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Shared value takes off
Shared value takes off

The airport industry is key to the growth of air travel in Latin America. This industry generates 5.2 million jobs that add $167,000 million to the region’s gross domestic product annually. Projections indicate that during the next 20 years this industry will create 99 million jobs around the world. For example in Quito the Mariscal Sucre International Airport was built in 2013 as a private undertaking that,  with the IDB Group support, would play a strategic role for this industry in the region. However, modern airports are much more than air transport terminals. They have become “development hubs where other air transport-related or complementary activities converge”, as we have already discussed. A ticket to local food It is increasingly evident that more airport operators and investors realize that environmental and social sustainability has become an investment opportunity that makes financial sense, generating significant benefits for sustainable development. Quiport S.A. — the private operator of the Quito airport — has not been an exception to the rule, and they approached us with a challenge in mind: how to share the value of this development with the local community? The first step was to support the company in conducting a shared value assessment, which allowed us to determine the current and potential resources available. Based on this analysis, Quiport decided to focus on three initiatives to improve both the company and community sustainability by establishing a community-based recycling organization, creating an aviation training center, and supporting the program development of Nuestra Huerta, helping local food producers to be involved in the airport activities. Over the last two years, IDB Invest has supported Nuestra Huerta with business, marketing, and execution trainings, including orientation regarding legal permits for food vending. Thus, the cooperative went from selling fruits and vegetables on a weekly basis to only 100 direct employees of Quiport, to selling more than 36 products to the 7,500 airport workers. Growth has been such that an online platform was created to place orders. Today, this program has benefited not only farmers, but also airport workers who can purchase fruits and vegetables in their workplace. Furthermore, Nuestra Huerta expects to open a store in the airport to sell their product to tourists. Shared value, multiplying effect on profits The Quiport project clearly shows that, in addition to any efforts and work aimed at including the community for the sake of sustainability, one of the most significant outcomes from this project are seen in the company´s positive bottom line. Even though it was not an initial project goal, the upcoming opening of a Nuestra Huerta store will generate a modest return for the airport. Currently, the company is developing recycling initiatives and an aviation training center. The recycling effort will allow the company to save in waste disposal costs, and generate some marginal income from the sale of recyclable materials. As for the training center, customer service will improve at the airport. IDB Invest is committed to working with the private sector to foster sustainable development in Latin America and the Caribbean. We seek investment opportunities that will bring about benefits to communities and companies, as we have done with the shared value assessment for the Quito project. It is not always easy to identify these opportunities, and it is even more challenging to move them forward, but Quiport is a good example that every effort has its reward. So, how do you share the value of your company? Subscribe to receive more content like this! [mc4wp_form]

Four challenges facing the buildings of the future
Four challenges facing the buildings of the future

In the 1960s, the Jetsons showed us a futuristic city in which pollution and the use of non-renewable resources did not exist. Twenty years later, when we had already begun to hear about environmental problems, Blade Runner showed us a more pessimistic vision of 2019: a city with countless skyscrapers, over-population, and extremely high pollution levels. Today we already have much of the Jetson’s smart technology, but sustainable buildings are needed to avoid Ridley Scott’s dystopian city. In 2016, the New Climate Economy determined that the only way to grow in the future and address the current gap is with sustainable infrastructure. According to the Inter-American Development Bank (IDB) and Mercer study “Crossing the Bridge to Sustainable Infrastructure Investing. Exploring Ways to Make it Across,” the ability to develop buildings of this kind depends on overcoming at least four key challenges: 1.     Lack of familiarity What is sustainable infrastructure? Many investors still lack the information they need to clearly identify what it is and what it is not, and to identify the nature of the business opportunity. This makes it difficult to increase this type of construction. Sustainable infrastructure is planned, constructed, and operated to comply with changing governance, social, environmental, economic, and financial standards over time. For this reason, the role of multilateral and governmental organizations is to educate, inform, and provide appropriate financial products, in order to adapt current businesses to a climate change resilient economy with low carbon emissions. 2.     Limited standardization of tools and approaches As this is a megatrend in full swing, there is excessive fragmentation in sustainability standards, principles, and initiatives. In addition, there is a lack of adequate information available on what the environmental, social, and governance criteria are for companies not listed in their respective securities markets, making it difficult for investors to identify which projects are sustainable. In addition, the lack of information increases transaction costs. For this reason, the IDB Group is developing and promoting the adoption of harmonized principles and working with investors to facilitate discussions regarding currently existing barriers to sustainable infrastructure. The objective is to generate useful solutions with innovative financial instruments in local markets and public-private partnerships and concessions that facilitate private sector participation. [clickToTweet tweet="US$6 trillion investment in sustainable infrastructure per year requires #Latam and the #Caribbean" quote="US$6 trillion investment in sustainable infrastructure per year requires Latin America and the Caribbean" theme="style1"] 3.     Lack of coordinated policy Another fundamental point is to have consistent regulations and a commitment to comply with them throughout the region and in all sectors. Following guidelines like the Paris Agreement and the United Nations Sustainable Development Goals is key to maintaining investors’ interest in measures such as the adoption of clean energy. For Latin America and the Caribbean, it is essential to adopt instruments adapted to our reality. In this case, the IDB Group’s NDC Invest is a solution enabling countries to implement these guidelines through a simple platform for preparing sustainable and bankable project portfolios, and increasing access to concessional funds, among other benefits. 4.     Lack of tools and focus on climate resilience To date, priority has not been given to how climate change adaptation should be achieved, both in terms of infrastructure and the financial tools for investing in it. However, today there are various financial tools for adapting to climate change. For example, IDB Invest (formerly known as Inter-American Investment Corporation) has mixed climate financing instruments that can be used to address these challenges and adopt climate change resilient modalities with low carbon emissions. Developing the construction of the future requires investing at least US$6 trillion per year in sustainable infrastructure for our region. This will make it possible to support the economic development of Latin America and the Caribbean, grow at the necessary pace, and prevent our cities from becoming futuristic dystopias. Subscribe to receive more content like this! [mc4wp_form]

