Impact Investing

Trials and triumphs of sustainable innovation with IDPM

Stockholm (NordSIP) – Sustainable entrepreneurs Nigel and Fiona Grier, Co-founders of the Singapore-based Integrative Design & Project Management, an interdisciplinary engineering, design and project management business operating globally, were among the more colourful attendees at last month’s TBLI Nordic. While they searched for investors for multiple projects that, by all accounts, put the sustainable in ‘sustainability’, the dynamic duo were also in Stockholm due to the Nordic reputation as a progressive hub for sustainable and impact investing. As their conversation with NordSIP revealed, though, their experience here shone the kind of spotlight on gaps between perception and reality in sustainable investing that TBLI holds as its purpose to reveal.

Integrative sustainability

Nigel & Fiona Grier,
CEO & CFO
IDPM

Established in 2012 and focused on developing sustainable development projects such as renewable energy for, among others, the hotel industry in Southeast Asia, the IDPM team is comprised of individuals with diverse engineering, architecture, science and management experience, its two primary markets being Indonesia and Burma. The Indonesia investment opportunities are mainly focused on IDPM’s work with hotels and resorts to develop their green utility infrastructure through IDPM’s Micro-Utility Partners initiative, which creates sustainable hotels through decentralised clean energy, water and zero waste partnerships, and the Integrated Micro-Grid (energy and water) project, which are the power plants and water treatment plants that IDPM owns, builds and operates with the objective of selling the service to the end user: the hotel. The Burma opportunities consist of work in Mu Aye Pu, the ‘free private city’ in Burma’s Karen state that seeks to redress the plight of Karen refugees after 65 years of civil war with Burma’s military junta, and the Karen Hotel School.

“For a lot of existing hotels and resorts we go into, we’re essentially doing a retrofit,” Nigel tells NordSIP. “We’ll refurbish their existing assets, but we’ll take our assets that we own, and sell them the service. Traditionally for most of those projects, their operating costs come down such that it’s a cash flow-positive solution for them. Ultimately it’s an off-balance sheet funded, cash flow-positive solution that delivers essential services in a cost-effective, sustainable and environmentally responsible way.”

The personable Grier, who is originally Irish but whose family emigrated to Australia, has been in South Asia for nearly ten years, and has a knack for telling a good story out of what seems like a complex affair to Western ears – but which, as he emphasises, shouldn’t be. In South Lombok, an island in West Nusa Tenggara province, Indonesia, for example, IDPM is developing its own independent power and water utility company through the Selong Selo Residences Project, working with a pool of developers in the sparsely populated Sumbawa area. The relatively empty area means there is no existing infrastructure, but that also makes it a tourist attraction, thereby creating its own waste, and thus its own need for the infrastructure it currently lacks.

“It’s very expensive to bring in the (state-owned electricity) PLN power grid or PDAM government water utility – it’s much simpler for a company like ours to go in, build, own and operate the assets, and sell the service,” Nigel explains. “Now, of course, the benefit for the developers is that they don’t have to fund this infrastructure themselves. The benefit to the Indonesian taxpayer is that they don’t have to provide the infrastructure, and ultimately we’re providing clean energy and clean potable water for the environment,” he continues. “Similarly, the wastewater is disposed of in an environmentally responsible way. So that can be recycled and reused for flushing toilets, irrigating gardens – or even if there was a drought, to be fed back into the water supply for further treatment.”

A business model to bridge perspectives

 Inspiring stuff indeed – or, as Robert Rubinstein might say, perchance even “teaching farming to hunters?” So how do Nigel and Fiona hope to attract investors at the TBLI Nordic conference in Stockholm? “From an investment perspective, we are the developer and fund the projects, so we have to raise the capital. A reason why it’s hard to do so in Asia is because the Asian market hasn’t necessarily caught up with the environmental consciousness, like Western Europe, the U.S., Australia, and so forth. Obviously Japan and South Korea have a sophisticated system there, but these emerging markets in South East Asia are quite different.”

This is a point picked up on later by Nigel’s wife, and IDPM CFO, Fiona. “In Asia, people don’t understand sustainability. In the Nordics, they do, but I’m not sure a manager trying to raise funds in, say, Africa really knows what’s going on in Asia.” The charismatic Ms Grier felt a part of this frustration evidenced at TBLI Nordic: “the phrase ‘emerging economy’,” she exclaims: “I’ve not heard anybody mention Southeast Asia – Malaysia, Thailand, Indonesia, Philippines, nobody mentions those, Indonesia has nearly 300M people living on 17,000+ Islands, shouldn’t this be one of the worlds priority focuses for Sustainable Investments? People mention India, but what happened to the rest of the world?”

