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Session 6: Mainstreaming resilience in projects-IISD

  1. Sustainable Asset Valuation (SAVi) and the case for investing in Nature-based Infrastructure Liesbeth Casier & Emma Cutler March 2023
  2. What if we invest in NBI where possible? Cost-savings up to 50% Health benefits, avoided pollution, avoided damages to infrastructure Increased revenues for local economic actors
  3. Some barriers to scaling the use of NBI ✓ Lack of rigorous and systemic assessments on the potential of nature to provide adaptation and infrastructure services ✓ Lack of understanding of the biophysical and monetary value of many ecosystems and their related co-benefits ✓ Lack of comparability and certainty for policy makers, infrastructure planners and investors to be able to rely on the performance of nature ✓ Lack of ability to compare the capital costs, operating costs and (indirect) revenue streams of NBI with grey alternatives for adaptation
  4. Questions SAVi can answer for Governments & Cities • How does environmental, social and economic performance increase value for money for taxpayers? • Is sustainable infrastructure systematically more expensive to build? Can these costs be recuperated during the use phase? • Do sustainable assets trigger more positive externalities such as higher GDP, Green GDP, employments, innovation, productivity, etc.? • Will this asset help trigger sustainable development? IISD’s Sustainable Asset Valuation (SAVi) is an assessment methodology that helps governments and investors steer capital towards sustainable infrastructure and demonstrates how this can deliver better value-for-money for all. Governments & Cities Investors Citizens
  5. SAVi Methodology Simulation Customization Valuation Based on systems thinking, system dynamics simulation, and project finance modelling. Developed by placing a financial value on economic, social and environmental externalities and risks Customized to reflect local conditions and needs Co-created through a multi-stakeholder approach that enables the identification of material risks and opportunities that are unique to the project. Co-creation
  6. ➢Energy ➢Transport ➢Buildings ➢Water & irrigation ➢Waste ➢Nature-based infrastructure Current use of SAVi & infrastructure sectors
  7. Sustainable Asset Valuation (SAVi) The SAVi methodology quantifies and values the environmental, social, and economic externalities of infrastructure projects.
  8. How we work
  9. Example: Results of an assessment of forest restoration in the Brantas River Basin
  10. Study Area Geographic location • East Java • Three sub-watersheds in the upper Brantas River Basin Activities • Upstream agriculture and forest • Downstream industrial activity including a PT Multibintang brewery
  11. Environmental Challenges and Proposed Solutions Current problems • Deforestation and land degradation leading to limited water retention • Drought during the dry season • Flooding and erosion during the rainy season • Water pollution Future problems • Continued land degradation and associated problems • Increased water demand • More precipitation with more variability Multi-stakeholder approach • United Nations Industrial Development Organization (UNIDO) convened public and private sector stakeholders to identify priority actions and apply for funding from the Global Environment Facility to address water concerns • Collaboration with the Ministry of Environment and Forests Proposed actions • Reforestation and improved forest management • Water retention wells
  12. SAVi Assessment Goals Quantify the costs, benefits, and financial performance of forest restoration and water management, including externalities and avoided costs Assess the impact on downstream water availibity if land restoration occurs on a large scale Identify mechanisms to fund reforestation, such as carbon finance
  13. Integrated Cost Benefit Analysis Results (million USD) 20-year lifetime 30-year lifetime RCP 4.5 RCP 8.5 RCP 4.5 RCP 8.5 Added Benefits Value of bamboo exports 0.21 0.21 0.35 0.35 Value of agroforestry benefits 2.12 2.12 3.35 3.35 Tree planting wages 0.52 0.52 0.52 0.52 Carbon storage benefit 31.99 31.99 31.99 31.99 TOTAL ADDED BENEFITS 34.84 34.84 36.21 36.21 Avoided Costs Avoided flood damages to households 24.00 24.53 486.79 77.96 Avoided flood damages to agriculture 12.06 14.00 193.73 36.90 Avoided erosion damages to agriculture 17.85 42.64 41.65 52.56 Avoided nitrogen pollution 17.10 17.10 25.65 25.65 Avoided phosphorus pollution 8.08 8.08 12.12 12.12 TOTAL AVOIDED COSTS 79.09 106.34 759.93 205.18 Investment & Maintenance Costs Improved land management investment cost 8.94 8.94 8.94 8.94 Absorption wells and biopori investment cost 0.56 0.56 0.56 0.56 Annual maintenance costs 0.10 0.10 0.14 0.14 TOTAL COSTS 9.60 9.60 9.64 9.64 NET BENEFITS 104.34 131.59 786.50 231.75 BENEFIT TO COST RATIO 11.87 14.71 82.56 25.03
  14. Key Takeaways The project has positive net benefits for society when externalities are considered and is cheaper than constructing a reservoir with the same water retention capacity. The project can reduce the costs of extreme flooding and contributes to climate adaptation. Carbon payments play a critical role in making the project financially and economically attractive and can cover the investment and maintenance costs. The avoided costs of flooding, erosion, and water pollution create signicant value for society but are not monetized for investors.
  15. Results can be used by many stakeholders • UNIDO / Donors and funders o The assessment shows the value of a multi-stakeholder approach to land and water management o Results can be used to help scale-up reforestation efforts • Industry / private sector o The assessment demonstrates that the project is an economical way to enhance water retention and water availability for industry while also providing co-benefits for society • Government o The assessment highlights the value of land restoration and watershed management, which are priorities identified in the Indonesia National Medium Term Development Plan 2020-2024
  16. Thank You! Contact details: Emma Cutler, Liesbeth Casier,