Teodora Nenova is a director leading the innovative impact measurement practice at Steward Redqueen — a specialized consultancy that works across the globe advising organizations on impact and sustainability. Nenova advises organizations which seek to understand, measure, and manage their economic, environmental, and social impact.
She has led and executed over 60 impact assessments of multinational companies, impact investors, commercial banks, and non-profit organizations. In an exclusive interview with the Dhaka Tribune’s SM Abrar Aowsaf, she spoke about the role of impact measurement in holding business accountable, Steward Redqueen’s recent socio-economic impact report for Coca-Cola Bangladesh, and strategies Bangladesh can adopt to attract more foreign investment.
What got you interested in impact measurement for businesses? What role can impact measurement play in holding businesses accountable?
I have been working in the field for almost 10 years now, but our company Steward Redqueen has been doing this for more than 20 years. We are driven by the belief that the private sector can and should leverage its resources to promote sustainable development.
Businesses are very well aware of their financial impact, but when it comes to the broader economic, social, or environmental effects they have, we see that a lot of executives are driving without a map. Objective impact measurement is important because it gives companies insights into the channels through which they drive societal impacts — both positive and negative.
Knowing what your baseline is, means you can make action plans on how to mitigate the negative and maximize the positive. And this is what excites me most about this work — that it helps design actionable strategies and tools for sustainable development.
Coca-Cola Bangladesh recently commissioned a socio-economic impact report from Steward Redqueen. Can you give us a brief overview of how you conducted that assessment?
The study is an economic assessment relying on rich data sets. For this type of value chain impact analysis, we used a combination of Coca-Cola’s financial and commercial data, industry information and Bangladesh’s economic data.
We deployed the so-called “input-output” methodology, which was developed by the Nobel Prize-winning economist Wassily Leontief. It is commonly used by economists worldwide. The method relies on the Social Accounting Matrix of Bangladesh which captures all financial sector inter-linkages in the economy. The money related to Coca-Cola in the country — its local expenses to produce the beverages, but also the margins which outlets make from selling Coca-Cola products — serve as an initial “injection” into the model. Using the financial matrix, we follow this money as they “flow” through the economy, supporting incomes and employment.
To understand the business better, verify the results, and put the analysis in the local context, we always combine the desk research with on-the-ground visits. However, that was not possible in the Covid-19 period. Fortunately, it is the second time we have worked for Coca-Cola in Bangladesh, so we knew its structure and business operations already. This helped a lot, since it was easy for us to carry out the discussions and verifications in online meetings.
Has Steward Redqueen worked on any other projects related to Bangladesh? Do you plan to do so in the near future?
Yes, we have. Apart from Coca-Cola, we did a similar assessment for one of Bangladesh’s leading banks, a few years back. We used a similar methodology, but the pathways of impact were different. The research question was to what extent distributed business loans supported employment and economic growth in the country.
We have also done different impact evaluations of private equity funds and potential infrastructure projects. So, we have done some work in the country in the past, and with impact investing on the rise, we hope there will be more opportunities coming!
Bangladesh has been growing at a very rapid pace for years — how can the country ensure that sustainable and responsible business practices make up for the majority of its growth?
This is a difficult question, without a straightforward answer. There is always a combination of push and pull aspects to building a sustainable growth-path.
Clearly there is a legislative and regulatory role; proper frameworks should be enforced in all areas related to responsible business conduct, including human rights, employment and labor, climate, environment, anti-corruption, etc.
But legislative action in itself is not sufficient.
Enabling enterprises to meet such requirements involves identifying and removing barriers to the uptake of responsible practices; it also entails engaging with businesses to strengthen their conduct, including with small and medium enterprises. Public-private cooperation has worked well in these areas, and there is a role for development assistance and financing organizations which can build such capacity.
Multinational companies should also get involved. For example, as our study has shown, Coca-Cola has a substantial local value chain. This means it works with numerous local enterprises. Big companies should require their partners to meet responsible business practices, and they could help them do that by passing the know-how and invest in getting them compliant.
A success factor in such engagements is showing companies that this is not simply done from a regulatory point of view — acting responsibly makes business sense. By now, we have plenty of evidence that companies with better environmental, social and governance (ESG) practices have stronger financial performance and enjoy lower cost of capital.
What strategies do you think Bangladesh can adopt to attract more impact investment?
First of all, like with any traditional investments, real or perceived doubts about the stability of the business environment can discourage the flow of capital. So we are back to the basics: investors need to be certain that there are adequate business policies and a stable, clear regulatory environment in place.
For project developers and businesses, it is important to keep in mind that impact investors are driven by financial return as much as the realization of their impact mandates. The latter can differ among financiers, but often revolve around quality employment generation, climate mitigation, social inclusion, access to critical services.
In the past years, we are seeing more and more institutions committing to investing in companies or projects empowering women economically and contributing to climate adaptation — topics which are very relevant to Bangladesh. Enterprises which are contributing to such objectives are the key target group of impact investors, so pitching their concrete ideas and strategies focusing on these themes will help them attract impact funding.
This links us back to another role for the government: participation in blended finance schemes through co-financing and co-investing. This can reduce the perceived risk associated with investments in projects and businesses in Bangladesh, enabling more projects to access private capital. Concessional finance for blending is becoming crucial for setting the right incentives to enable scale.
What role can impact investment play in dealing with the challenges posed by the Covid-19 pandemic?
As we know by now, the Covid-19 pandemic is not only a health crisis, but also an economic one. The pandemic is threatening lives and livelihoods across the globe, bringing challenges which risk slowing and even reversing the progress made towards achieving the Sustainable Development Goals (SDGs).
The role of impact investing from the very beginning has been to address issues such as access to healthcare, quality employment creation, inclusive incomes generation, food security — issues that have become ever more pressing during the past two years. So, impact investing continues having a natural role in addressing these issues. At the start of the pandemic, the industry was detrimental in quickly stepping up and deploying capital to support businesses to cope and adapt.
If there is any kind of silver lining, it is that the pandemic accelerated the interest towards impact investing. We see that leading mainstream banks and institutional investors like pension funds are gaining interest in impact investing and putting their money to work to contribute to the SDGs. We hope that even as the recovery sets forward, this trend will continue.