MookPAW2006

Integrating and reporting an economically targeted investment’s economic, social and environmental value added: The case of a master planned community: 

Integrating and reporting an economically targeted investment’s economic, social and environmental value added: The case of a master planned community Laurie Mook, OISE/University of Toronto October 20, 2006

Fiduciary responsibility: 

Fiduciary responsibility Best interests of beneficiaries are not solely financial interests “There is significant legal and empirical support for viewing socially responsible investment practices as a requisite element of prudent and loyal trusteeship” (Yaron 2001, 2) Confirmed by subsequent analysis of legal frameworks in nine countries (Watchman et al. 2005, 13)

Fiduciary responsibility: 

Fiduciary responsibility Environmental, social and governance (ESG) issues may affect financial value and thus returns; and ESG issues may be aligned to specific investment objectives of investees

A trade union approach to pension fund investing: 

A trade union approach to pension fund investing Create good, unionized jobs Earn good returns with targeted social, economic and environmental objectives Promote good corporate behaviour Limit excesses of corporate executives and inside shareholders Curb anti-social corporate behaviour such as environmental pollution and child labour (CLC 2004)

Economically Targeted Investments (ETIs): 

Economically Targeted Investments (ETIs) One type of socially responsible investment which “seeks to obtain risk-adjusted market grade returns while achieving collateral benefits for plan members and their communities” (SHARE, n.d.)

Value added: 

Value added Value added is a measure of wealth that an organization creates by adding value to raw materials, products and services through the use of labour and capital. typically measured by the difference between the market value of the goods or services produced, and the cost of goods and services purchased from other producers (Ruggles and Ruggles 1965)

Example: 

Example Raw materials (wood, screws, glue, etc.) Transformed by labour and capital Finished table $100 $300

Example: 

Example Raw materials (wood, screws, glue, etc.) Transformed by labour and capital Finished table $100 $300

Example: 

Example Raw materials (wood, screws, glue, etc.) Transformed by labour and capital Finished table $100 $200 $300

Income Statement & Value Added Statement: 

Income Statement & Value Added Statement

Limitations of traditional value added : 

Limitations of traditional value added Focuses only on financial items and pays no attention to intangibles and items that do not pass through the market Does not account for indirect impacts of an organisation’s activities Does not make explicit the choices made in obtaining resources

Key considerations: 

Key considerations Return on investment to pension fund investors Creation of jobs Contributions to pension funds (deferred wages) Impact on residents Impact on local community Environmental impact

Case studies: 

Case studies Hypothetical case based on features of existing ETI Compared to similar case which does not have these features 10-year timeframe

Overview: 

Overview Scenario 1 Combination of rental buildings and condominiums Population 5,000 Surrounding community 40,000 Financing – 50% private; 50% pension funds 10 year timeframe Scenario 2 PLUS Amenities Location near public transit Environmental policies

Case studies: 

Case studies

Implications: 

Implications

Quantifying impacts: 

Quantifying impacts Location: Near Public Transit What is the impact of shifting commuters from car use to public transit? 5 days a week, 48 weeks a year 20 kilometres round-trip Total 4,800 kilometres

Transit costs: 

Transit costs Individual costs Vehicle ownership Parking costs Vehicle operation Travel time Accident costs

Transit costs: 

Transit costs Individual costs Societal costs Accident costs Parking costs Congestion Roads Municipal services Air pollution Noise Resource consumption Water pollution Waste disposal Land use impacts

Impact of transit shift: 

Impact of transit shift (Litman 2005)

Impact of transit shift: 

Impact of transit shift What is the impact of shifting commuters from car use to public transit? 5 days a week, 48 weeks a year 20 kilometres round-trip Total 4,800 kilometres 4,800 kilometres multiplied by $0.5659 = $2,716 (1996 US$) per switch

Quantifying impacts: 

Quantifying impacts Amenities: Community Centre/Parks; Community Policing Centre Impact of active lifestyle Impact of reduction in crimes Direct cost of crimes to victims Cost of pain and suffering Opportunities to volunteer

Active lifestyle: 

Active lifestyle 1997 study found that 2/3 of Canadians physically inactive Effects of physical inactivity estimated to be 2.5% of all healthcare costs, or $2.1 billion a year (1997) Same study found that by reducing physical activity by 10 percent, healthcare expenditures could be reduced by $150 million a year

Reduction in crime: 

Reduction in crime In 1996 Canadian $: Average direct cost of property crimes in Canada was $2,390 (Statistics Canada) Cost of pain and suffering $11,076 (Leung 2004)

Volunteer involvement: 

Volunteer involvement Example from Collingwood Community Policing Centre Strong volunteer involvement 2005: 219 volunteers; 25,202 hours Equivalent to 13.85 FTE (87 percent of all hours) CMV = $293,855 ($11.66 hour) (55% of all resources) Financial resources = $241,770

Quantifying impacts: 

Quantifying impacts Operations: Environmental Policy Purchasing Energy Star devices versus non Energy Star devices Exit signs Compact fluorescent lights

Exit signs/CFBs: 

Exit signs/CFBs

Exit signs/CFBs: 

Exit signs/CFBs Reduction in energy use Reduction in cost to operate buildings Reduction in CO2 and other emissions

Net income reconciliation: 

Net income reconciliation

Value added reconciliation : 

Value added reconciliation

Fiduciary responsibility: 

Fiduciary responsibility Environmental, social and governance issues may affect financial value and thus returns, and second, they may be aligned to specific investment objectives (Watchman et al. 2005) Best interests of beneficiaries are not solely financial interests (Yaron 2001)

References: 

References Canadian Labour Congress (2004) A Trade Union Approach to Pension Fund Investing. Available from Internet URL <http://www.canadianlabour.ca> Mook Laurie (2006) Integrating and Reporting an Organisation’s Economic, Social and Environmental Performance: The Expanded Value Added Statement. In Schaltegger, Stefan, Martin Bennett & Roger Burritt (Eds.), Sustainability Accounting and Reporting, 281-298. Dordrecht: Springer. Mook Laurie, Jack Quarter & Betty Jane Richmond (2007) What Counts: Social Accounting for Nonprofits and Cooperatives, Second Edition. London: Sigel Press.

References: 

References Watchman Paul et al. (2005) A legal framework for the integration of environmental, social and governance issues into institutional investment. London/Geneva: Freshfields, Bruckhaus, Deringer/United Nations Environment Programme Finance Initiative. www.unepfi.org/fileadmin/documents/freshfields_legal_resp_20051123.pdf (30 August 2006). Yaron Gil (2001) The responsible pension trustee: Reinterpreting the principles of prudence and loyalty in the context of socially responsible institutional investing. Vancouver: SHARE.www.share.ca/files/pdfs/Trustee%20_final.pdf (30 October 2004).

Thank you!: 

Thank you! Contact information: Laurie Mook OISE/University of Toronto Social Economy Centre 252 Bloor St. W., Toronto, Ontario Canada M1L 3S9 Email: Lmook@oise.utoronto.ca Website: http://home.oise.utoronto.ca/~lmook