Unit 5: Social Return on Investment (SROI) and Cost-Benefit Analysis
Expert-defined terms from the Advanced Certificate in Social Impact Measurement for Real Estate course at London School of Business and Administration. Free to read, free to share, paired with a professional course.
Accountability refers to the responsibility of organizations to demonstra… #
This concept is closely related to transparency and stakeholder engagement. In the real estate sector, accountability can be demonstrated through regular reporting and evaluation of social and environmental outcomes, such as the impact of affordable housing on community development.
Benefit #
Cost Ratio (BCR) is a metric used to evaluate the feasibility of a project or program by comparing the benefits to the costs, which is a key concept in Cost-Benefit Analysis. A BCR greater than 1 indicates that the benefits outweigh the costs, while a ratio less than 1 suggests that the costs exceed the benefits. For example, a real estate developer may use BCR to evaluate the viability of a sustainable building project, considering the costs of energy-efficient systems and the benefits of reduced energy consumption.
Capital Budgeting is the process of allocating resources to projects or p… #
This process involves evaluating the costs and benefits of different projects and selecting those that are expected to generate the highest returns. In the context of social impact measurement, capital budgeting can be used to prioritize projects that address social and environmental issues, such as affordable housing and community development.
Cost #
Benefit Analysis (CBA) is a methodology used to evaluate the feasibility of a project or program by comparing the costs to the benefits, which is a fundamental concept in the Advanced Certificate in Social Impact Measurement for Real Estate. CBA involves identifying, quantifying, and comparing the costs and benefits of a project or program to determine whether it is worth implementing. For instance, a real estate developer may use CBA to evaluate the costs and benefits of incorporating green building features into a new development project.
Cost #
Effectiveness Analysis (CEA) is a methodology used to evaluate the efficiency of a project or program by comparing the costs to the outcomes, which is closely related to SROI and Cost-Benefit Analysis. CEA involves identifying, quantifying, and comparing the costs and outcomes of different projects or programs to determine which one is the most efficient. In the real estate sector, CEA can be used to evaluate the cost-effectiveness of different approaches to addressing social and environmental issues, such as energy-efficient retrofits versus new construction.
Discount Rate is the rate at which future cash flows are discounte… #
The discount rate reflects the time value of money and is used to evaluate the present value of future benefits and costs. For example, a real estate developer may use a discount rate to evaluate the present value of future energy savings from a sustainable building project.
Economic Impact Assessment (EIA) is a methodology used to evaluate the <i… #
EIA involves identifying, quantifying, and analyzing the economic impacts of a project or program, including the creation of jobs, stimulation of local economies, and generation of revenue. In the real estate sector, EIA can be used to evaluate the economic impacts of large-scale development projects, such as shopping centers or office buildings.
Efficiency refers to the ability of an organization to achieve its goa… #
In the context of social impact measurement, efficiency is critical to ensuring that resources are used effectively to address social and environmental issues. For instance, a real estate developer may prioritize efficient use of resources in the construction process to minimize waste and maximize social and environmental benefits.
Environmental Impact Assessment (EIA) is a methodology used to evaluate t… #
EIA involves identifying, quantifying, and analyzing the environmental impacts of a project or program, including the mitigation of negative impacts and the enhancement of positive impacts. In the real estate sector, EIA can be used to evaluate the environmental impacts of development projects, such as the impact of new construction on local ecosystems.
Externalities refer to the consequences of a project or program that affe… #
Externalities can be either positive or negative and can have significant impacts on the feasibility of a project or program. For example, a real estate developer may consider the externalities of a new development project, such as the impact on local traffic patterns or air quality.
Financial Return on Investment (FROI) is a metric used to evaluate the <i… #
FROI involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, FROI can be used to evaluate the financial viability of development projects, such as the return on investment for a commercial property.
Impact Investing refers to the practice of investing in projects or progr… #
Impact investing involves evaluating the potential for both financial and social or environmental returns and selecting investments that align with values and goals. In the real estate sector, impact investing can be used to support development projects that address social and environmental issues, such as affordable housing or sustainable building.
Internal Rate of Return (IRR) is a metric used to evaluate the financi… #
IRR involves calculating the rate at which the net benefits equal the costs. In the real estate sector, IRR can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Net Present Value (NPV) is a metric used to evaluate the financial … #
NPV involves calculating the present value of future cash flows by discounting them to their present value. In the real estate sector, NPV can be used to evaluate the financial viability of development projects, such as the present value of future rental income from a commercial property.
Outcome refers to the result of a project or program, which is a critical… #
Outcomes can be either positive or negative and can have significant impacts on the feasibility of a project or program. For example, a real estate developer may evaluate the outcomes of a community development project, such as the impact on local employment rates or crime rates.
