Social Investment Monitoring

It is ARUN’s belief that there are two types of social investment returns: financial return and social return. In order to understand and share the information on the achievements of social investments, ARUN gathers information on the invested businesses closely and uses the information to evaluate the businesses according to three indicators: business model and operation, finance, and social impact.

 

investment 

Evaluation of business model and operation

We evaluate how entrepreneurs construct business models and what structure they use to run the business in order to achieve their social missions. The evaluation includes following points:

 

Leadership of the entrepreneur

We evaluate how the entrepreneur makes commitment to achieve the goals of social mission, has a vision for the future, and is able to expand the business.

 

Healthy governance

We evaluate invested companies’ governance structure (existence of board, audit, etc.)

 

Innovative and visionary business models

We evaluate how invested companies use business as a means of innovative solutions to the social problems that have been difficult to solve. We study how they proceed the rough roads that lead to the problem solving with trial and errors. A business that is successful in the innovative methods attracts attention of the society, and has a positive impact to other organizations with similar mission. 

 

 

Financial Evaluation

 

ARUN focuses on the four points when conducting the business’s financial evaluation; profitability, stability, growth, and reliability (of financial statements).

The purpose of financial evaluation is to evaluate sustainability of the invested project. This is because no matter how a project is socially meaningful, without sustainability, it could as one-time event and we consider such practice as not suitable for ARUN’s investment.

 

Profitability

Our indicator is whether the business can pay the principal of their loan while making adequate payments to the business partners and employees.

 

Stability (Security)

Our indicator is whether the invested secure business operation cash flow enough to pay the loan principal as scheduled (cash flow).  We also look at whether the debt accumulating too much (stock), compared to the size of their operation. These are our indicators to evaluate stability of the invested company. We look at the “operation cash flow” and “debt equity ratio”.

 

Growth

We establish the increase of revenue, which is the indicator of the size of the operation, as the most important indicator, and pay attention to the “sales growth”. Social enterprise has social impacts on the producers, the employees and the local community through its operation, and its expansion is a key factor in determining the magnitude of social impact.

 

Ability to create financial statements

We evaluate whether the invested company can produce necessary financial statements when needed. We require ARUN’s invested company to submit operational reports monthly.

 

 

Evaluation of social impact

The most important social impact indicator is the degree of social mission achievement that the invested business promises. For example, one of the invested companies, Sahacreas CEDAC’s organic rice project aims to improve the lives of small organic rice farmers through the production and distribution of rice. In this project, we monitor how the organic rice project contributes to the income gain of the producers and formation of producers’ association, as well as how livelihood of each individual farmer has been affected.Other social impacts that ARUN expects from the invested enterprises are as follows:

 

Employment

We evaluate how many employment opportunities are created through the business. Not only the numbers of the employees, but also we evaluate the quality of the employment, such as skill-up training for the employees and hiring of socially disadvantaged. In addition to the direct employment, we also evaluate the creation of employment throughout the business supply chain, such as the organic rice producers.

 

Impact on the local economy

We evaluate how the business develops, not only its expansion but also how it influences the people and other businesses in the community.

 

Environment

We evaluate the business practice and development that contributes to the improvement of the environment.