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An Application of the Sustainable Asset Valuation (SAVi) Methodology in Sri Lanka: Assessing the economic value of restoring the ecological health of Beira Lake in Colombo

Key Messages

  • The SAVi assessment quantifies the economic value of investing in different ecological restoration options for the South-West Beira Lake in Colombo, Sri Lanka. The most cost-effective and benefit-generating intervention is to invest in the upgrade of wastewater treatment facilities to reduce pollution pressures on the lake.
  • The improved water quality increases the economic value of properties surrounding South-West Beira Lake by more than USD 14 million by the end of 2025 while stimulating more than USD 10 million in increased spending on recreation by locals and tourists between 2020 and 2025.

The SAVi assessment quantifies the economic value of investing in different ecological restoration options for the South-West Beira Lake in Colombo, Sri Lanka. The report presents the results of the review of the effectiveness of restoration options and an integrated cost–benefit analysis. This analysis includes a valuation of water-quality impacts on property values and an estimation of the enhanced recreational value of a restored lake.

The SAVi assessment was conducted for four scenarios. The business-as-usual scenario (1) assumes no additional investments for restoration. This will reduce water quality, cause a net decrease in property values and no increase in the lake’s recreational value.

Reducing the inflow of nutrients from sewage drains is paramount to solving the eutrophication and algae bloom problems in the lake, as reflected by the results of Scenario 2, which assumes investments into the wastewater treatment system. The improved water quality leads to a USD 14 million increase in the economic value of properties surrounding South-West Beira Lake. It also stimulates a USD 10 million increase in spending on recreation by locals and tourists between 2020 and 2025. Scenario 3 assumes the dredging of the lake sediment. This intervention yields only a slight increase in water clarity but does not address the continuous inflow of nutrients. Therefore, investing in dredging alone won’t yield long-lasting water-clarity improvements and economic gains.

Combining the above interventions (Scenario 4) achieves significant improvements in water clarity. This scenario generates the greatest increase (USD 43 million) in the economic value of properties. It also increases the total amount of recreational spending by USD 19.5 million between 2020 and 2025.

The results of this SAVi assessment make a strong case for investing in the restoration of South-West Beira Lake, given the positive effects on property values and the recreational value of the lake. If available financing sources are limited, prioritizing investing in the upgrade of the wastewater treatment system in the drainage area of the lake is recommended because this intervention has by far the best benefit-to-cost ratio. The report also points to financing solutions to realize the restoration interventions.