Impact monetization or social value is the process of converting impact into monetary value. It is a way to translate the positive (or negative) change experienced by beneficiaries into easily comparable and understandable terms. The benefit to implementing organizations (like nonprofits or social enterprises) and funders (foundations, investors, donors and corporations) is that it allows everyone to speak the same language in objective, quantitative terms. 

CGM’s Monetization Framework focuses on assessing a potential increase in economic opportunity and/or a decrease in economic loss, which is generally called the human capital approach. This approach considers the knowledge, skills, and health people invest in and accumulate throughout their lives, enabling them to realize their full potential and positively contribute to their community.

“There is mounting evidence that unless they strengthen their human capital, countries cannot achieve sustained, inclusive economic growth, will not have a workforce prepared for the more highly skilled jobs of the future, and will not compete effectively in the global economy. The cost of inaction on human capital development is going up.” 

‍ - The World Bank

While our framework is rooted in the human capital approach, and most monetization methodologies relate to wages and employment, CGM does not consider those, or the Social Value calculation, as an actual increase in income experienced by the beneficiaries and does not see income levels necessarily as the ultimate goal projects should pursue. Rather, we view these calculations as proxies for well-being and program success. 

Our aim is to translate all kinds of outcomes into a single standardized monetary unit (international dollars) for simplicity, comparability, and approachability, serving as a common language for our stakeholders.

As a consequence, CGM’s Monetization Framework does not aim to generate a complete and exhaustive picture of the potential social value of the goods and services an organization creates. Instead, this approach enables a conservative representation of overall social value, grounding project impacts in well-established economic theory, verifiable data sources, and credible valuation models.

“[Social value] isn’t just a question of scorekeeping. Nor is it all about a single, precise value itself. Rather, it is about encouraging better decision making, understanding the drivers of impact and uncertainty, and allocating our resources more efficiently.“ 

- Greg Fischer, Chief Economist, Y Analytics

How it works

CGM’s Impact Model employs three different data sources to convert outcomes into social value: independently verified, monitored program data; peer-reviewed, third-party research; and data banks from credible Organizations, such as the World Bank and World Health Organization. These data can be applied individually or combined to create various analyses, such as the baseline socioeconomic conditions, the financial proxy, the intervention’s scale and depth of impact, and the impact discounts.

CGM calculations are initially guided by data sourced from the World Bank, ensuring the assessment is grounded in the baseline socio economic conditions of the country where the project operates. The PPP per capita, for instance, serves as our baseline value, representing the value an average, healthy adult contributes annually to the community in the country where they live. 

To measure and verify the program outcomes, CGM requires monitored data from the program to assess the beneficiaries' demographics, the depth of change, and other relevant parameters. CGM supports projects in identifying and gathering the necessary data to credibly and accurately claim those impacts, setting them up for success once they get to the verification process, which is led by third-party, independent audit firms.

Peer-reviewed research plays a crucial role in CGM's valuation process. It bridges the gap between the project’s outcomes and the social value calculation, enabling us to establish reasonable, evidence-based boundaries (such as value factors or financial proxies, durability of outcomes, and other monetization assumptions) to convert the project outcomes into international dollars. In cases where beneficiaries experience and benefit from the outcome after the intervention is complete, the financial proxy is projected into the future based on positive cash flows and brought back to present value using a Social Discount Rate.

Finally, to provide a meaningful, net measure of impact achieved, CGM follows best M&E practices in the sector to apply additional discounts and analyses to determine not only the change over the baseline, but also the amount of change that would have happened in the absence of the project (the counterfactual scenario) and more.

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Additional Quotes and Comments on Monetizing Impact

1. Because no single measure can summarize something as complex as the well-being of the members of society, our system of measurement must encompass a range of different measures. [...] There are several dimensions to well-being but a good place to start is the measurement of material well-being or living standards. - Stiglitz
2. We do not ignore the fact that “focusing exclusively on [...] economic gain to measure development ignores the negative effects of economic growth on society, such as climate change and income inequality. (HBR)” However, due to our data-driven approach and goal of enhancing the comparability and simplicity of our methodologies, we use these economic datasets for what they are: reliable, historical, globally available datasets that can help bridge the monetization gap. At the same time, by applying them, we hope to highlight what they often fail to account for: the monetary value of several positive externalities, social impacts, and non-market activities.

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Additional resources:

• Monetizing Impact - Y Analytics Impact Learning Series - Jan 2020_0_0.pdf
• Harvard Business Review, 2019. Calculating the Value of Impact Investing 
• SROI Guide, 2012

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