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Superfoods also take care of Amazonia’s health
The development of sustainable value chains for quinoa, cocoa, sesame, and other high-nutritional-value crops can foster integration into international markets, benefit the region, and contribute to sustainable development goals.
By Adopting Traceability in Its Supply Chain This Company Managed to Become More Sustainable
In a world where sustainability is part of the DNA of business, an Ecuadorian company implemented standards to guarantee socially just and ecologically respectful practices throughout the value chain.
A Global Movement for Sustainable Growth Sprouts in the Heart of Amazonia
IDB Invest Sustainability Week 2024 brings together an array of public and private sector stakeholders, the impact investors community, governments, international organizations, and civil society in Manaus with one goal: scaling up impact.
Mobilizing the private sector to ensure access to water and sanitation for all
Sunday November 19th, 2017 will be Toilet Day. Why would we need a Toilet Day?! It is not a celebration day; as per the United Nations, “World Toilet Day is about taking action to reach the 2.4 billion people living without a toilet.” In Latin America and the Caribbean, access to sanitation is one of our greatest challenges: only 22% of the population has access to safely managed sanitation, and 20 million practice open defecation. So how do we make this day meaningful? We should put it in a wider context, as it obviously goes beyond raising awareness. Indeed, the Sustainable Development Goals (SDGs) propose to transform the world. Goal six ambitions to “ensure access to water and sanitation for all” includes a clear target: By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations. A $15 billion market There is a case for the private sector in this target: toilets play a crucial role in creating a strong economy, as well as improving health and protecting people’s safety and dignity. Given the magnitude of the resources needed and the public resources constraints, it is essential to mobilize the private sector for: the funding of the investments, the construction, and the efficiency improvement in the operation of the infrastructure. In sanitation, there are near 15 million households without access to improved sanitation in Latin America and the Caribbean, which represents a market and potential revenue of up to $15 billion only for construction of sanitation infrastructure. While in pit or septic tank emptying and wastewater/sludge collection services, the market potentially reached over a billion dollars per year across the region, according to an IDB study. This also means the potential creation of thousands of jobs, provided with the help of the private sector. A drop of financial innovation For this we need a clear risk-reward framework, recognizing that “financial sustainability can be achieved through a combination of rates, tariffs and subsidies”. Also, it is important to state that — under adequate models — the private sector can supplement the public-sector approaches to reach lower income population, which is the most affected by lack of service coverage. [clickToTweet tweet="In #sanitation, there is a potential revenue of up to $15 billion in #LatinAmerica & #Caribbean" quote="In sanitation, there is a potential revenue of up to $15 billion in Latin America and the Caribbean" theme="style1"] To better serve the base of the pyramid, the region needs to promote blend participation from public, private and financial sectors for water and sanitation services. For example, SOIL, in Haiti, shows an innovative sanitation business model for lower-income households. It is a service to collect the waste from ecological toilets to treatment plants, where it is sold for agricultural purposes. This sustainable model covers the entire sanitation chain and after a few years it has already served over 2,000 people. With only 12 years left to accomplish the SDGs and the vast amount of resources required, we should recognize the need for an integral approach to water and sanitation services. Today, those lacking these network services are those that pay the highest price for alternative arrangements. However, with coordination between the public and the private sector we could develop products to better serve them. Development banks, like the IDB Group, engaging the private sector through IDB Invest and leveraging its public-sector presence, have an important role to play in promoting those synergies. Subscribe to receive more content like this! [mc4wp_form]
The way to build the future is to invest in it
The world is evolving at exponential speeds. Technology is contributing to a future marked by major social and economic improvements. This is especially true in Latin America and the Caribbean. Mobile subscribers in the region have increased 800% in the last five years. In 2017, financial technology (fintech) companies transacted more than US$90 billion in transactions in the region, an amount that surpasses Panama’s gross domestic product (GDP). And the region already leads the world in clean energy. Private sector innovation and competition have led to much of these technological advances, but development challenges remain. The region’s productivity lags its East Asian peers. Financing gaps, such as infrastructure, amount to billions of dollars or over 2% of the region’s GDP, while women-led businesses are still less likely to access financing than their male counterparts. The speeds, flexibility and power of technology have their limits. Our clients in the region’s private sector have ambitious goals, and it will take a range of solutions to achieve them. Designing