Overview

Working directly with consumers and tourism operators to improve their behaviors has generated limited adoption of responsible tourism practices, due primarily to perceived cost barriers and continuing information gaps.

We are approaching the problem from the investor’s viewpoint: What information is needed to facilitate environmentally and socially sound investment decisions?

We believe the answer lies in developing a rigorous tool for assessing the environmental and social impacts of investments. Such a tool would complement the expertise of lending institutions in financial valuations and risk management.

The Global Sustainable Tourism Criteria (GSTC) and the Sustainable Investment and Finance in Tourism (SIFT) Network are new industry-wide initiatives to promote responsible tourism. They represent a growing need for actionable tools for making smarter investments, such as the EcoValuator.

The EcoValuator

To identify the most responsible projects, and to help investors distinguish “green” from “greenwashing,” the EcoValuator assesses 24 different areas of environmental, social and governance (ESG) performance, and distills the results into a clear and succinct snapshot. Although it is designed primarily to influence investment decisions, the information provided by the EcoValuator is also useful to developers, planners, governments, and other stakeholders who strive to make more informed and effective development decisions. In a variety of applications, the EcoValuator will help this diverse group of decision-makers to:

1. •Identify worthwhile projects among competing tourism development opportunities. The EcoValuator’s assessment of ESG performance can also be integrated with conventional valuation and due diligence methods.
   

2. •Quantify the benefits of environmental stewardship and community development, compared to a baseline scenario of conventional development practices. Comparison to baseline will be conducted at project-specific and regional scales.
   

3. •Account for local conditions that may affect a project’s impacts, including the biodiversity value and the extent of pre-existing development in the surrounding region.
   

Globally Relevant Methods

The EcoValuator is a proximity-to-target methodology that incorporates elements of established scorecard methodologies currently used in a variety of applications in the field of impact analysis. To produce a comprehensive snapshot of a project’s performance, the EcoValuator scorecard takes into account numerous aspects of a project’s design and operations. The specific, actionable performance indicators used to assess the project impacts are developed from the literature on sustainability indicators and the GSTC process, with an eye toward maintaining a balance of rigor and ease of implementation in the field.

The EcoValuator includes 63 performance indicators, covering all the performance areas addressed by the 37 components of the GSTC, plus a number of issues encountered in coastal tourism projects in developing countries.

Scoring and Monitoring Performance

From the performance measures, the EcoValuator calculates a score for each tourism project, representing, on a 0-100 scale, the performance relative to competing tourism projects of similar size and function. The EcoValuator analysis compares the impacts of a responsible development with that of a baseline scenario of conventional development. 

Projects with favorable scores would qualify for investment from responsible capital sources. This capital would feature good terms and incentives, such as reduced/subsidized interest rates, grace periods, or capacity building. Because of the consistent metrics, scores can be monitored over time (Year 1, 2, 3). Projects that falter below the baseline or assigned values could subsequently lose some of the incentives, or miss opportunities for better incentives. Hence, developers would be motivated to plan more responsible projects (to qualify for incentives) and maintain their standards (to keep incentives over time).

Strategic Information for Investors

EcoValuator results add quantitative rigor to the process of selecting the best investment opportunities, by informing financial valuations, competitive analyses and risk assessments. Assisting investors understand the costs and risks associated with ESG performance is important to reduce investor uncertainty and to demonstrate the short- and long-term benefits of responsible tourism development. Our strategic analysis would:

1. •Assess the risks associated with not investing in environmental and community safeguards.
   

2. •Quantify the benefit-cost trade-offs of investing in the capital (e.g., personnel, technology, natural resources) needed to improve outcomes for local communities and ecosystems.
   

Location: Tourism Development Hotspots

The EcoValuator is designed to support responsible investment in locations with emerging tourism development. Typical areas feature:

1. •Large anticipated investments promoted and funded by both governments and the private sector.
   

2. •Significant biological and cultural resources.
   

3. •Economic development needs (e.g., located in developing countries).
   

New development is occurring in several places, including under-developed regions of countries with established tourism industries (e.g., Huatulco in Mexico and Kuna Yala in Panama), as well as in countries with little tourism infrastructure, such as Nicaragua and El Salvador.

Focus Area: Bahias de Huatulco

In 2010, we will focus on Bahias de Huatulco as the case study for the development and application of the scorecard. Located in the state of Oaxaca, Huatulco is the latest of five government-funded (FONATUR) sites to be master planned (others include Cancun, Loreto, Los Cabos, and Ixtapa). Huatulco is anticipated to grow substantially in the next 10 years and is being designed as an eco-friendly destination. However, concerns of “greenwashing” are prevalent. With the EcoValuator’s quantitative metrics, clear standards for investment can be defined to ensure consistent and responsible development.

Next Steps

1. •Identify and analyze up to 50 mature coastal tourism developments using the EcoValuator, in Huatulco, Mexico, and throughout Latin America, to refine the scorecard and bring market visibility.
   

2. •Conduct principle components analysis to determine the sub-set of performance indicators that best represents the results of the full scorecard’s 63 indicators.
   

3. •Report on the cost/risk advantages of responsible development, based on case studies.
   

4. •Raise funds for research and development of the EcoValuator and cost/risk analysis for investors.