“Like Singapore, which is a developed country,” she suggests. “Because of the population pressures there and the rate of rapid urbanisation, land values have gone sky high, and are continuing to do so. They have so much construction going on, that they have so many ways they can make an impact, but they don’t. Or like in Bali, which is quickly becoming an environmental disaster where everyone goes on holiday. Visitors have this idea of it being paradise, and if you’re the government in Bali and you depend on tourism, the logical thing to do would be to gather everyone and do something about the environmental problems and specifically the waste, right?” she says, a little exasperated. “But then it’s a business thing again,” she continues. “How, as a hotelier, do you join forces with other hoteliers on solving sustainability issues when your model is to only make a difference for yourself, because you’re the one paying for it?”

This, then, is the crux of the impasse IDPM’s sustainable business model seeks to resolve: “Ultimately we are trying to bridge the gap between the asset owner and the hotel operators, whereby the operator wants to be Sustainability, but to be Sustainable it will cost more money and the Asset Owner doesn’t want to pay for it. We are working with Alila Hotels & Resorts in Bali and Jakarta where we are making their hotels genuinely Zero Waste. Zero Waste, she explains is, how organic waste is processed into animal feeds, fertiliser, compost and biomass fuel, plastics are converted back to light crude oil which can be distilled down to diesel, kerosene and gasoline for reuse in the hotel generators etc. and glass, ceramics and some plastics are repurposed and combined to make green building materials. Waste if you look at it with our eyes is an incredible opportunity, not a problem.

Grounded vision, scaled up

“Our role is to work with the hotel to close the loop Sustainably on their engineering and business systems through integrative design,: we use tried and proven mechanical & biological engineering system integrated in a unique way,” Ms Grier explains. “If you know how to do it and it’s replicable then economies of scale work in your favour. But first of all it must prove itself to be commercially sustainable, second proven cash-flows and third, it must become financially sustainable for the community – e.g.; we need people to work for us, so we partner with the local community (typically the existing waste vendor who usually happens to be the politically strongest man in the village) who provides the manpower whom we will train. Additionally we also use local resources to reduce carbon footprints. For the hotelier, the business model is to sell rooms and look after guests, not to be involved in these things. So they might call themselves sustainable from a marketing perspective when in reality they’re not, which is where we come in to help. We take it off their hands as a dedicated service provider that allows them to focus on their core business. But then people say, isn’t the revenue stream very small, how can you do that? My response is it’s really not – it’s not small when you have our methodology, are able to execute replicate and most importantly scale it up.”

The hardest thing in terms of scaling up, though, appears to be breaking hardened perceptions on each side of the global divide. “The Asian businessman mentality is: I’m a trader – I buy and sell, but I don’t want to build anything: it’s too risky. On the other hand in the Nordics, they understand all this, because they want to make an impact, they can see the pipeline, they know it can potentially be a billion dollar business, they feel excited about it – it’s sexy because it’s a sustainable system, you can replicate it in any resort/hotel, because if one hotel is doing this for the community, then the other big hotel chains will want to get on to the bandwagon and the ball gets rolling…”

But the problem for Western investors, conversely, may be fear of competing in a foreign culture where they may not understand the language or, consequently, the red tape and other hurdles to transparently investing in SMEs. “It is scary, because they’ve never been there,” Fiona affirms. “The question is how to bridge that gap, right?” So one big part of the problem is the contradiction between the global perceptions afforded by technology as to the possibilities of sustainable investment from afar, and the component of the need for the understanding to put its money where its eyes still are physically. How, then, does one get investors to physically travel to a region like Lombok for purposes other than vacationing and evaluate projects like IDPM’s?

“In Asia it happens, but it’s government supported. They send out groups of people as part of government and/or trade delegations to investigate the technology transfer and investment opportunities.” But surely Nordic countries do as well? “Yes, but I haven’t seen any government-related people at a conference [TBLI] like this, discussing how to bridge the problems investors and SMEs face, bringing the issues back and providing solutions to allay investor fears. In our case, we’re past the incubation phase, we’re really in execution, so in IDPM’s case, we can bring you to the site, show you what’s happening, and show you the numbers. I know there’s a lot of people in the Nordics interested in emerging economies, but there isn’t someone who says: let me guide you through this process – and we can’t be doing it because we don’t have the extra resources to be doing it. So how can we bridge this gap?

A central question from someone actually in the field, which, if it wasn’t solved at this year’s TBLI Nordic, could at least be a pressing topic at future gatherings. NordSIP last spotted IDPM’s Nigel and Fiona Grier in a meeting with potential investors, one of many across the two-day conference. Based on their pitch and the merits of their programmes, one can only hope one of these will take the opportunity to visit IDPM projects in Indonesia or Burma, and judge for themselves (watch this space!).

 

Kames Capital
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  1. Pingback: The Week in Green (October 27th edition) | NordSip

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