Sustainable Infrastructure: Valuing the cost of risks

On 19 March 2019 (10:00 AM -1:00 PM CET), UN Environment, the International Institute for Sustainable Development (IISD), and the MAVA Foundation are are holding "Sustainable Infrastructure: Valuing the cost of risks" in the context of the Geneva Environment Network (GEN) at the International Environment House II. 

The event will focus on early experiences with the Sustainable Asset Valuation (SAVi) Tool, which aims to help governments and investors assess the true costs–and risks–associated with infrastructure projects in order to make better decisions.

For more information on Savi, read these two posts from the GGKP Insights blog: 

• Promoting Sustainability, One Infrastructure Investment at a Time
• Research highlights from the Fifth GGKP Annual Conference - Q&A with Oshani Perera

About the event

Governments, investors and citizens continue to debate on the added value of sustainable infrastructure. 

• Does sustainable infrastructure systematically bring more value for money?
• Are the financial returns of sustainable infrastructure more attractive than business-as-usual alternatives?
• Does sustainable infrastructure reduce risks across the project life cycle?  How can we calculate the costs of these risks? 
• We agree that infrastructure is a prerequisite for realising the UN Sustainable Development Goals. We also agree that infrastructure done right, can trigger sustainability improvements across a host of industries. How can we value these benefits?    
• How can simulation be used to provide responses to the above questions?

See temporary project page at https://www.iisd.org/project/SAVi-sustainable-asset-valuation.  

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

A SAVi website will be launched in March 2019. Meanwhile, please see the temporary project page at https://www.iisd.org/project/SAVi-sustainable-asset-valuation