Research highlights from the Fifth GGKP Annual Conference - The Sustainable Asset Valuation (SAVi) tool

Oshani Perera is the Director of the Public Procurement and Infrastructure Finance program of the International Institute for Sustainable Development (IISD). Oshani will be presenting the new Sustainable Asset Valuation (SAVi) Tool at the GGKP Annual Conference on Sustainable Infrastructure, hosted by the World Bank in November 2017. Oshani sat down with the GGKP to discuss the SAVi Tool and how it can support sustainable infrastructure decision making.

What is the Sustainable Asset Valuation (SAVi) tool? 

Governments and investors often ask about the value-added of sustainable infrastructure, including:

• Does sustainable infrastructure systematically optimise value for money for taxpayers?
• Are internal rates of return more attractive when assets are planned and built in a more sustainable manner? 
• To what extent can climate risks as well as well as wider environmental, social and economic risks be valued in financial terms?
• Sustainable infrastructure can bring a host of positive externalities –  resource and energy efficiency, job creation, productivity, and innovation, to name a few. To what extent can these be measured and valued in financial terms?
• Sustainable infrastructure costs more to plan and build.  To what extent can these costs be recuperated later in the asset lifecycle?  

These questions are challenging, because conventional cost-benefit analysis and project finance valuation methodologies ignore a range of material environmental, social and economic risks, intangibles and externalities.

The International Institute for Sustainable Development (IISD) and the MAVA Foundation built SAVi to respond to respond to this challenge. SAVi assesses the environmental, social, and economic risks and externalities of infrastructure projects, and then demonstrates how they impact the asset’s financial performance. 

What can governments and investors do with the SAVi tool?   

Governments can use SAVi to:

• Compare and contrast the environmental, social, and economic performance of business-as-usual infrastructure with sustainable alternatives. 
• Determine the climate resilience of planned infrastructure projects. 
• Assess the positive externalities of sustainable infrastructure projects, including contributions to GDP and green GDP, employment, productivity, wages, household incomes, lower carbon and green house gas emission, improved energy, water, and resource efficiency, reduced effluents and wastes, and much more. 
• Determine trade-offs and prioritise projects and policies based on their broader contribution to sustainable development.

Governments can also use SAVi to assess the effectiveness and trade-offs of green economic and sustainable development policies. For example:  What are the costs, benefits, and trade-offs in granting fiscal incentives for renewable energy, green buildings, and the production of less toxic building materials? What are the trade-offs between innovation, automation, and job creation? What are the trade-offs between budget reforms that reduce spending on environmental services in favour of education and health?

Investors can use the SAVi tool to:

• Assess whether improved sustainability performance can affect future cash flows and contribute to more attractive financial returns.
• Identify and asses the climate risk of infrastructure assets and prepare disclosure statements, as recommended by the Financial Stability Board.
• Quantify, evaluate and report on the environmental, social and economic co-benefits and avoided costs generated by infrastructure projects, and thus its contribution to sustainable development.

How can governments and investors use SAVi tool for sustainable infrastructure decision-making?

IISD defines sustainable infrastructure as assets that:

• Lower carbon and environmental footprints
• Provide for the stewardship of natural ecosystems
• Move beyond compliance on core labour standards and human rights
• Trigger green technological and industrial innovation
• Spur investment in education, skills building and R&D
• Increase employment and the growth of green jobs 
• Are financially viable 
• Crowd-in domestic investors and businesses
• Increase opportunities for foreign direct investment and domestic value-added
• Optimize value for money for taxpayers and investors across the asset life cycle

SAVi can be customised to each infrastructure asset, as the financial feasibility and the environmental, social, and economic performance of assets are assessed individually.  IISD works with the asset owner, public authority, or investor to collect data on the characteristics of the asset and on the externalities that are material to them.

We invite GGKP stakeholders to use SAVi, provide feedback, and help us improve the tool so that it is even more robust and relevant. 

The SAVi has the potential to play a key role in supporting governments and investors to make decisions that will help close the US$ 90 trillion global infrastructure gap so that we can move forward with building sustainable and inclusive societies.

Click here for a full presentation on the Sustainable Asset Valuation Facility.