Payback Period is the time it takes for a project or program to generate… #
The payback period is used to evaluate the feasibility of a project or program and to determine whether it is worth implementing. In the real estate sector, the payback period can be used to evaluate the viability of development projects, such as the time it takes for a commercial property to generate enough rental income to recover the initial investment.
Return on Investment (ROI) is a metric used to evaluate the financial<… #
ROI involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, ROI can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Social Impact refers to the consequences of a project or program on so… #
Social impact can be either positive or negative and can have significant impacts on the feasibility of a project or program. For example, a real estate developer may evaluate the social impact of a community development project, such as the impact on local employment rates or crime rates.
Social Return on Investment (SROI) is a metric used to evaluate the so… #
SROI involves calculating the return on investment by comparing the net benefits to the costs, including both financial and social benefits. In the real estate sector, SROI can be used to evaluate the social and financial viability of development projects, such as the return on investment for a community development project.
Stakeholder refers to an individual or group that has an intere… #
Stakeholders can include investors, customers, employees, and community members. In the real estate sector, stakeholders may include residents, business owners, and community organizations.
Sustainability refers to the ability of a project or program to be mai… #
Sustainability is critical to ensuring that projects and programs are feasible and responsible. In the real estate sector, sustainability can be achieved through the use of green building materials, energy-efficient systems, and environmentally responsible construction practices.
Value for Money (VFM) refers to the relationship between the costs … #
VFM involves evaluating the efficiency and effectiveness of a project or program to ensure that it is delivering the best possible outcomes for the resources used. In the real estate sector, VFM can be used to evaluate the cost-effectiveness of different approaches to addressing social and environmental issues, such as energy-efficient retrofits versus new construction.
Weighted Average Cost of Capital (WACC) is a metric used to evaluate the… #
WACC involves calculating the average cost of capital by weighting the costs of different sources of capital. In the real estate sector, WACC can be used to evaluate the cost of capital for development projects, such as the cost of debt and equity financing.
Years to Break #
Even is the time it takes for a project or program to generate enough cash flows to recover the initial investment, which is a key concept in Cost-Benefit Analysis and SROI. The years to break-even is used to evaluate the feasibility of a project or program and to determine whether it is worth implementing. In the real estate sector, the years to break-even can be used to evaluate the viability of development projects, such as the time it takes for a commercial property to generate enough rental income to recover the initial investment.
Accounting Rate of Return (ARR) is a metric used to evaluate the finan… #
ARR involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, ARR can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Benefit #
Cost Ratio Analysis (BCRA) is a methodology used to evaluate the feasibility of a project or program by comparing the benefits to the costs, which is a fundamental concept in Cost-Benefit Analysis and SROI. BCRA involves identifying, quantifying, and comparing the benefits and costs of a project or program to determine whether it is worth implementing. For instance, a real estate developer may use BCRA to evaluate the costs and benefits of incorporating green building features into a new development project.
Capital Expenditure (CapEx) refers to the expenses incurred by an organiz… #
CapEx can include construction costs, equipment purchases, and technology upgrades. In the real estate sector, CapEx can be used to evaluate the costs of development projects, such as the costs of constructing a new building or upgrading existing infrastructure.
Cost of Capital refers to the cost of borrowing or raising … #
The cost of capital reflects the opportunity cost of using resources for a project or program. For example, a real estate developer may consider the cost of capital when evaluating the viability of a development project, such as the cost of debt financing versus equity financing.
Depreciation refers to the decrease in value of an asset ov… #
Depreciation can be caused by wear and tear, obsolescence, or damage. In the real estate sector, depreciation can be used to evaluate the decrease in value of a property over time, such as the decrease in value of a building due to wear and tear.
Economic Value Added (EVA) is a metric used to evaluate the financial<… #
EVA involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, EVA can be used to evaluate the financial viability of development projects, such as the return on investment for a commercial property.
Financial Modeling refers to the process of creating a mathematical</i… #
Financial modeling involves identifying, quantifying, and analyzing the costs and benefits of a project or program. In the real estate sector, financial modeling can be used to evaluate the financial viability of development projects, such as the costs and benefits of constructing a new building.
Internal Rate of Return on Investment (IRRI) is a metric used to evaluate… #
IRRI involves calculating the rate at which the net benefits equal the costs. In the real estate sector, IRRI can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Net Operating Income (NOI) refers to the income generated by a project or… #
NOI is used to evaluate the financial performance of a project or program and to determine its viability. In the real estate sector, NOI can be used to evaluate the financial performance of a property, such as the income generated by a commercial property after operating expenses have been deducted.