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How to Implement Infrastructure Projects in the COVID-19 Era

IDB Invest's new guide for infrastructure projects has proven its usefulness in Colombia and can help decision-making during the pandemic. The guide helps to assess and prevent risks at a time when the region needs such projects more than ever.

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Lessons from a Success Story: Private Port Operators in Latin America and the Caribbean

In the midst of COVID-19, maritime transportation remains essential to the world economy. Ports operated by the private sector have historically shown better performance as well as more flexibility and faster adoption of new technologies, key factors for a strong recovery from the current economic crisis.

Making social investments count
Making social investments count

When someone searches the word “sustainability” online, images of wind farms, trees, and waterways dominate the results. What is often missing from these photographs are people. It remains a challenge to break the habit of equating sustainability just with the environment. Sustainability, at its core, is something that should conjure not just these images but illustrations depicting people and the benefits of a positive healthy community. The private sector, in particular, should desire sustainable communities since this can often translate into better economic performance. According a study conducted by Deutsche Asset Management and the University of Hamburg, there is a positive correlation between good environmental, social and governmental practices and improved corporate financial performance. In other words, it literally pays to incorporate sustainability at the core of one’s primary business. An example of this is the Kingston Freeport Terminal Limited (KFTL) sustainable program at the Kingston harbor, in Jamaica. After winning the 30-year concession to operate the Kingston Container Terminal, KFTL saw an immediate need to seek out partners to become the catalysts for development in the harbor. Making room for sustainable infrastructure The first field visits to KFTL were challenging. I arrived at Greenwich, one of the largest fishing beaches in the harbor, to be immediately struck by the complexity of its location. Situated between the harbor and the state oil refinery on a slim piece of land, I wondered how these two could coexist. The visible conditions were extremely poor: no basic infrastructure and a landscape dotted with makeshift wooden shacks. Despite this, there was a real community there; fisherfolk (as they are called in Jamaica), who for several generations have made their livelihood from fishing these waters, have adapted to an extremely challenging environment. They are the largest —more than 4,000— and most economically vulnerable stakeholder. [clickToTweet tweet="Private sector should desire sustainable communities since they improve economic performance" quote="Private sector should desire sustainable communities since they improve economic performance" theme="style1"] As we began our conversations with the fisherfolk the tension was clear. The main concern was about the impact in their business, since previous experiences negatively affected their fish catch for more than a year. To define a social investment strategy and successfully structure the deal, IDB Invest (formerly known as Inter-American Investment Corporation) began working with KFTL. The purpose was to help the company to develop a long-term sustainability approach to ensure that investments produce benefits not only to private sector companies working with us but also to society. Coming to a sustainable agreement KFTL concession allows the company to modernize the harbor and to conduct dredging operations to receive larger Panamax vessels, which are designed to pass through the Panama Canal. These operations will increase employment opportunities for the surrounding communities, and help port operators engage with other stakeholders to ensure long-term sustainability for all harbor users. However, the creation of a long-term sustainability program was also a main objective for the company. This will be paramount to enhance relationships among port stakeholders, and invest in improving fisherfolk conditions. To increase social inclusion and incentivize an open dialogue, we recommended the creation of a committee with the fisherfolk fishing beach representatives, the Jamaican Port Authority, and KFTL staff. The committee has defined three main activities to revitalize the harbor: 1) provide livelihood support during dredging activities; 2) conduct solid waste cleanup of fish nurseries within the harbor; and 3) develop a fish sanctuary and artificial reef outside the harbor. These programs are still in their planning phases. However, their investments will provide long-lasting benefits to a community that has experienced declining incomes and economic vulnerability for years. On the business side, the 830 government workers from the port were employed by KFTL, and as container traffic increases additional labor growth is expected. Moreover, since the handover an additional 40 staff have been hired in various positions throughout the company. Ultimately, KFTL commitment will help shaping what it means to be a sustainable company while simultaneously providing a tangible improvement to an extremely vulnerable population. This is one clear example of how the private sector can leverage its resources to create economic benefits not only for itself, but also broad societal benefits for key stakeholders. Subscribe to receive more content like this! [mc4wp_form]

How Argentina can attract the private sector
How Argentina can attract the private sector

This week I had the opportunity to participate in the Argentina Business and Investment Forum in Buenos Aires. The world has been watching as the country took center stage to start the conversation with the private sector and discuss ways to open its markets to the world.