Peter Swannick
Linked In Connection and Group Organizer

Group ... Valuing Non-Financial Performance

Burgess COMMENTARY

Peter Burgess

Valuing Non-Financial Performance

ABOUT THIS GROUP

Unlisted•283 members

A Community of Practice for those with a professional interest – investment industry, corporate, consultant, researcher, or academic – in issues where the linkage between financial and non-financial is the common bond.

Our mission is to address three key challenges. How can we:

• 1. identify more effective ways to monetise or valorise non-financial factors?

• 2. where this is not possible, use indicators and metrics to fully represent the value – short and long term – of non-financial performance to better inform decision making?

• 3. ensure these concepts are integrated into management, accounting, reporting and investment conventions?S

John Swannick John Swannick Sustained and sustainable organisational change OWNER

Drawing the current state of knowledge together

Dear All

You may already have seen this article I posted on LinkedIn – Value and a new disclosure paradigm http://bit.ly/1PeoSeS - which could almost be seen as a sort of manifesto for the Group. I have received much on and offline interest in the two weeks or so since; it has also been published on the Market Mogul platform.

In essence, the article argues:

• • We need more effective valuation of the non-financial to make more sense of investment models and business case processes;

• • Current investment industry valuation conventions are no longer fit for purpose;

• • ESG or CSR indicator frameworks are probably not the answer;

• • Materiality definitions have to address financial materiality;

• • Real integration can only happen when the financial and non-financial are connected and included in both investors’ Discounted CashFlow forecasts and corporate Net Present Value analysis;

• • Corporate disclosure is still the ‘art of the possible’ but the huge information gaps may be filled with the advent of big data;

• • Above all, by effectively valuing the non-financial we can bring the long-term forward.

The answer has to be better valuation and I intend that we focus over the next few months in drawing together the current state of knowledge, particularly around some obvious key areas of non-financial performance where, arguably, the most progress has been made:

• • Employee engagement

• • Customer perception and advocacy

• • Product, market and business model innovation

• • Brand and reputation

• • Corporate governance and ethics

• • Environmental management

I hope you can find time to engage in this. By initiating and/or participating in discussions, referencing resources and linking to articles and publications.

Regards

John Swannick Group Facilitator

LikeComment23

1mo Anne Gadegaard Anne Gadegaard Dear John, Thank you for taking the time to make this important conversation happen. I am attending the 3GF (@3GF16) and will today attend the Natural Capital Coalition's session. Working with other types of capital is definitely one of the avenues for consideration; it is however not an easy one. To our surprise the “moneytarisation” of environmental capital, which for our 2011 impact, was not an insignificant amount, raised no eyebrows. So my reflection is that it will not be enough to calculate the value, you will also need to figure out how the valuation can be used in an operationalised setting, where business decisions will be impacted by the information. As an example most companies are today incl. linear models for the price increase in water- and energy cost to new investments. I would argue that these models needs to be adjusted to reflect the likely scarcity of the resources and their “true value” in order to factor in the right costs and thereby make the right decision. AShow less Like

1mo John Swannick John Swannick Anne Gadegaard Thanks for your comments. I completely agree on the need to operationalise valuation. Every company I have worked with has some form or balanced scorecard even if they don't call it that. A collection of KPIs cascaded down through the company, often from the top. Fine for performance assessment. But when big decisions are taken, almost always the business case is an NPV analysis based entirely on financial inputs and outcomes. Unless and until all relevant factors can be incorporated in this type of analysis, we will not have operationalised valuation of the non-financial. Show less Like

1mo Mary Adams Mary Adams I agree about the primacy of NPV. And I believe that the integrated model is the right support for this. It combines three important threads: traditional financial, intellectual/intangible (human, relationship and organizational capitals) with natural capitals. Each of these is part of the analysis for an NPV calculation. Here's a simple example: http://info.smarter-companies.com/blog/value-creation-vs.-valuation-an-integrated-viewShow less Like

Announcement from Valuing Non-Financial Performance announcerFullName John Swannick Sustained and sustainable organisational change Dear all Current conversations include:

• Data analytics and non-financial data http://bit.ly/2a0crGl

• The Elders are challenging the S Word http://bit.ly/2aronFt

• Drawing the current state of knowledge together http://bit.ly/1POxwpW

• The Global Opportunity Report at the UN Global Compact Leaders’ Summit http://bit.ly/28XQ9DD

• A meta analysis of meta analyses http://bit.ly/28Y0BxV

• New Calvert-Serafeim study highlights alpha-generating potential of ESG http://bit.ly/29fmZkZ

• Trust is a highly profitable strategy http://bit.ly/293YZFr

• Can you train employees to be ethical? http://bit.ly/28YK1ke

Regards

John Swannick Group Facilitator john@swannick.com