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Keeping it simple: The FV Tool in eight steps

Enter project description and lifecycle phases for a selected project site. Input relevant financial information including cost of capital and inflation rate and set risk modeling parameters.
Include expected costs and revenues from initial project to get yearly cash flows over the project duration.
Identify all environmental and social risks associated with the project and estimate the frequency, duration and financial consequences of these risks.
In a separate exercise, list all the project stakeholders and calculate the risk mitigation potential of each sustainability investment through mapping the interdependencies between the project’s stakeholders, their issues, potential risks and sustainability investments. This is done using IFC’s spreadsheet “Risk Mitigation Factors” that will generate input needed for this section of the tool.
Identify up to two sustainability investment scenarios (A & B), which could include existing and proposed investments, to be evaluated against a baseline scenario that is the minimal investment to meet regulatory requirements. The FV Tool calculates the financial return on the incremental value between the scenarios A & B and the baseline scenario.
Use the built-in self-assessment quality benchmark matrix to measure the quality of the selected sustainability investments against international good practices to get a score on their effectiveness.
Conduct a cost-benefit analysis for each sustainability project in scenarios A & B to quantify the financial value created (i.e. savings or productivity gains) by each sustainability investment. IFC has developed a “Value Drivers Tool” for this step to help users identify direct project benefits.
The FV Tool estimates the Net Present Value (NPV) that is created and protected for each scenario, identifying which sustainability portfolio yields the highest return. The tool also allows you to compare scenarios as well as test inputs.

User Guide

The User Guide is a comprehensive instruction manual with handy screen shots outlining how to use the FV Tool. It provides guidance on overall methodology and project set up, as well as step-by-step details on how to complete each tab.

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Frequently Asked Questions and Answers

The FV Tool has been developed for companies in a variety of sectors including oil and gas, mining, agriculture and forestry. Users include CEOs, CFOs, COOs and CSR or sustainability managers. The tool can also be used by firms or individuals offering consulting services to companies in the areas of sustainability and international development. Universities, colleges and graduate schools with sustainability and development programs also use the FV Tool to research and evaluate approaches to social, infrastructure, economic and environmental investments. Finally, governments in developing nations, country development banks, investment agencies and import-export banks can all use the FV Tool to assist financial decision-making around the value of sustainability investments.
The following functions are usually required: Community Relations, Finance, Procurement, Operations, Human Resources (HR) and Environment, Health & Safety (EH&S).
You will need to do the following:

  • Identify the right set of internal stakeholders and team members (as shown above).
  • Ensure proper scoping of the project/asset selected for the model
  • Identify the right sources of information and gather details on required data (direct costs and benefits) prior to using the model
    • Sustainability/Community relations – Stakeholder analysis, perception survey results, budgets, key performance indicators (KPIs) for programs and future strategic plans.
    • Finance – Costs of included sustainability programs, future budgets and project level cash flows.
    • EH&S – Environmental and health costs, and costs related to prevention programs, regulatory requirements.
    • Operations – Risk register (for the overall operation) and risk evaluation tools, etc.
    • HR – Number of hires, cost of training, employment & turnover, commitments to local labor, etc.
    • Procurement – Procurement and local content spending, supply chain requirements, etc.
Timing will vary from site to site depending on available resources. Some of these phases can run concurrently. Generally you can expect:

  • Objectives & Risk Analysis (1 month)
  • Scoping & Planning
    • Project Design & Data Acquisition
    • Risk Identification
    • Define Scenarios & Learning/Planning Objectives
  • Value Creation & Value Protection: Evaluation of Risks & Investments (1-2 months)
    • Validate investment scenarios & perform cost benefit analysis for each initiative
    • Determine Risk Significance and Quality Ratings
    • Analyze Results & Input Refinements
  • Finalize Business Case (1-2 months)
    • Run simulations and finalize business case
    • Conduct final meeting to interpret results
After implementation, the FV Tool can help you evaluate investment decisions and proposed projects. You will now be able to:

  • Have a robust process and analysis to support sustainability investment decisions
  • Determine the right portfolio of sustainability investments for a given site/operation
  • Estimate the financial return from your sustainability investments.
The FV Tool was designed to be a forward looking planning/decision tool that calculates a probable range for the net present value (NPV) back to the company from a portfolio of sustainability investments, including value protected through risks mitigated and value created through productivity gains. The tool can compare two different sustainability investment scenarios, based on risks and opportunities faced by an operation/asset, such as a mine or pipeline, to help managers decide which scenario is likely to yield the most value for the company by creating positive impact for surroundings communities.

Some companies have been able to use it to forecast current programs at operations still in their early stages.

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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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