The Sustainable Asset Valuation (SAVi) tool
IISD aims to demonstrate how sustainable infrastructure delivers better value-for-money for governments and taxpayers, and offers better financial returns for investors.
Sustainable infrastructure holds enormous potential for alleviating poverty, improving access to basic services, creating employment and businesses, and ultimately contributing to the well-being of people and the planet.
IISD’s Sustainable Asset Valuation tool (SAVi) assesses the extent to which environmental, social and economic risks and externalities affect the financial performance of infrastructure assets. It also calculates the societal and economic benefits of sustainable infrastructure, such as employment, productivity, income and contributions to GDP.
SAVi is an assessment methodology that helps governments and investors steer capital towards sustainable infrastructure. The SAVi characteristics are:
Cost of Risk
SAVi places a financial value on economic, social and environmental risks and shows how these risks affect financial performance of infrastructure projects and portfolios, across their life cycle. Such risks are often overlooked in traditional financial valuations.
Cost of Externalities
SAVi identifies and values in financial terms the externalities that arise as a direct consequence of infrastructure projects. This enables policy-makers and investors to appreciate the 2nd-order gains and trade-offs of infrastructure investments.
Costs of Emerging Risks
SAVi shows how externalities today can transform into direct project risks tomorrow. Such valuations help stakeholders make decisions in favour of sustainable infrastructure.
SAVi is customized to individual investment projects and portfolios. SAVi can therefore value the cost of risks and as well as a range of wider externalities that are directly material to each asset.
How can SAVi help?
SAVi helps policy-makers and investors understand the costs of economic, social and environmental risks and how these risks affect the financial performance of infrastructure projects across their life cycles.
SAVi also values the costs and benefits of externalities. Policy-makers and investors can ascertain the whole-life value contribution of infrastructure projects to sustainable development. More importantly, they will be able to assess how externalities today can turn into direct project risks in the future.
Hence, SAVi can be a valuable tool for planning and investing in sustainable infrastructure. Policy-makers and investors are challenged to understand a number of elements related to sustainable infrastructure:
- What makes an asset sustainable?
- How can different degrees of sustainability be defined and measured in a scientifically accurate manner?
- How does sustainable infrastructure better contribute to enhanced GDP, employment, innovation, productivity and overall to the UN Sustainable Development Goals? Additionally, how can the contributions be measured?
- Why sustainable infrastructure assets can offer better financial returns and better value for money than their business as usual counterparts?
- How much additional capital is required for sustainable infrastructure projects and infrastructure that is more resilient to changing climates?
SAVi provides a robust, interdisciplinary, quantitative response to all these questions. In the quest for assessment methodologies that are based on science and comfortably intersect with financial asset valuation, SAVi provides a solution.
How does SAVi add value to traditional cost benefit analyses?
SAVI identifies a range of economic, social environmental risks and simulates how these risks will change and affect project cashflows across the asset life cycle. This is possible because the SAVi system dynamics model simulates how the asset impacts and is counter-impacted by the economic, social and environmental "system" within which it is located. SAVi can hence measure in financial terms a complex and dynamic range of risks, as well as indirect costs, intangible costs and opportunity costs.
As SAVi simulates the systemic impacts of infrastructure projects, it also identifies externalities and places a dollar value on them. Policy-makers and investors can thus use SAVi to determine the wider 2nd-order gains and trade-offs and prioritize projects based on their whole-life value for sustainable development. More importantly, they can use SAVi to understand how today’s externalities can turn into direct projects risks tomorrow.
SAVi also adds value by accounting for the cost of capital and other financial concerns such as currency depreciation, interest rates, inflation, varying cash flows and the present value of money. The SAVi project financial model calculates the net present value, internal rate of return, credit ratios, gross margin and other financial performance indicators.
SAVi in use
SAVi is being used by policy and investors around the world. We are currently working on applications in the Netherlands, Senegal, Morocco, Germany, Ghana, Canada, India and more. Customized models are available for renewable energy assets, roads, buildings, irrigation, water supply and sewerage. More models will be made available in the near future.
Green Economy Analysis in Georgia: A Sustainable Asset Valuation for the analysis of sustainable infrastructure investmentsGeorgia’s Green Economy Strategy includes infrastructure investments in agriculture, buildings and the tourism sector. SAVi assesses the investment costs, government revenues and co-benefits of implementing the Green Economy Strategy. Read More
Lake Dal in Srinagar, India: Application of the Sustainable Asset Valuation (SAVi) methodology for the analysis of conservation optionsThe report presents the interim results of the SAVi analysis for developing the business case for the long-term conservation of Lake Dal. A hybrid infrastructure solution is most cost-effective for reducing pollution pressures and for generating economic benefits in the region. This solution combines sewage treatment infrastructure upgrades and the construction of an artificial wetland. Read More
The Sustainable Asset Valuation of the Southern Agricultural Growth Corridor in Tanzania (SAGCOT) Initiative: A focus on irrigationThis report discusses the results of the application of the Sustainable Asset Valuation (SAVi) tool to irrigation infrastructure in the Southern Agricultural Growth Corridor in Tanzania. Read More