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Defining an Investment Portfolio
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1. DEFINING AN INVESTMENT PORTFOLIO
Within the context of an environmental initiative using a renewable resource, an investment portfolio is a combination of projects and programmes. It uses a variety of financial instruments and funding sources dedicated to mitigating the harmful effects of pollution, and establishing mechanisms and cleaner processes to ensure resource and environment sustainability in the most economically efficient and viable manner.
An investment portfolio is unique to a specific project. Depending on the objectives of a specific initiative, the portfolio approach identifies a number of projects and programmes whose collective implementation reduces the harmful effects of pollution, whilst promoting and deploying cleaner technologies and processes which are economically-viable. The net effect is an integrated approach toward the sustainable use of a renewable resource in an environmentally efficient, yet economically-viable manner.
The following characterizes the fundamental elements in developing an (environmental) investment portfolio.
In addressing an environmental problem (such as in the case of the Dnieper River Basin, in addressing identified “hot spots”), the portfolio approach seeks to address primarily the “problem at hand” (i.e., “Repair Damages Resulting from Pollution” and “Implement New Technologies and Cleaner Production Process”). Thus, the main cause(s) of pollution are immediately addressed.
However, the portfolio approach goes beyond solving the immediate problem. Investment should also include projects that deal with ancillary pollution risks as well as addressing the efficacy and success of mitigating the main cause(s) of pollution. Opportunities for the development of downstream or upstream activities and associated businesses should be investigated, as the integration of these can add a valuable element to the financial viability of the overall undertaking. For sustainability, a legislative framework must be established through the enactment of legislation to protect and reinforce the objectives of such remedial actions. In addition, community and (public and industry) education initiatives must be undertaken to reinforce the benefits of the portfolio approach.
To ensure the ultimate sustainability of the portfolio approach, underpinning any investment, funds and financial mechanisms need to be established and allocated to re-invest in the projects and maintain the benefits of the initial integrated actions. Thus, “Monitoring and Enforcement” to assess ongoing performance of the overall investment portfolio, is a key element.
The following sections explore the experiences of other jurisdictions with the investment portfolio approach, as well as identify some key considerations for developing investment portfolios for the short-listed “hot spots” identified within the Dnieper River Basin Strategic Action Plan.
