Sustainable Infrastructure | Valuing the cost of risks (Early lessons from the Sustainable Asset Valuation

Governments, investors and citizens continue to debate the added value of sustainable infrastructure. Some of the core questions they consider are the following: - Does sustainable infrastructure systematically bring more value-for-money than business-as-usual alternatives? - How can risks be reduced across an infrastructure project’s life cycle by incorporating environmental, social and governance (ESG) considerations? How can we calculate the costs of these risks?

About this Session

IISD and the MAVA Foundation built the Sustainable Asset Valuation (SAVi) to respond to these questions. SAVi calculates the costs of environmental, social, economic and governance risks. SAVi also places a dollar value on externalities that arise as a direct consequence of infrastructure development. SAVi is therefore able to show why sustainable infrastructure can deliver better value-for-money for citizens and investors alike.

An event took place at International Environment House II on 19 March 2019, to debate SAVi’s early track record.

The meeting was organised by UN Environment, the International Institute for Sustainable Development (IISD), the MAVA Foundation, Sustainable Finance Geneva, and the Green Growth Knowledge Platform (GGKP). The event is being held within the framework of the Geneva Environment Network.

The new SAVi website is available at: https://savi.iisd.org

About SAVi

SAVi is an assessment methodology that helps governments and investors steer capital towards sustainable infrastructure.
SAVi’s features are:

A. Simulation: SAVi combines the outputs of system dynamics simulation with project finance modelling.

B. Valuation:

Cost of Risk: SAVi places a financial value on economic, social, environmental, governance risks. It then shows how these risks affect the financial performance of infrastructure projects and portfolios, across their life cycles.
Cost of Externalities: SAVi identifies and values in financial terms the externalities that arise as a direct consequence of infrastructure projects.
Costs of Emerging Risks: SAVi shows how externalities today can transform into direct project risks tomorrow.

C. Customization:

SAVi is customized to individual investment projects and portfolios.

Examples of Risks

Economic: Interest rate fluctuations; currency devaluation, unexpected changes in feed-in tariffs.
Revenue: Reduced demand due to changing consumer preferences or stagnant wages.
Climate: Lower cash flow due to carbon taxes, writeoffs and impaired assets caused by freak weather events and natural catastrophes.
Environmental: reduced revenue due to polluted water and land.
Social: Impacts on cashflow caused by industrial action, civil disturbances and acts of terrorism.
Legal: Disruptions in construction and operation resulting from poorly executed environmental and social impact assessments.
Reputational: Allegations of human rights abuses and subsequent divesting.

SAVi in practice

SAVi assessments are underway in Senegal, Germany, Sri Lanka, Canada, Morocco, Ghana, India, Malawi, Georgia and Tanzania.

Agenda

10:00
Opening Statements – Launch of the SAVi website savi.iisd.org
Nathalie Bernasconi, Group Director Economic Law and Policy, IISD
Fulai Sheng, Head, Economic & Fiscal Policy Unit, Resources & Markets Branch, UN Environment

10:15
Introducing SAVi – Results from the SAVi track record
Andrea M. Bassi, Senior Associate, IISD
David Uzsoki, Senior Advisor, Infrastructure Finance and Green Finance, IISD

11:00
Comments by SAVi users
Arjan Hijdra, Ministry of Infrastructure and Water Management, The Netherlands

11:20
Debate

12:00
Experience – SAVi in action. Interactive exercise

12:50
Closing Remarks
John Maughan, Research Programme Manager, Green Growth Knowledge Platform (GGKP)
Qendresa Rugova, Sustainable Finance Geneva

Documents

Invitation
Andrea BASSI & David UZSOKI Presentation
Experencie of SAVi in action, exercise.
UNEA4 Resolution on Sustainable Infrastructure
Read GGKP article on the event: Savvy and Smart: SAVi Makes the Case for Sustainable Infrastructure

Video

The event was live on Facebook. (part 1, part 2, part 3)

More on Sustainable Infrastructure

This event is part of a series organized by UN Environment Sustainable Infrastructure Partnership team, with the support of the Geneva Environment Network:

Infrastructure innovations as solutions to Environmental Challenges with Prof. Spiro Pollalis (Harvard University) (5 September 2018),
An evidence-based approach to resilient, sustainable infrastructure with Steven Crosskey (UNOPS) and Scott Thacker (University of Oxford/UNOPS) (15 November 2018)