted investing programs © 2007 Hagerman

Challenges  Time is money – balance feasibility in measuring data and credibility of data  Quality of outcomes - health insurance, living wage  No benchmarks aside from comparing against state standards (social) and ISO, LEED, EPA (green)  Lack of resources and varying levels of detail  Often no 3rd party regulator  Balance tensions - investor type and reporting requests © 2007 Hagerman

Looking ahead  Manage what you measure - tracking ensures social and environmental returns happening  Saves money and increases profits to investors  How to simplify the process and standardize?  Engage investors in the process?  Research: © 2007 Hagerman