Opportunity Cost refers to the value of the next best alternative … #
Opportunity cost is used to evaluate the trade-offs involved in a decision and to determine whether a project or program is worth implementing. For example, a real estate developer may consider the opportunity cost of investing in a development project, such as the potential return on investment from an alternative project.
Present Value (PV) refers to the value of a future cash flow in to… #
PV is used to evaluate the financial performance of a project or program and to determine its viability. In the real estate sector, PV can be used to evaluate the present value of future rental income from a commercial property.
Return on Assets (ROA) is a metric used to evaluate the financial … #
ROA involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, ROA can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Social Impact Assessment (SIA) is a methodology used to evaluate the s… #
SIA involves identifying, quantifying, and analyzing the social impacts of a project or program, including the mitigation of negative impacts and the enhancement of positive impacts. In the real estate sector, SIA can be used to evaluate the social impacts of development projects, such as the impact on local communities and residents.
Stakeholder Engagement refers to the process of involving stakeholders… #
Stakeholder engagement involves communicating with stakeholders, consulting with stakeholders, and involving stakeholders in the decision-making process. In the real estate sector, stakeholder engagement can be used to involve local communities and residents in the decision-making process for development projects.
Sustainability Reporting refers to the process of reporting on the sus… #
Sustainability reporting involves disclosing information on the social, environmental, and economic impacts of an organization's operations. In the real estate sector, sustainability reporting can be used to report on the sustainability performance of development projects, such as the energy efficiency of buildings and the use of sustainable materials.
Value Chain refers to the series of activities involved in the … #
The value chain includes raw materials, manufacturing, marketing, and sales. In the real estate sector, the value chain can be used to evaluate the costs and benefits of development projects, such as the costs of construction and the benefits of rental income.
Years to Maturity is the time it takes for a project or program to be … #
The years to maturity is used to evaluate the feasibility of a project or program and to determine whether it is worth implementing. In the real estate sector, the years to maturity can be used to evaluate the viability of development projects, such as the time it takes for a commercial property to generate enough rental income to recover the initial investment.
Break #
Even Analysis is a methodology used to evaluate the feasibility of a project or program by comparing the costs to the benefits, which is a fundamental concept in Cost-Benefit Analysis and SROI. Break-even analysis involves identifying, quantifying, and comparing the costs and benefits of a project or program to determine whether it is worth implementing. For instance, a real estate developer may use break-even analysis to evaluate the costs and benefits of incorporating green building features into a new development project.
Cash Flow refers to the inflow or outflow of cash from a pr… #
Cash flow is used to evaluate the financial performance of a project or program and to determine its viability. In the real estate sector, cash flow can be used to evaluate the financial performance of a property, such as the income generated by a commercial property after operating expenses have been deducted.
Cost #
Benefit Analysis Matrix is a tool used to evaluate the feasibility of a project or program by comparing the costs to the benefits, which is a fundamental concept in Cost-Benefit Analysis and SROI. The cost-benefit analysis matrix involves identifying, quantifying, and comparing the costs and benefits of a project or program to determine whether it is worth implementing. In the real estate sector, the cost-benefit analysis matrix can be used to evaluate the costs and benefits of development projects, such as the costs of construction and the benefits of rental income.
Discounted Cash Flow (DCF) is a methodology used to evaluate the finan… #
DCF involves calculating the present value of future cash flows by discounting them to their present value. In the real estate sector, DCF can be used to evaluate the financial viability of development projects, such as the present value of future rental income from a commercial property.
Economic Feasibility Study is a methodology used to evaluate the econo… #
The economic feasibility study involves identifying, quantifying, and analyzing the economic impacts of a project or program, including the creation of jobs, stimulation of local economies, and generation of revenue. In the real estate sector, the economic feasibility study can be used to evaluate the economic viability of development projects, such as the impact of a new shopping center on local employment rates.
Financial Statement Analysis is a methodology used to evaluate the fin… #
Financial statement analysis involves analyzing an organization's financial statements to evaluate its financial performance and to identify trends and risks. In the real estate sector, financial statement analysis can be used to evaluate the financial performance of a property, such as the income generated by a commercial property after operating expenses have been deducted.
Internal Rate of Return on Costs (IRRC) is a metric used to evaluate the… #
IRRC involves calculating the rate at which the net benefits equal the costs. In the real estate sector, IRRC can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Net Present Value of Benefits (NPVB) is a metric used to evaluate the … #
NPBV involves calculating the present value of future benefits by discounting them to their present value. In the real estate sector, NPBV can be used to evaluate the financial viability of development projects, such as the present value of future rental income from a commercial property.