for trust and client-focus For example, AirBnB, a hotel retailer, has grown from zero to 24 million annual guests in less than a decade. AirBnB does rely on technological platforms to unite lodging supply with demand, but it is the company’s ability to foster trust that gave it market leadership. This means fostering trust not only in the company to match people and process payments but also fostering trust among complete strangers who share their homes with one another. AirBnb, like Netflix, iTunes and so many others, remind us that technology alone is not the real disruptor. Designing for trust and the client experience is much bigger. Staying relevant while building a better future The digital disruption leaves no room for complacency. In addition to upending the hotel industry, it has taken over taxi and retail services highlighting that the quest to stay relevant is more difficult than ever. These changes, coupled with cash strapped governments and geopolitical shifts, put pressure on development banks to turn the billions on their balance sheets into trillions of development finance. To compete in today’s world and achieve our collective development goals, we must find ways to solve tomorrow’s challenges. A client experience defined by process agility, product flexibility and a sense of trust will allow development banks to stay relevant in changing times. Staying relevant includes more equity and quasi-equity, such as mezzanine and subordinated debt, to grow companies and allow them to create jobs. It includes engaging institutional investors through products like B-Bonds and demonstrating that their investments in emerging markets can perhaps outperform their developed market comfort zone. Staying relevant includes offering more local currency so that borrowers can repay in the currency they are generating cash flow. We also work in a world of liquidity where cash is no longer king. Providing advisory and knowledge to our clients will be what adds value and defines our development impact. These are some of the ways development banks can better tailor client experiences, reduce risks and allow clients to focus on stimulating development. Today, we are launching the most consequential makeover in our history. We are revamping our vision, strategy, products, sectors and culture under the new brand IDB Invest. This is about our commitment to take the best of what works. Our synergies with IDB coupled with product flexibility and process agility incorporate the best of the public and private sectors. Our transformation may be facilitated by technology, but it will be driven by a quest to put clients at the center and earn their trust and business in return. This will ensure the development impact for all our stakeholders. Subscribe to receive more content like this! [mc4wp_form]
Three keys for supporting Caribbean tourism after natural disasters
For the tourism sector, the second most important source of employment in the region, there will be a period of inactivity estimated to last between three to four months. This could reduce the sector’s revenue by as much as 50%, according to the World Travel and Tourism Council.
Unity is strength
The irruption of new players in the global commodities trade, greater consolidation of the multinationals, and the effects of climate change are forcing agricultural producers in Latin America and the Caribbean to rethink their strategies for minimizing risks and maximizing results on a sustainable basis. Realities and opportunities Although the research and development (R&D) investments of the “Big Four” (Bayer-Monsanto, ChemChina-Syngenta, Dow-Dupont, and BASF) achieved scientific advances that transformed global agriculture, expanded the agricultural frontier, and increased yields, producers face a dependence on technology and prices that is difficult to mitigate. Although in grains, companies like China’s COFCO or Japan’s Marubeni challenge the power of the ABCD (ADM, Bunge, Cargill, and Dreyfus), and demonstrate the strategic importance of ensuring the supply of commodities for some countries. In this fight, it is likely that corporate acquisitions will continue, or that new commodities platforms will be developed, creating opportunities for groups of producers, cooperatives, or business associations. Finally, the effects of climate change (rains, droughts, frosts, floods, cyclones, reduced aquifer flows, and new diseases) are affecting the producers’ profits, particularly in Central America where the narrow strip of land between two oceans makes climatic distortions even worse. Various ways to partner It is an historic reality that agricultural producers take the greatest risks but capture the smallest piece of the pie because of their fragmentation, difficulties in accessing financing, and minimum added value. However, producer partners in cooperatives that adapted to the dynamics of the market, through internal transformations (including advances in the management of corporate governance), were able not only to improve their incomes, but also to become part of a sustainable business, like Copersucar in Brazil, Conaprole in Uruguay, ACA in Argentina, FNC in Colombia, Colonias Unidas in Paraguay, or Dos Pinos in Costa Rica. In the case of independent larger-scale producers, although they will be able to maintain a certain individualistic profile internally to obtain efficiency and productivity, improving the external profitability is a must. They could take their inspiration from the spirit of cooperatives to create partnerships leveraging their combined volume (with increasing strategic value) and obtaining better conditions, or even process it for greater added value. For example, in Argentina, the 30 partnered