Services Overview
Social Return Partners works with both private equity investors and large public market investors offering three levels of social risk assessment differentiated by the depth of analysis required.
All three layers include a formal social risk assessment AND integration with the valuation and discounted cash flow models
Bridging the gap between social risk and investment return is somewhat unique in this sector. It requires a thorough understanding of both the investment process, including valuation methodologies, and the complex social science necessary for successful social management.
The end-to-end process requires unique skills and experience that the professionals at Social Return Partners can offer. We will work closely with your investment professionals to ensure that both the social risk identified through our assessment layers, and other project-level impacts, are incorporated into the valuation models.
Social Risk Assessment Service Layers
Layer 1: Portfolio & Country Risk Analysis
Portfolio exposure and country risk analysis based on desktop reviews of portfolio companies. This includes approximately 125 indicators covering political, corruption, human rights, rule-of-law, policy and indigenous land risks. This work involves a systematic and thorough portfolio review to assess project and country risk exposure. Using a weighted blend of indicators, such as the World Bank Governance Indicators, various third-party corruption indices, mining surveys, human rights indices and assessments of regulatory processes, judicial systems and NGO activity, it is possible to distill the risk profile of a portfolio into manageable units with identifiable focus points. This layer of analysis enables a more targeted approach to assessing social and political risk within an overall portfolio.
Layer 2: Capacity & Management Systems Audits
In depth portfolio company audits focus on ensuring that management has appropriate capacity, systems, skill sets, resources and on-the-ground programs in place to manage local social license risks.
- Does the portfolio company have the right management resources and capacity in place to enable it to manage complex social risks properly?
- Are the management systems robust enough to capture major potential risks?
- Are there sufficient human and financial resources deployed at the project level to mitigate social risk?
These are just some of the questions that need to be answered in order to assess whether the portfolio company has the appropriate capacity to manage the complex issues relating to social license to operate.
Layer 3: Onsite Project-level Analysis
Onsite assessment of the strength of social license to operate and social risk. This entails local stakeholder interviews, detailed due diligence and an assessment of local stakeholder management strength, review of stakeholder engagement plans and creation of gap analysis relative to international best practice social management. Nothing is better than this project-level analysis for assessing the strength of a project’s social license to operate. Beyond the obvious benefits of understanding and assessing the everyday challenges faced by on-the-ground personnel, this level of analysis allows the opportunity to really listen to the issues at stake. This is where Social Return Partners works best. Experience, skills, listening abilities, compassion, empathy, and the ability to stand in someone else’s shoes and see things from a different perspective, all come together at this point to make this work a unique part of Social Return Partner’s offerings.
“Net Impact” Calculation
The key to what sets us apart in this field is our thorough understanding of the investment process and the ability to incorporate the results of our social risk assessment into traditional financial valuation models.
Using “Triple Bottom Line” accounting methodologies in conjunction with data from environmental and social impact studies, SRP is able to provide insight into a project’s total Net Impact by quantifying and valuing non-financial environmental and social factors and incorporating them into the valuation models.
This information is what gives you the ability to make informed decisions on your portfolio and/or a specific project.
While there are many talented individuals working in this space that can provide excellent social due diligence, we believe this is a unique part of our service that very few of our competitors can offer.
Service Layer Summary
Portfolio & Country Risk Analysis
What is it? A desktop review of your portfolio companies consisting of an overall analysis and assessment of the portfolio’s project and country risk exposure.
How is it done? SRP uses a proprietary weighted blend of indicators, indices, surveys and other assessments.
Why would we do it? To distill the risk profile of a portfolio into manageable units with identifiable focus points.
Business Value Identifies areas of political and social risk in a portfolio and ensures proper diversification of risk within a portfolio.
Portfolio Company Capacity and Management System Audit
What is it? An in-depth portfolio company audit focused on ensuring management has appropriate capacity, systems, skill sets, resources and on-the-ground programs in place to manage local social license risks.
How is it done? SRP evaluates the portfolio company’s management capacity and resources, risk management systems, and processes and protocols used to capture, mitigate and manage social risks.
Why would we do it? To assess whether the portfolio company has the appropriate capacity to manage the complex issues relating to social license to operate.
Business Value Being aware of where companies can improve social risk management reduces the likelihood that a company’s profitability is negatively impacted as result of community opposition.
Onsite Project-level Analysis
What is it? An onsite assessment of social risk and the strength of social license to operate.
How is it done? SRP conducts local stakeholder interviews, detailed due diligence and an assessment of local management/personnel strength, reviews stakeholder engagement plans and completes a gap analysis relative to international best practice social management.
Why would we do it? To obtain a first-hand/in-person understanding and assessment of the everyday challenges faced by on-the-ground personnel.
Business Value Being aware of different perspectives, cultures and local community needs opens the doors for cooperation and peaceful resolution of pressing issues. Impacts are faster implementation time and lower costs.
“Net Impact” Calculation
What is it? An integration of social and environmental aspects into the existing financial models using “Triple Bottom Line” accounting methodologies to calculate the “Net Impact”.
How is it done? SRP evaluates the social and environmental aspects of a project and integrates them into the financial models to arrive at an aggregate valuation that includes both financial and non-financial components.
Why would we do it? To ensure that all financial and non-financial factors of a project are taken into consideration.
Business Value Ability to make more informed decisions to reduce overall risk and maximize total returns.