Sustainable Asset Valuation Model (SAVi): Transparency for ... Bassi... · SAVi application to...

Sustainable Asset Valuation Model (SAVi):

Transparency for Decision-Makers

and Investors

Method and Insights

November 2018

Andrea M. Bassi

Georg Pallaske

Madeline Stanley

Oshani Perera

Infrastructure projects must consider carbon

and environmental footprints, social

cohesion, stewardship of natural ecosystems

and the financial viability of projects.

Infrastructure is an enabler, and hence it

has to be sustainable.

The Sustainable Asset Valuation (SAVi) tool assesses:

• environmental, social and economic risks and

externalities.

• socio-economic benefits, such as employment,

income generation and contributions to GDP.

Investors use a SAVianalysis to assess the impacts of improved

sustainability on future cash flows and

financial returns.

Disclosure

statements

(e.g. carbon)

Environmental, social and

economic co-benefits.

CSR, impact

investing

Governments use a SAVi analysis to assess

value for money for public investments, and determine changes in

government revenues and

expenditure.

How does ESG

performance increase value

for money for tax payers?

Do sustainable assets trigger positive

externalities? (e.g. higher GDP)

Can sustainable infrastructure

increase fiscal sustainability?

SAVi puts a financial value on

risks and externalities that

are not well understood and

therefore ignored in traditional investment

assessments.

SAVi calculates the impacts of

various risks and externalities on

levelized costs, gross margins, net

present value, internal rates of

return and credit risk ratios.

Potential risks and

externalities

Physical/Environmental

Higher global temperatures, rising sea levels, water shortages,

water and air pollution, land degradation, extreme weather,

biodiversity.

Social/Political

Currency inconvertibility, wage fluctuations, industrial action, war,

terrorism, civil disturbance.

Technological/Legal

Environmental and social safeguards, troubleshooting experimental

or emerging technologies.

Consumer/Reputational

Changing public opinion, industrial action, environmental disasters,

human rights abuses.

Economic

Contribution to GDP, household incomes, carbon taxes, changes in

feed-in tariffs, fluctuations in resources, access to land.

SAViinfrastructure

asset types

SAVi can currently be applied to energy, roads,

buildings,

water infrastructure,

nature-based infrastructure. Waste

infrastructure will be developed in 2019.

We customize SAVi to our

clients’ needs

Each analysis is custom tailored, whether clients

are looking at a single project, a portfolio of

projects, or an economic or industrial policy.

Together with the client, we identify

externalities and risks on a case-by-

case basis.

Current applications

Clients include:

The Ministry of Infrastructure and Water Management

of the Netherlands, the Directorate of Tourism of

Jammu & Kashmir in India, UN Environment, WWF, the

Moroccan Road Agency, and the Senegalese

Government Agency for the Implementation of the

Plan for an Emerging Senegal.

SAVi application to natural infrastructure

We assess impacts across:

- Dimensions of development

- Sectors

- Economic actors

- Over time

- In space

Method: integrated cost benefit analysis

Fishing

Water quality

Forest

Agriculture

Population

Tourism

Biodiversity

Employment

Culture, education

GDP

Population

80,000

60,000

40,000

20,000

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Per

son

Population : Bita 28Aug - BAU

Population : Data

total value added

400 B

300 B

200 B

100 B

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Pes

os/

Yea

r

total value added : Bita 28Aug - BAU

total value added : Data

Biodiversity

1.098

1.023

.9489

.8744

.8

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Dm

nl

Biodiversity : Bita 28Aug - BAU

fallow / Forest Land

247,000

246,500

246,000

245,500

245,000

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Ha

"fallow / Forest Land" : Bita 28Aug - BAU

"fallow / Forest Land" : Data

water quality index

.9

.85

.8

.75

.7

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

water quality index : Bita 28Aug - BAU

Agriculture Land

3000

2250

1500

750

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Ha

Agriculture Land : Bita 28Aug - BAU

Agriculture Land : Data

Governance

0

-.075

-.15

-.225

-.3

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Dm

nl

Governance : Bita 28Aug - BAU

ornamental fishing

35.04

31.28

27.52

23.76

20

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Ton/Y

ear

ornamental fishing : Bita 28Aug - BAU


Fishing

Water quality

Forest

Agriculture

Population

Tourism

Biodiversity

Employment

Culture, education

GDP





- Sectors

- Economic actors

- Over time

- In space


A

B

Total avoided costs and benefits(A+B+C)

Societal avoided costs and benefits

(B+C)

Firm avoided costs and benefits

C

Direct cost reduction for public budget

items (e.g. health)

Total investment




- Sectors

- Economic actors

- Over time

- In space


SAVi application to Canada

There are growing concerns over irregular rainfall patters and floods,

water quality, irrigation and water needs.