Opportunity Cost of Capital (OCC) refers to the cost of capital th… #
OCC is used to evaluate the trade-offs involved in a decision and to determine whether a project or program is worth implementing. For example, a real estate developer may consider the OCC of investing in a development project, such as the potential return on investment from an alternative project.
Payback Period Analysis is a methodology used to evaluate the feasibil… #
Payback period analysis involves identifying, quantifying, and comparing the costs and benefits of a project or program to determine whether it is worth implementing. In the real estate sector, payback period analysis can be used to evaluate the costs and benefits of development projects, such as the costs of construction and the benefits of rental income.
Present Value of Costs (PVC) refers to the value of future costs i… #
PVC is used to evaluate the financial performance of a project or program and to determine its viability. In the real estate sector, PVC can be used to evaluate the present value of future construction costs for a development project.
Return on Equity (ROE) is a metric used to evaluate the financial … #
ROE involves calculating the return on investment by comparing the net benefits to the costs. In the real estate sector, ROE can be used to evaluate the financial viability of development projects, such as the return on investment for a residential property.
Social Impact Measurement is the process of measuring and evaluating the… #
Social impact measurement involves identifying, quantifying, and analyzing the social impacts of a project or program, including the mitigation of negative impacts and the enhancement of positive impacts. In the real estate sector, social impact measurement can be used to evaluate the social impacts of development projects, such as the impact on local communities and residents.
Sustainability Reporting Framework is a framework used to report on the <… #
The sustainability reporting framework involves disclosing information on the social, environmental, and economic impacts of an organization's operations. In the real estate sector, the sustainability reporting framework can be used to report on the sustainability performance of development projects, such as the energy efficiency of buildings and the use of sustainable materials.
Value at Risk (VaR) is a metric used to evaluate the financial per… #
VaR involves calculating the potential loss of a project or program over a given time horizon. In the real estate sector, VaR can be used to evaluate the financial viability of development projects, such as the potential loss of a commercial property due to market fluctuations.
Years to Break #
Even Analysis is a methodology used to evaluate the feasibility of a project or program by comparing the costs to the benefits, which is a fundamental concept in Cost-Benefit Analysis and SROI. Years to break-even analysis involves identifying, quantifying, and comparing the costs and benefits of a project or program to determine whether it is worth implementing. In the real estate sector, years to break-even analysis can be used to evaluate the costs and benefits of development projects, such as the costs of construction and the benefits of rental income.
Break #
Even Point is the point at which the costs of a project or program equal the benefits, which is a critical concept in SROI and Cost-Benefit Analysis. The break-even point is used to evaluate the feasibility of a project or program and to determine whether it is worth implementing. In the real estate sector, the break-even point can be used to evaluate the viability of development projects, such as the point at which the costs of construction equal the benefits of rental income.
Capital Asset Pricing Model (CAPM) is a model used to evaluate the cos… #
CAPM involves calculating the expected return on investment by comparing the risk of the investment to the return on a risk-free investment. In the real estate sector, CAPM can be used to evaluate the cost of capital for development projects, such as the cost of debt and equity financing.
Cost of Debt refers to the cost of borrowing money to finance a pr… #
The cost of debt reflects the interest rate on the loan and is used to evaluate the feasibility of a project or program. For example, a real estate developer may consider the cost of debt when evaluating the viability of a development project, such as the interest rate on a construction loan.
Discount Rate refers to the rate at which future cash flows are di… #
The discount rate reflects the time value of money and is used to evaluate the feasibility of a project or program. For example, a real estate developer may use a discount rate to evaluate the present value of future rental income from a commercial property.
Economic Feasibility refers to the ability of a project or program to gen… #
Economic feasibility is used to evaluate the viability of a project or program and to determine whether it is worth implementing. In the real estate sector, economic feasibility can be used to evaluate the viability of development projects, such as the potential for a new shopping center to generate economic benefits for the local community.
Financial Leverage refers to the use of debt to finance a project… #
Financial leverage involves borrowing money to finance a project or program and is used to evaluate the feasibility of a project or program. For example, a real estate developer may use financial leverage to finance a development project, such as borrowing money from a bank to construct a new building.
Market Risk refers to the risk that the value of a project or prog… #
Market risk is used to evaluate the feasibility of a project or program and to determine whether it is worth implementing. For example, a real estate developer may consider the market risk of a development project, such as the potential for a decrease in property values due to market fluctuations.
Net Operating Income (NOI) refers to the income generated by a project or… #
Net Operating Income (NOI) refers to the income generated by a project or program after operating expenses have been deducted, which is a key concept in SROI and Cost-Benefit Analysis.
Opportunity Cost refers to the value of the next best alternative … #
Opportunity Cost refers to the value of the next best alternative that is given up when a choice is made, which is a fundamental concept in Cost-Benefit Analysis and SROI.