Louise Ellis, water engineer at the Resilience Shift and Arup, interviewed Amanda Janoo at this August’s Stockholm World Water Week 2018 on alternative economic thinking around the resilience challenges for economic and industrial policy including diversification, intervention, and balance.
Amanda Janoo is an Alternative Economic Policy Expert advising governments and the United Nations.
Her advice on policy has particular reference to issues of diversification, value addition, inequality reduction and employment generation. She specialises in a holistic approach to industrial policy design that considers economic, social and environmental dimensions of development, to ensure context-appropriate and complementary policies which are in line with larger national objectives.
You can see what she suggests will be making a difference in the short interview below.
The value of resilience is a hot topic globally and the Resilience Shift recently debated the value of resilience at our Global Knowledge Exchange event. You can watch the debate here. It raised a number of challenges that begged the question of how to increase the perceived value of resilience in particular with asset owners and funders.
What do you think about the resilience challenges for policy? Do we need to change the prevalent economic thinking to achieve the shift in resilience thinking and practice that we will need to make the world a safer and better place?
Tell us what you think in the comments or by emailing us at [email protected]. Or get involved in the debate on twitter or linkedin.
For more about urban and water resilience, search our blogs for updates from World Water Week.
“If resilience had any real economic and societal value, then decision makers would be implementing it already”
At the Resilience Shift, our aim is a safer and better world through resilient infrastructure. This debate and audience Q&A, at the Global Knowledge Exchange event on 22 August 2018, posed this challenging question in a lively and opinionated discussion.
The views and opinions raised as part of this classic debating format do not represent the panel’s own views or those of any associated organisations.
Chaired by Dr Mark Fletcher, Global Water Leader, Arup, the panel included (pictured from left to right):
- Trevor Bishop, Director of Strategy and Planning, OFWAT
- Juliet Mian, Technical Director, Resilience Shift
- Fred Boltz, CEO Resolute Development Solutions, and Chair, City Water Resilience Framework
- Dr Mark Fletcher, Global Water Leader, Arup
- Ruth Boumphrey, Director of Research, Lloyd’s Register Foundation
- Cayley Green, Senior Resilience Analyst, City of Cape Town
- Diego Juan Rodriguez, Senior Water Resources Management Specialist, World Bank
The full debate:
The audience Q&A
Savina Carluccio from Resilience Shift will be hosting a technical session at this World Bank conference providing examples of how resilience value can be delivered and resilience enhanced at different (spatial) scales.
Entitled ‘Enhancing resilience: from asset to city scale’, this will be a practical session on how risk fits into the wider context of resilience. The session will cover different scales of resilience from individual asset to city resilience:
City resilience, giving specific examples of implementation of the City Resilience Index – the first comprehensive tool for cities to understand and assess their resilience, enhancing their ability to build sound strategies and plans for a strong future
The World Bank Urban Rail Design Guidebook – Practical guidance on embedding resilience to climate and natural hazards in urban rail projects
Resilience of the Corridor X Highway Project and other infrastructure in the Western Balkans – measures taken to strengthen environmental and social performance
The Resilience Shift – a global initiative to re-orient professional practice from a focus on infrastructure as an asset, to a focus on infrastructure as part of a system that provides services under both ordinary and extraordinary circumstances and the role tools and approaches can play in enhancing resilience.
Presentations will be followed by a panel discussion and a feedback session
Savina Carluccio explores what we mean by resilience value, and how we are using value chains to connect the concepts of resilience and value.
We define the critical functions of infrastructure as the ability to sustain societal needs through protecting, connecting and/or providing essential services. Ensuring that these are delivered and maintained in ordinary as well as extraordinary circumstances is what we define as resilience value.
One of the biggest challenges for critical infrastructure is breaking down the silos between infrastructure providers and customers along the supply chain so that everyone is focused on delivering resilience value where they can.
At the Resilience Shift, we have found that a value chain is extremely useful for connecting the concepts of resilience and value in a context that will be familiar to everyone working on the design, delivery, operation of infrastructure systems.
This concept of “joining the dots” helps articulate the contribution of all parties in delivering the overall function and value of infrastructure systems, and also helps align stakeholders behind a common outcome.
Above all it helps us to:
- Articulate WHY it is important that resilience value is created, enabled and protected at each stage and carried through the value chain because the resilience increases the value of the service provided, by reducing the impact of disruptions.
- Show HOW to ‘do’ resilience by mapping tools and approaches that can be used to enhance resilience at different parts of the value chain and at a level of sophistication appropriate for stakeholder role.
- Indicate WHERE the entry points and opportunities to create, enable and protect resilience value are for different stakeholders in the value chain and explain how they are connected.
Find out more about how we are using a value chain approach in our work on resilience tools and approaches.
Lisa Dickson, Associate Principal and Director of Resilience for the Americas, Arup, writes a guest blog on financing urban infrastructure and how the case for resilience can be made.
