UNDERSTANDING THE TRIPLE BOTTOM LINE OF PUBLIC INFRASTRUCTURE INVESTMENTS THROUGH SUSTAINABLE RETURN ON INVESTMENT

Transcription

1 2014 HDR Architecture, 2014 HDR, Inc., all rights reserved.

2 UNDERSTANDING THE TRIPLE BOTTOM LINE OF PUBLIC INFRASTRUCTURE INVESTMENTS THROUGH SUSTAINABLE RETURN ON INVESTMENT Dennis Bruce Senior Vice President, HDR October 9th, 2015

3 3 PRESENTATION OUTLINE Introduction and Context SROI Process/Methodology SROI Examples

4 ECONOMICS PRACTICE WITHIN HDR HDR is a 10,000 person A&E firm Decision Economics joined HDR in 2005 HLB Decision Economics becomes part of HDR to provide decision support service to HDR clients Now we have 35 economists providing decision support services Cost risk analysis Cost Benefit Analysis Economic Impact SROI

5 IS DECISION MAKING MORE COMPLEX NOW? o way of life, health 5 Economy o Greater global connections o Significant uncertainty Demographics o Aging population Finance o Tight public budgets and aging public infrastructure Environment o Global warming Social

6 SROI APPLIES BEST PRACTICES IN THE ECONOMICS OF DECISION MAKING Sustainability is the act of balancing the environmental, social, and economic needs of the built and natural environments for present and future generations. o Ask whether and when a project is worthwhile o Objective, theory-based o Life cycle monetary & non-monetary outcomes o Peer-reviewed evidence o Accounts for uncertainty o Assess base case vs. incremental change

7 SROI OVERVIEW 7

8 MAKING SUSTAINABLE DECISIONS BASED ON A MONETIZED TRIPLE BOTTOM LINE 8

9 MAKING SUSTAINABLE DECISIONS BASED ON A MONETIZED TRIPLE BOTTOM LINE Capital Costs Fixed O&M Costs Variable O&M Costs Fuel Costs Decommissioning Cost Residual Value of Capital Expenditures Revenues Greenhouse Gas Emissions Criteria Air Contaminants Land degradation Noise Invasive species Water Consumption Water Quality By-Product Landfilling Property Appreciation Pavement Maintenance Accidents Traffic Congestion Health Parkland Creation from redevelopment Low income mobility 9

10 THE TRIPLE BOTTOM LINE FRAMEWORK Project Cash Impacts Internal Non- Cash Impacts External Non-Cash Impacts Revenue; Operational Savings Capital Costs; O&M Costs Health & Safety Public Acceptance Value of Time Green House Gases Criteria Air Contaminants Water Quantity/ Quality Financial Return Reliability Regulatory Other Public Health & Safety Odor & Noise Other Financial & Social Sustainable Return on Investment 10

11 SROI PROCESS 11

12 SUSTAINABLE RETURN ON INVESTMENT (SROI) METHODOLOGY A Four Step Process to Bring Objectivity and Transparency to Sustainability Decision Making SROI reveals the hidden value in projects. David Lewis, PhD Former Principal Economist at the US Congressional Budget Office Author Policy and Planning as a Public Choice: Mass Transit in the United States

13 SROI METHODOLOGY EXAMPLE STEP 1 TRANSPARENT STRUCTURE AND LOGIC DIAGRAM Documents relationships and facilitates communication between Engineers and Economists 13

14 SROI METHODOLOGY STEP 2 QUANTIFY INPUT DATA ASSUMPTIONS CO 2

15 SROI METHODOLOGY STEP 3 RISK ANALYSIS SESSION Potential Participants: o Facilitators o Owner s project team o Consultant team o Outside experts o Academic community o Regulators o Business groups o NGOs o Community groups o Environmental groups

16 16 SROI METHODOLOGY STEP 4 SIMULATE RESULTS Runoff Flooding (# Events/yr) Reduced Energy Demand (kwh/yr) Property Value ($/Flood Event) Jointly Determined Probabilities Energy Savings ($/kwh) F = f (A, B, C, D,..) Value of Investment ($/yr)

17 RESULTS PROVIDE BOTH FINANCIAL (FROI) AND SUSTAINABLE RETURN ON INVESTMENT (SROI) The Sustainability S Curve to Optimize the Total Value of Projects 17

18 EXAMPLES 18

19 P R O J E C T: S R O I A n a l y s i s o f P o w e r P l a n t C o n v e r s i o n C L I E N T: H o l l a n d, M I B o a r d o f P u b l i c W o r k s S C O P E O F W O R K : C o m m u n i t y - o wned, non- p r o f i t utility E v a l u ation m e t h o d that c o n s i d e r e d t riple b o t t o m line B e n e f i ciaries a n d Benefits:» H o l l and B P W: F i n a n c i al» E l e c t ricity U s e r s : Energy Costs» E n v i r o n m ental: GHG, C A C» E c o n o m y: r e l o c a t i o n, t ransportation» C o m m u n i t y: l a n d v a l u e, s n o wmelt

20 P R O J E C T: P h y s i c a l S e p a r a t i o n o f t h e G r e a t L a k e s a n d M i s s i s s i p p i Wa t e r w a y s C L I E N T: G r e a t L a k e s C o m m i s s i o n & G r e a t L a k e s C i t i e s I n i t i a t i v e S C O P E O F W O R K : I s it feasible to p h ys i c a l ly s e p a r a t e t h e Great Lakes a n d Mississippi R i v e r b a s i n s t o m i t i g a t e s p r e a d o f A s i a n C a r p? W h a t a r e t h e i m p a c t s a n d where?

21 P R O J E C T: P o l icy A n a l ys i s o f t h e R e n e wable E n e rgy Production Ta x Credit C L I E N T: N e w Mexico E n e r g y, M i n e r a l s a n d N a t u r a l R e s o u r c e s D i v i sion S C O P E O F W O R K : A s s e s s whether the economic b e n e f i t s o f R E P T C e xceed t h e t a x l o s s A s s e s s f rom an economic a n d s o c i a l p e r s p e c t i v e E xamine p a s t a n d f u t u r e policy a c t i o n s D e v e l o ped B/C Ratios with and without e n v i r o n m e n t a l e ff e c t s

22 P R O J E C T: S R OI A n a l ys i s o f Transportation M a s t e r Plan C L I E N T: M e t rolinx S C O P E O F W O R K : C o n d u c t e d e c o n o m i c a n a l ys i s o f M e t r o l i n x s B i g M o v e E s t i m a t e d p u b l i c b e n e f i t s a n d e c o n o m i c i m p a c t s E s t i m a t e d t h e cost of c o n g e s t ion i n the GTHA

23 P R O J E C T: S R OI A n a l ys i s o f I n f rastructure I n v e s t m e n t s C L I E N T: D e n v e r M e t ro S C O P E O F W O R K : D e v e l o p i n i t i a l f r a m e work E v a l u ate a n d prioritize i n v e s t m e nts i n» B i o s olids M a n a g e m e n t» N u t r i e n t R e m o v a l» L i q u i d S t r e a m Tr e a t m e n t» E n e r g y S o u r c e s

24 24 WRAP-UP The world is changing and public infrastructure decision making is evolving Effective infrastructure decision making balances economic, social and environmental factors in an open discussion Quantification of all effects not always feasible but it is critical for decision makers to identify, discuss and understand all the issues

25 QUESTIONS? 25