ABOUT THE
FINANCIAL VALUATION TOOL

IFC developed the FV Tool to help companies identify the optimum sustainability investment portfolio to deliver maximum business and social value.

FV Tool – Rationale

IFC developed the FV Tool to help companies identify the optimum sustainability investment portfolio to deliver maximum business and social value.

Independent research in the extractive sector shows that prudent, local sustainability investments can be critical to ensuring on-time and on-budget project completion in addition to creating community benefits. In a study of 190 oil and gas projects, Goldman Sachs found that over 70% of delays were caused by stakeholder-related sustainability issues, more than commercial or technical factors. Accenture found that 33% of these projects were over budget by 25% or more due to unforeseen delays.

The FV Tool allows an organization to test whether its sustainability initiatives will effectively create or protect value for a project and, most importantly, manage risks that could negatively impact project completion and ongoing business operations. And because it uses a data-driven methodology, Return on Investment is expressed in the quantifiable metric of Net Present Value (NPV), which enables sustainability budgets to more effectively compete with other corporate priorities.


Development

The FV Tool was developed by IFC’s Infrastructure & Natural Resources Advisory team (formerly the Oil, Gas and Mining Sustainable Community Development Fund) in partnership with Rio Tinto and Deloitte to tackle the long-standing challenge of financially quantifying the value derived from sustainability investments.

It has been continuously updated and refined using thousands of data points from pilot testing across the extractive industries with Rio Tinto, Pacific E&P,Cairn Energy and Newmont (read more in our case study section). In the future, the tool will be adapted for application in other sectors such as agribusiness and water.

What the Tool Does

The FV Tool provides transparency and rigor to the evaluation of financial returns on sustainability investments, introducing the language of finance to sustainability decisions in order to support capital allocation to CSR programs.

IFC defines strategic sustainability investment as contributions or actions by companies to help communities in their areas of operation address their development priorities and take advantage of opportunities created by private investment—in ways that are sustainable and support business objectives.

By calculating a NPV over a project’s lifecycle through the quantification of benefits, issues and risks, the tool simultaneously develops a business case for a sustainability investment while building a foundation for project risk management. Inside an organization, this process brings together a multidisciplinary team and encourages objective data analysis and collaboration across functions. The tool also incorporates the mapping of key stakeholders as well as the identification of their issues and concerns into decision-making, ensuring sustainability initiatives focus on mitigating potential risks.

Organizations that Have Used the Tool

  • "The FV Tool opened a new door to the way we look at CSR and sustainability. Through it, we were able to understand the value of the engagement mechanisms we have in place and corroborate that obtaining value protection supersedes monetary investments, the traditional lens through which CSR is measured. Our goal is to continue raising awareness about the importance of corporate responsibility, especially at a time of budgetary challenges."

    • Federico Restrepo
    • VP Corporate Affairs and Sustainability
      Pacific Exploration & Production Corporation

About IFC

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IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise and influence to create opportunity where it’s needed most. In 2015, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity.

IFC provides advice on a wide range of issues, including environmental, social and governance standards, energy and resource efficiency and supply chains. Our offerings are designed to meet the specific needs of clients in different industries, with a special focus on infrastructure, manufacturing, agribusiness, services and financial markets.

For more information, visit www.ifc.org

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Please read the policy in order to download the FVTool
All tools, calculators, and frameworks are supplied as a courtesy only. International Finance Corporation (“IFC”) is not responsible for the accuracy or completeness of information that you provide or information generated by the calculators. Please check your records carefully before inputting your information into the calculators or tools. All projected results are estimates, are examples only, and are necessarily hypothetical in nature. No results are guaranteed. The output of the tools and calculators may vary with each use and over time. The output and results should not be construed as financial, legal or tax advice, and the calculators and tools are not intended to replace the advice of qualified professionals. You should not rely on the calculators and tools as your only source of information. You should consult with a qualified professional of your choice whenever specific advice is necessary or appropriate.

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