We use SAVi to:

• Identify, quantify and carry out an economic valuation of the assets and

the services provided by natural infrastructure.

• Estimate the potential cost of generating these same services with new,

built infrastructure.

• How much savings has natural infrastructure allowed to accrue?

• Is it worth conserving, restoring natural infrastructure or building

new infrastructure?

Stephenfield Reservoir and Pelly’s Lake

1

Scope of the analysis

What are the services

provided?

Stephenfield Reservoir and Pelly’s lake

1. Water supply2. Scenic beauty3. Nitrogen and Phosphorous uptake 4. Carbon sequestration5. Economic activity

1. Maintenance2. Water provisioning3. Cattail production

1. Water provisioning2. Tourism

1. Water supply2. Irrigation3. Water (nutrient) treatment4. Carbon sequestration

What is the cost of

providing these services?

What are the revenues

generated from the provision of

these services?

What is the cost of building alternative

(built) infrastructure to provide the same

services?

2 3

4

Results of the analysis

– Stephenfield ReservoirServices provided

stranded land

70,000

52,500

35,000

17,500

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Ha

stranded land : BAU 2018 11 07 AB7 CC

stranded land : BAU 2018 11 07 AB7 no CC

Water Stock Stephensfield

4000

3500

3000

2500

2000

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

Acr

eft

Water Stock Stephensfield : BAU 2018 11 07 AB7 CC

Water Stock Stephensfield : BAU 2018 11 07 AB7 no CC


– Stephenfield ReservoirServices provided

total annual n loadings

1.624 M

1.351 M

1.078 M

805,900

533,300

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Time (Year)

total annual n loadings : BAU 2018 11 07 AB7 CC

total annual n loadings : BAU 2018 11 07 AB7 no CC

total annual n loadings

N Loadings From Nonurban Atmospheric Deposition Rate

agricultural fertilizer total annual n loadings

n loadings from manure on pasture (no manure storage system)

n loadings from stormwater

n loadings in treated wastewater

urban indirect n loading from atmospheric deposition

Results of the analysis – Pelly’s LakeEconomic assessment

$0

$40,000

$80,000

$120,000

$160,000

$200,000

Cattail value added Basin maintenance

CA

D (

dis

cou

nte

d)

CBA item


$-

$5

$10

$15

$20

$25

Cattail valueadded

Basinmaintenance

Irrigation Wastewater Carbonabatement

CA

D (

dis

cou

nte

d)

Mill

ion

s

CBA item


$-

$10

$20

$30

$40

$50

$60

$70

$80C

AD

(d

isco

un

ted

)

Mill

ion

s

Revenues

Basin maintenance

Total O&M costs

Total capital costs of builtinfrastructure

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

Water licenses Tourism Reservoir O&M Wastewater Irrigation Water storage Carbon

CA

D (

un

dis

cou

nte

d)

Mill

ion

s


– Stephenfield Reservoir Economic assessment

Existing reservoir New built infrastructure

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

Water licenses Tourism Reservoir O&M Wastewater Irrigation Water storage Carbon

CA

D (

un

dis

cou

nte

d)

Mill

ion

s



Total revenues (not profit)

Profit?

$16,000 / year

Capital and O&M: 50/50.

Likely higher –location!

Advanced options are

expensive and more capital

intensive

What storage buffer?

Carbon sequestration or emission

rductionExisting reservoir New built infrastructure

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

Mill

ion

s

Reservoir O&M

Total O&M costs of builtinfrastructure (replacement)

Total capital cost of builtinfrastructure (replacement)



The O&M cost of built infrastructure would be higher than the current O&M cost of

the reservoir and related natural infrastructure

The capital cost of built infrastructure, and the

resulting cost of financing, impact financial

considerations for new infrastructure projects

Interested in alternative scenario?

Conclusions

• Should we use the results presented, as is?

• Are the models, and results perfect?

• Does the approach support changing perspective?

• Does it stimulate more discussion?

• Does it help ask the right questions?

At this stage we aim at being “somewhat right” and inform the

debate than “being wrong with a high degree of

precision”!

Contact us today to find

out more about how SAVi can

help you

Oshani Perera, [email protected]

Madeline Stanley, [email protected]

Andrea Bassi, [email protected]

Georg Pallaske, [email protected]

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