Risk Management for Asia Pacific Sustainable Projects

 

Sustainable or “Green” initiatives are gaining momentum around the world. SmartRisk was an invited speaker on the topic of sustainability and risk at the recent 2011 Asia Pacific Risk Management Conference that was held in Bali, Indonesia.

 

For good reason, significant interest is on sustainable strategies for the Asia and Pacific Region based on the increasingly resource-limitations and intensive growth due to rapid urbanization, increasing consumption and high economic growth. This growth has come at a high price - degraded natural resources and ecosystems - worsening water stress - and increasing amount of hazardous waste. These problems have had an adverse effect on public health and human well-being with increasing pressure on the environmental carrying capacity of the region.

 

Key Facts

• 10 of the World's 25 largest and fastest-growing cities are in Asia
• Urban population projected to increase by 44 million annually over the next 20 years. (Compared growth with the populations of Canada at 34 million and Australia at 23 million)
• Sixty percent (60%) of the world's population is in the region
• China and India accounts for 37% of the World’s population
• Asia accounts for 25% of the world’s GDP but consuming 50% of world's raw material
• Air pollution in most cities exceeds the World Health Organization standard limits
• Indoor air pollution is high in most cities.
• Net forest loss is 1.4 million hectares/year in the last 10 years
• Deforestation and other land use changes are responsible for 75% of total GHG emission in Southeast Asia.
• About 70% of freshwater withdrawals in the region are for irrigation
• Demand for food in Asia is projected to increase by 40% by 2050

 

Buildings Prme Target

Applying a sustainable design approach is necessary for the successful growth of the Asian and the Pacific Region. Buildings are a prime target for incorporating energy efficiency with an average of 68% consumption of electricity and 40% of the total energy use. Developers are attracted to the reduced energy and life-cycle costs, increased property valuation, higher sales and rental income with additional benefits of a higher productivity workplace. Estimates suggest that 60% of the buildings that will exist in 2050 have already been built. The importance and opportunity of retrofitting existing buildings to improve energy efficiency and reduce emissions cannot be overstated.

 

 

Stimlus Funding

Governments globally have allocated a reputed US $430 billion in ‘green’ fiscal stimulus packages, much of which is finding its way to building energy efficiency projects across Asia. For example - 80% of the of recently announced fiscal stimulus package in South Korea was aimed at green development projects. There has also been a proliferation of ‘local’ standards in Asian economies, with the BCA Green Mark scheme in Singapore notable for its strong government, institutional and corporate support through both incentives and regulation.

 

Sustainable Advantage

The focus on energy efficiency allows developing Asian economies to increase their energy security for future economic growth, relying less on imported fossil fuels. Companies and investors must develop a full understanding of the associated risks and opportunities in the real estate and construction sectors, as well as in their own real estate portfolios. Mitigating actions taken to avoid the financial impacts of increased taxation, fines, energy costs and carbon pricing will potentially affect financial valuations as analysts start to account for environmental externalities. Real estate developers, construction materials suppliers and real estate managers who ignore these ‘externalities’, run the risk of being left behind as the building landscape changes and Asian regulators catch up with policies being already established in Europe and the United States.

 

Conclusion

There is a greater understanding in the Asia and Pacific regions of the role sustainable projects will play in addressing the environmental concerns as well as the financial and reputational risks for the region. Risks for corporations such financial exposures, return on investment, uncertainty about evolving regulatory standards and legal issues, qualifications of consultants and subcontractors, and the long-term performance of green building products, systems and materials must be identified.

Based on the sustainable expertise in the United States, firms will have business opportunities in the Asian Pacific Regions. Having a risk management strategy is essential including conducting a sustainable project risk analysis, developing a matrix identifying goals, responsibilities and applying a systematic, risk-based, decision-making process at the onset of a project will dramatically aid in it’s success.

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Thank you.