Developing the ESGAP method in order to assess physical risks related to economic activities

Public actors need to monitor the state of the environment in order to assess the effectiveness of their actions, prioritize management policies and measures, and thus objectively establish their contribution to the conservation of natural capital. To do so, they must be able to rely on science-based standards to identify the thresholds at which environmental functions can be considered sustainable.

The ESGAP (Environmental Sustainability Gap) is an innovative tool for assessing the condition of a territory’s environmental functions and how sustainable they are. For all critical components of natural capital in the territory concerned (air or water quality, pollution, forest resources, fisheries, etc.), this indicator calculates the difference between their current state and a state that would be sustainable (i.e., a state compatible with the sustainable functioning of the processes necessary for the preservation of life, human activities and well-being). This allows for the calculation of the “environmental sustainability gap”, which highlights the path to environmental sustainability. This can then serve as a guide for public policies to estimate and preserve the critical functions of the natural capital of a given territory. ESGAP has already been tested in New Caledonia, Kenya and Vietnam.

Within the framework of the ECOPRONAT research programme, AFD aims to develop methodologies for assessing strong sustainability, that is, adopting demanding criteria concerning the non-substituability of natural capital by other forms of capital (physical among others) in a territory or country. AFD also wants to promote their use in international frameworks and contribute to emerging international standards on the good ecological state of ecosystems.

Find out more about ECOPRONAT

The ESGAP pilot project recently conducted in Vietnam made it possible to measure the state of the environmental functions of this country. It identified fisheries resources, soil erosion, air and water pollution as the most degraded dimensions. 

It appears that some economic activities can put pressure on these different environmental functions, while other activities depend on their proper functioning. Developing the ESGAP framework is necessary to go further, by integrating the linkages that exist between the economy and the environment and identifying which human activities are concerned. 

In order to do this, the research team will try to link ESGAP measures to socio-economic activities and build a monetary ESGAP. The aim will be to assess the physical risks associated with certain economic activities on the basis of scenarios of environmental pressures (such as the breakdown of supply of certain essential environmental services, for example in agriculture). The development of these new applications of the ESGAP framework aims to guide policy makers in designing more sustainable development paths. 

 

The research project will be conducted in two phases: 

• The first step will consist in building a “monetary” ESGAP that measures the cost (expressed in monetary units) needed to achieve a sustainable environmental state. This cost is considered an unpaid ecological debt: it corresponds to the cost of effective measures that society would have to spend to achieve a good ecological state. It will be calculated as an abatement cost, that is, the expenditure necessary for human activities (such as production and consumption) in Vietnam to reduce their environmental pressures to a level that does not result in degradation of natural capital (or to an acceptable level, considering the good condition standards considered by the ESGAP).
• The second phase will use the modeling framework developed in the first phase, and assess how different public policies can improve Vietnam’s environmental sustainability by 2035, as well as mitigate the economic risks associated with the loss of the country’s natural capital. First, the team will develop scenarios to determine which interventions can improve Vietnam’s ecological status. Secondly, it will assess the extent to which economic risks related to biodiversity (due to the dependence of the Vietnamese economy on ecosystem services) can be mitigated through these interventions.

Since this study is considered experimental research, the different elements outlined in the research proposal and intermediate results may be adjusted throughout the study based on different factors – such as access to data, data quality, difficulties in implementing certain aspects of the methodology, or unsustainable or misleading results.

The team will produce a synthesis of the study, that will be used as a working document for communication purposes. The final deliverable will outline the methodology, database used and main results of the monetary ESGAP applied in Vietnam and the physical risk assessment methodology for the Vietnamese economy. This final deliverable will explore the relevance of ESGAP for the implementation of public policies aimed at achieving a good state of environmental conditions and future research pathways to link ESGAP measures to socio-economic activities.

Contact: 

• Oskar Lecuyer, research officer, AFD