Sustainable Asset Valuation (SAVi) Tool: Helping Governments and Investors See the Value of Sustainable Infrastructure
Roads, bridges, power plants and other forms of infrastructure are critical to a functioning and sustainable economy. They are also extremely costly: the global infrastructure need through 2030 is estimated to be a whopping USD 90 trillion.
Infrastructure locks in land use, design, technologies and capital for decades. It will therefore be a missed opportunity if these assets are not planned, designed, procured and financed in a manner that optimises environmental stewardship, builds skills and crowds-in domestic businesses and investors.
The argument for investing in sustainable infrastructure is strong: planning and deploying a project to optimise environmental, social, economic performance reduces risk and enhances financial attractiveness. The design of our infrastructure also needs to change in order to help cities and nations adapt to the impacts of climate change and use infrastructure as trigger for more inclusive growth. Sustainable projects can accelerate economic development by triggering technological and industrial innovation and creating more long-term employment than business-as-usual infrastructure.
Yet prevailing financial valuation methodologies often favor business-as-usual infrastructure projects as they can entail lower upfront capital costs, fewer technology risks and shorter project preparation periods. Governments often don’t have the expertise or time to plan and tender for sustainable infrastructure.
IISD has developed a Sustainable Asset Valuation (Savi) tool to help governments and investors assess the true costs–and risks–associated with infrastructure projects in order to make better decisions.
As a baseline, SAVi provides an assessment of the Total-Cost-of-Ownership and financial feasibility of individual infrastructure projects, from highways and solar parks to buildings and irrigation projects. The financial feasibility analysis includes the pricing of environmental, social and economic performance in order to give governments and investors a clear and detailed picture of how and why a sustainable infrastructure project is more financial attractive.
The added value of SAVi, however, is its ability to identify and price the broader co-benefits that sustainable infrastructure brings to the domestic economy: enhanced GDP, avoided spending on pollution clean-up and public health services, more jobs, the opportunity to up-skill and much more. Governments and investors can then make infrastructure decisions based on the total value created by projects and not simply on the financial feasibility at the point of procurement. When a project is planned and deployed to create net value, the project is automatically de-risked across its entire life cycle. In other words, SAVi shows why sustainability and profitability in infrastructure go hand in hand.
SAVi also assesses project risks under three different climate change scenarios, such as the number of days a coal plant would need to shut down due to increased air temperatures and decreased water availability.
IISD seeks to work with policy makers, project developers, sponsors and investors, to assess the climate and other environmental, social, economic and governance risks of their projects, portfolios and project pipelines.
Governments and cities can use the results generated by SAVi to:
- Demonstrate the business case for sustainable infrastructure
- Implement policies that promote sustainable infrastructure and reward front-runners
- Prepare and procure sustainable infrastructure projects
- Develop infrastructure pipelines taking into account the environmental, social and economic co-benefits and avoided costs of individual projects
- Report on how the development and expansion of infrastructure supports the realization of national Sustainable Development Goals and National Climate Change Adaption Plans.
Investors can use the results generated by SAVi to:
- Understand why sustainable infrastructure can generate more attractive financial returns
- Identify and price a range of environmental, social, economic and governance risks that are currently not being accounted for
- Assess, disclose and monitor how climate risks are effecting infrastructure portfolios.The Financial Stability Boards has recommended that all investors identify, assess and disclose the risks of climate change on their portfolios including infrastructure assets.
- Report on how infrastructure investments are contributing towards low carbon and sustainable development
IISD can provide assistance in the following areas:
- Work with governments and cities to prioritize and deploy infrastructure projects based on their environmental, social, economic and governance (ESEG) risks, co-benefits and avoided costs
- Work with investors to analyse their infrastructure portfolios and prepare climate and other ESEG-related risks and opportunities mapping
- Customize SAVi to fit a specific portfolio, run different scenarios to assess potential impact stemming from climate-related risks and opportunities, demonstrate relevance to realizing SDGs
- Assess and report on how infrastructure projects contribute toward realizing sustainable development gaols
- Assist in preparing climate and other ESEG-related risks disclosure
For more information please contact:
For a deep dive into SAVi, please view our interactive presentation:
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