producers of Bio4 transform their own and third-party corn to produce ethanol, and the “L” Group partners to sell milk. Similarly, in Mexico, the partnered producers of Proaoass and Gradesa export bread wheat or durum wheat. Although the greatest challenge for farmers under this model was to remain united, and in some cases to delegate the management of the new business to third-party professionals, they were also focused on obtaining better economic results, and also to develop a platform to start new businesses and obtain market intelligence. Looking ahead It is likely that differences in results among producers of a similar scale are due to: (1) more collective than individual actions; (2) a more business-like profile for sustainable production; and (3) the management of individuals or teams that applied the best technology packages. Considering that quasi-state companies, and sovereign funds from Asia-Pacific and Middle East countries are seeking alternatives to ensure the food supply, soon it would not be utopic to think that networks of partnered producers or cooperatives may develop strategic alliances to have their own ports, freezers, or powdered milk plants. Moreover, since these investments require long-term financing, it would not be unrealistic to think that development banking will be financing these projects. As Seneca said: “It is not because things are difficult that we do not dare, it is because we do not dare that things are difficult.” Subscribe to receive more content like this! [mc4wp_form]
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]
4 ways to invest responsibly in hydropower
Hydropower presents many advantages as a source of energy, even though it is often complex from the environmental and social perspective. It is based on relatively simple and robust technology, easy to adapt to different conditions. Hydropower projects have a long-term life span, often benefiting several generations. Due to its long operational life and low operation and maintenance cost, hydropower generation continues to be highly competitive. Experiences around the world provide ample evidence that proactively addressing the potential impacts of projects early in the pre-feasibility phase is a sound investment decision by developers and contractors alike. The anticipation of potential risks and the identification of opportunities to benefit communities and ecosystems beyond the mitigation of impacts can significantly reduce implementation and operation and maintenance costs. A recent study by Harvard University on the cost of social conflicts in the extractive industry shows that companies usually do not understand and capture the full range of costs of conflicts with local communities. Costs arising from lost productivity due to temporary shutdowns or delays can escalate to millions of dollars. This is not different from what takes place with large infrastructure projects such as hydropower. Responsible development can benefit companies in at least four dimensions: 1. Social acceptance Projects that are developed considering the concerns and expectations of communities and that obtain a “social license to operate” are less prone to face social unrests, protests, or labor related challenges, such as strikes, invasions and vandalism to job sites and equipment. This, in turn, translates into lower costs and opportunities to build win-win alternatives in which both the private sector and communities benefit from the implementation of projects. 2. Reduction of administrative and legal processes Adequate treatment of social and environmental issues significantly reduces administrative and judicial processes that often hinder the implementation of projects and account for significant cost increases. Disputes over compensation, land expropriation, involuntary resettlement, or general mitigation of social impacts can drag on for years, generating direct costs as well as reputational impacts to companies and projects. 3. Financing alternatives Adequate identification of management of environmental and social risks can be directly linked to a wider range of alternatives, incentives, and better terms for financing projects. This can bring substantial upsides, like lower cost of capital to support the implementation of hydropower projects. 4. Reputational gains Positive image and corporate credibility resulting from responsible implementation of a project goes far beyond regional or sector specific benefits. Companies that are recognized as sustainability leaders are able to attract and retain talent, establish long term partnerships with privates, communities and NGOs, and expand involvement in different sectors, amongst others. The current scenario with increasing pressure for water, energy and food supplies, and the uncertainties associated with climate change, make the tangible benefits of hydropower greater than ever before. This represents challenges as well as opportunities for the development of sustainable hydropower projects. Accessing the full range of benefits that can be derived from hydropower requires responsible development of projects. At IDB Invest (formerly known as Inter-American Investment Corporation) we are supporting the implementation of hydropower projects such as Chaglla in Peru and Reventazon in Costa Rica that have been listed in a recent study as examples of best international practices. We will continue to partner with institutions and support projects that provide lessons and contribute to the sustainable development of countries in Latin America. [gallery type="slideshow" size="large" link="none" ids="8082,8083,8084,8085,8087,8088,8089,8090,8091,8092,8093,8095,8096,8098"] Subscribe to receive more content like this! [mc4wp_form]