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Page 1: John Fletcher

Addressing some of the Issues of Sustainable Investment

(development of an impact model for WWF-UNEP)

John Fletcher

Page 2: John Fletcher

The study

Approached in December 2008 to build a new model to help advise on sustainable tourism investment in coastal areas (WWF)

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Met to discuss and agreed that it should not be a “new model” but a “new approach”.

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The models we already have are far more accurate than the data we use

to drive them!

Page 5: John Fletcher

Define Sustainable Investment for the purpose of this study

Sustainable investment can be in:

• sustainable development;• reducing the rate of consumption of natural

resources;• reducing GHG emissions;• technologies to remove Carbon from the

atmosphere;• reducing the need to travel

Page 6: John Fletcher

Working DefinitionIncreases to the capital stock that will:

• drive the destination towards optimising its use of local natural resources;

• reduce the incremental negative environmental and social impacts associated with increased productive capacity and;

• enhance local socio-economic effects.

Page 7: John Fletcher

Review of economic impact models

• Ad Hoc Multiplier models;

• Input-Output Models;

• Computable General Equilibrium Models

Page 8: John Fletcher

Choice of model• Ad hoc models were considered partial and too

subjective in construction;

• CGE Models were considered to be strong and accurate with sufficient data availability but too complex for online development;

• Input-Output models were considered sufficiently reliable and robust enough for online development.

Page 9: John Fletcher

Model Structure

• The structure of the model is based on an I-O Model, and an environmental matrix (to capture upstream environmental impacts and expresses them as GHG emissions, Acid Rain Precursors, Occupational injuries and deaths, biodiversity etc);

• The model also attempts a socio-economic module even though somewhat limited to indicators such as local labour content, skill levels;

• The model is importantly subject to an auto-regressive forecasting module that estimates likely future impacts.

Page 10: John Fletcher

In 1992…

The model we built gave results that looked like this….

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In 1999…

The model we built gave results that looked like this….

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To keep the data entry simple..

We looked at the level of aggregation to be used…

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AggregationTested various aggregation levels starting with 48

x48 I-O matrices for a wide range of countries:– OECD– Industrialised– Agricultural– Extractive

With a wide range of income levels – high, middle and low income countries.

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The effects of aggregation• Output/income multipliers calculated for all

countries at 48, 25, 24, 23, 19, 16 and 13 sector levels of aggregation;

• Optimum aggregation was between the 23 and 16 sector levels, but even at the 13 sector level the errors introduced were less than 5% in the vast majority of cases.

Page 18: John Fletcher

Agriculture, Hunting, Forestry and Fishing Output Multipliers, Brazil

1.96

1.965

1.97

1.975

1.98

1.985

1.99

1.995

2

2.005

2.01

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 19: John Fletcher

Agriculture, Hunting, Forestry and Fishing Output Multipliers, China

1.97

1.975

1.98

1.985

1.99

1.995

2

2.005

2.01

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 20: John Fletcher

Agriculture, Hunting, Forestry and Fishing Output Multipliers, Germany

2.012

2.014

2.016

2.018

2.02

2.022

2.024

2.026

2.028

2.03

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 21: John Fletcher

Agriculture, Hunting, Forestry and Fishing Output Multipliers, UK

2.185

2.19

2.195

2.2

2.205

2.21

2.215

2.22

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 22: John Fletcher

Construction Sector Output Multipliers, Australia

2.14

2.145

2.15

2.155

2.16

2.165

2.17

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 23: John Fletcher

Construction Sector Output Multipliers, Japan

2.12

2.14

2.16

2.18

2.2

2.22

2.24

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 24: John Fletcher

Construction Sector Output Multipliers, USA

1.97

1.975

1.98

1.985

1.99

1.995

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 25: John Fletcher

Distributive Trade Output Multipliers, France

1.6

1.605

1.61

1.615

1.62

1.625

1.63

1.635

1.64

1.645

1.65

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

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Distributive Trade Output Multipliers, Inodenesia

1.686

1.688

1.69

1.692

1.694

1.696

1.698

1.7

1.702

1.704

1.706

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 27: John Fletcher

Hotel & Restaurant Output Multipliers for Australia

2.23

2.24

2.25

2.26

2.27

2.28

2.29

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

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Hotel & Restaurant Output Multipliers, Brazil

2.12

2.13

2.14

2.15

2.16

2.17

2.18

2.19

2.2

Original Agg 1 Agg 2 Agg 3 Agg 4 Agg 5 Agg 6

Page 29: John Fletcher

Schematic Diagram

Input-Output Model

Environmental Matrix

Forecasting Module

Socio-economic Module

Private Sector Businesses

Public Sector Officials

Guidelines and sustainability checklist

Investment Appraisal

1

2 3

Output:Benchmarking & Forecasts

Input:Expenditure, Employment,Size, etc

Output:EconomicEnvironmental socio-economic results

Input:Tourist arrivals,

expenditure, employment by

sector, etc

Page 30: John Fletcher

The Investor’s Interface (1)• The role that this has is still under discussion;

• Use the Inter-American Development Bank (GSTC) Scorecard system to “lock out” unsustainable investors, or;

• Use it as a way of driving investors to be more aware of sustainability

• Access to the site will give them impact and average performance benchmark indicators for the sector that is relevant to their proposed investment.

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Private Sector Interface (2)• The crucial interface – this is what fuels the

model;

• Requires engagement of the private sector;

• Rewards engagement with benchmark and performance indicators (min, mean and max economic, environmental, business) for their sector.

Page 32: John Fletcher

Types of benchmarks/indicators

• Hotels…RevPAR, Energy (Kw) per guest night, energy costs as % of total costs, occupancy rates, marketing as % of total costs etc., etc.

• Restaurants…Sales per cover…energy costs as % of total, sales per employee, marketing costs as % of total…etc.

• Retail….sales per sq.mtr, sales per employee, energy costs as % of total costs, etc,. Etc.

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Public Sector Interface (3)• Provides an overview of investment and tourism

activity/development;

• Requires engagement in the form of providing tourist data (spend and visits) as well as control totals for each sector (such as employment);

• Creates a planning and sustainability culture.

Page 34: John Fletcher

Online model needs to be…

• Easily maintained and managed;

• Reconciliation checks;

• Secure/confidential;

• Localised (language and questions);

• Keep same structure.


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