The American Society of Civil Engineers publishes a report every four years that assesses the state of infrastructure in America. In 2017, American infrastructure scored a D+. This reflects both an ever-growing backlog of deferred maintenance and the inability to invest in much needed improvements. In terms of the financial impact, this amounts to nearly 4 trillion dollars, which is more than 20% of US GDP.
Layered on top of this is the ever-increasing impact of climate change. In 2017 alone, the US experienced well over $300 billion dollars of damages that were a direct result of climate. Since 1980, the US has experienced more than 1.5 trillion of weather-based impacts. This results in monies being diverted to reactive, recovery efforts, and less that is made available for strategic development. In short, the endgame is defined by lost opportunities and not growth.
The challenge becomes how to build our way towards a more sustainable and resilient infrastructure system. How do we modify the investment scheme to encourage consideration of long-term, resilient infrastructure? What are the current barriers and how might we reconsider our approach to incentivize investment in more resilient systems? The following is a primer to spur those discussions.
Understated risk
One of the primary barriers to investment in resilience is the fact that risk is often understated. Understated risk means that resilience itself becomes fundamentally undervalued. An example of this can be found in how the insurance industry has traditionally assessed flooding risk. An asset’s risk of flooding is calculated for that particular year, then reset. However, if that risk was assessed cumulatively, let’s say over 50 years, that 1% chance of flooding translates into a 39% chance of flooding over the life cycle of the asset. An owner’s overall perception of risk and motivation to act would likely change significantly if risk were considered in this way.
Ownership of risk
Another challenge is an understanding of who actually owns that risk and how much of it may or may not be subsidized by other public agencies or insurance. This lack of clarity fundamentally undermines the sense of relevancy and personal investment. However, recently proposed federal legislation has started to introduce the concept of proactively identifying and reducing some of those vulnerabilities, or risk a reduced payout from FEMA following a natural disaster. In the larger market, both Moody’s and Standard & Poor’s are starting to consider how climate preparedness (or lack thereof) may influence a city’s overall bond rating. Finally, the Task Force on Climate Disclosure is providing guidance to private entities to disclose their risks to climate change – not only with respect to emissions, but with a much more focused approach to physical adaptation and preparedness considerations. In fact, some are predicting that these disclosures may become mandatory, much in the same way that entities must now disclose their pension liabilities.
Funding versus Financing
Although often used interchangeably, there is an important difference between funding and financing. While financing focuses on how the “deal will be brokered” (e.g. will it be a long-term loan, with what type of interest rate, etc.) funding focuses on what monies will be used to pay back that debt. There is a plethora of financing options that readily exist to broker infrastructure investments. However, the challenge is to solve for the revenue stream that must be generated to pay back that debt.
Funding can be raised in many ways including tolls, taxes, availability payments and user fees. However, exacting these revenues is much more about making a convincing argument about the overall value of that benefit and, in the end, the return on investment for those that are paying into the system. Funding is essentially tied to society’s perceived value of a resource or service. Value is an inherently subjective measure – and it is not always rational. We just need to look at how water, an essential live-giving resource is priced (or valued) in relation to other non-essential resources.
This is where governance comes in. Governance plays a significant role in how that value is captured and monetized at a societal level. It is the linchpin to many of these funding challenges and must be addressed at the same time as we solve for the technical and economic challenges of investment in resilience.
The perceived revenue challenge
Finally, there is a widely held sentiment that there is insufficient funding to address the lack of resilience in our infrastructure systems. However, there is a competing school of thought which argues that public entities – cities, in particular – have sufficient revenue at their disposal to solve for all of this. The issue is more of how that revenue is captured and distributed and not about whether it even exists. In their book on The Public Wealth of Cities, authors Dag Detter and Stefan Folster argue that American cities have sufficient wealth within their jurisdictions. In their estimation, cities own 90% of the GDP (approximately 15 trillion dollars) – greatly exceeding the current $3.7 trillion in municipal debt. Examples of Singapore’s and Hong Kong’s urban wealth funds are used to illustrate how similar structures could be translated in the US. The key is to optimize the underperforming utilities and real estate holdings, while at the same time shifting attention from short-term spending to investments that are focused on improving the quality of life. If these public assets were managed in such a way, the authors argue that a city could easily generate a net yield of 3% or more to solve for other issues. In their assessment, the primary barrier to enacting this is governance.
About our guest blogger
Lisa Dickson is an expert in translating the risk of climate change into resilient solutions within the built, social, public health and natural environments, including economic considerations. She is Associate Principal and Director of Resilience for the Americas at Arup. Lisa has led multiple climate change projects including work for the City of Boston, Washington D.C., City of Cambridge, Massachusetts, the Army National Guard, Logan International Airport, several coastal municipalities, in addition to her current work with Partners Healthcare and New Jersey American Water. She has been invited to the Pentagon and National Guard Headquarters in DC to advise them on her work related to climate security.
This article was first published on 5 July 2018 at NewCities