Financial Valuation (FV) Tool for sustainability investments

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There is a growing body of work for quantifying the impact of sustainability programs and taking a more strategic view of community investment decisions. Intuitively, mining companies understand the business case for being a good corporate citizen and generating positive relationships with communities, civil society and governments that enable key business drivers, including access to land, government approvals, access to resources and access to capital. Quantifying the value of these investments and planning accordingly, however, has long posed a challenge for companies and community development practitioners.

Through a multilateral partnership, including the IFC, Rio Tinto, Deloitte, Newmont, the Multilateral Investment Guarantee Agency (MIGA) and the Government of Norway, the FV Tool was developed which quantifies the return on site-specific sustainability investments. This value is generally understood to take the form of either direct value creation (i.e. reduced costs, generated benefits) or indirect value protection (i.e. risk mitigation, program effectiveness). Such information helps to justify and stabilize the annual budget that companies devote to sustainability efforts. It creates incentives, within companies, to invest in their communities. The FV Tool is a web-based software available at

Ahafo gold mine pilot

The Newmont Mining Corporation Ahafo mine has been pilot testing the FV Tool over the last several years and is currently testing the potential of formally integrating the FV Tool in its budgeting and capital project process planning for operational investments related to sustainability, impact mitigation and community benefits. The company firmly believes its performance in the areas of environment and social responsibility (ESR) is key to its future success. While this sentiment is broadly shared throughout the company, there are divergent views among the company’s internal stakeholders as to how much the company should be spending on sustainability investments and what the benefits are to the business in more concrete terms.

Newmont anticipates that the tool will better enable the environment and social teams to communicate, in more rigorous terms, the value of the sustainability investments. While the FV Tool provides an estimated net present value (NPV) range of a specific sustainability portfolio, the true value of using the FV Tool is the process, cross-functional engagement and ability to provide explicit rationale for each program in terms of direct value creation and risk mitigation. Conversation with non-sustainability functions Management of programs and budgets with direct sustainability outcomes and impacts reside with different non-traditional sustainability functions in a company. For example, the Newmont Ahafo Linkages and Apprenticeship programs are managed by Supply Chain and Learning and Development functions and are designed to generate local business opportunities and enhanced skill training for local community members. An intense data collection process was required to generate inputs into the FV Tool. The FV Tool provided a common platform for risk, social responsibility, human resources, health and safety, supply chain, operations and land teams to engage in discussions to understand the strategy, data, analysis and decision-making process related to sustainability investments and associated expenditures.

Value protection and risk management

ESR and risk teams worked closely to identify risks from the Newmont Ahafo mine’s risk register that are being managed by sustainability investments, including managing community expectations for jobs and benefits, in-migration, water quality and access, public relations, stakeholder engagement and compliance-related issues. The FV Tool process strengthened the understanding and convergence between risk, finance and social responsibility teams and led to a growing appreciation among Newmont staff of the relationship between social responsibility investments and risk management and the ability of the ESR staff to communicate from a risk and finance perspective.

Value-creation perspective

A cost-benefit analysis for each sustainability investment was conducted by finance and ESR staff to identify “value drivers” or productivity gains/savings to Ahafo. Where evidence to support value drivers was not available, conservative assumptions were developed and key performance indicators identified for future monitoring and evaluation. Finance was critical to this process by supporting the ESR team to express the value of their programs in terms of cost (operating expenditure and capital expenditure), benefits (e.g. cost savings and productivity leading to financial gains) and operational risk mitigation. For example, a cost-benefit analysis of Newmont Ahafo’s malaria control program revealed several key value drivers. In 2006, the average monthly workforce malaria incidence rate was about 8%, costing the Ahafo mine nearly 76,680 hours of lost productivity due to employee and contractor absenteeism, translating into an operating cost of nearly US$400,000. Without the malaria control program, the projection of the direct costs to the company over a five-year period (2006–2010) due to absenteeism alone would have been about US$2 million. The cost for medication and medical consultation (average US$30 per case) for that five-year period would have stood at about US$500,000 and indirect costs (e.g. workforce morale, candidate refusals to accept posting to Ahafo, cost of family members contracting malaria, etc. at US$30 per case) contributing to another loss of US$500,000. Thus, the total cost of malaria to the company without a malaria control program over the five-year period would have been around US$3 million, minimum.33 In comparison, Newmont Ghana invested US$1.5 million in the malaria control program over the same five-year period. This achievement made by the company in the fight against malaria has received global recognition by the Global Business Coalition in 2010. The project team recognizes some limitations to fully integrate the financial outputs of the FV Tool due to accounting principles but observes an improved understanding of shared value by non-sustainability business functions.

Business process integration

The real test of the FV Tool will be determined by Ahafo’s ability to formally integrate the FV Tool process into the business process and planning cycle. In the past, ESR staff have relied on Newmont’s social responsibility standards, intuition around benefits and moral arguments to defend budget requests rather than value, NPV and risk language. Over the past year, there has been a considerable improvement in the ESR staff’s ability to evaluate their sustainability investments using principles of value creation and protection. Ongoing training efforts are being conducted to expose ESR and finance staff to the types of inputs required and analysis of outputs generated by the FV Tool and use of the budgeting templates.

Lessons learned

A key learning from using the FV Tool is not how much sustainability investment cost but rather how dispersed pieces of information limited the company from having more informed discussions based around the value of sustainability investments in a language the business understood. That is, the outcome is an ongoing process for evaluating sustainability investments rather than a point-in-time prioritization or go/no-go recommendation. The enhancement of communications within the company and with stakeholders has helped create common understanding of how defining value should be at the core of all the company’s resource allocation going forward.


33. Private Sector Integrated Malaria Control in Ghana: Methods, Impact and Business Case for Protecting Employees – Godwin Fuseini, Peter Ebsworth, Dave Knight, Paul Caiger, Chuck Burns, Michael J. Bangs.