@Leisure - Vol-26 | srei

@Leisure - Vol-26

Newsletter
 

Climate Change – Its Impact on Infrastructure

Global warming and climate change are the result of greenhouse gas emissions into the earth’s atmosphere by indiscriminate burning of fossil fuels. Greenhouse gases include carbon dioxide, methane, nitrous oxide, etc. The main reason for this is the rapid industrialization of our economy during the last couple of centuries. Unless this trend is curbed, it will lead to disastrous effects on our earth’s delicate climate and ecosystem such as:

  • Global warming or increase in the earth’s average temperature
  • Melting of the Arctic and Antarctic ice caps
  • Rise in the sea level
  • Erratic weather conditions

The Challenge

Climate change and global warming will make infrastructure networks extremely vulnerable. These include vital installations like drinking water supply, power grids, transport networks and communication systems. Disruptions in these systems would greatly affect the day-to-day activities of modern life.

The Risks

Global warming is the average rise in the temperatures of earth’s oceans and land areas. It is estimated that during the past 100 years, the earth’s average temperature has risen by one degree Celsius. As against this, the earth’s average temperature remained almost static for over a millennium prior to the industrial era.

Climatologists estimate that even one meter rise in sea level, as a result of global warming, would submerge vast areas of land around the world, needing relocation of millions of people. As a result, a great many of the infrastructure projects like roads, railways, airports and sea ports will go under water.

Making Infrastructure Systems Resilient to Climate Change

The great engineering challenge of today revolves around protecting the existing infrastructure and making future infrastructure adaptable and resilient to climate change.

All kinds of infrastructure such as water supply, sewage, transport, power grids, dykes and buildings, are crucial for the functioning of society and the economy. Therefore, it is imperative to assess the adaptability and resilience of existing and future infrastructure to the risks of current and future climate change. Furthermore, it is important to note that the infrastructure systems are interdependent and will have a cascading effect on one another should some disaster strike.

Public-Private Partnership Approach to Climate Change

Investments in clean and green technologies of low greenhouse gas emissions are costly and will need following steps to be taken:

    • Mobilize public and private support for low-emission projects
    • Create a conducive climate for greater investment in low-emission projects
    • Leverage private financing with effective use of scarce public funds
    • Direct new investments into clean and green technologies while phasing out the old, low-cost polluting alternatives
    • Establish a credible and effective framework of legal, regulatory, monitoring, reporting and verification systems for reducing third-party risks in public-private partnership

In conclusion, the strengthening of vital infrastructure systems to face imminent climate change is of utmost priority even though it would require huge investments.

 

Smart city plans for 98 cities

The Urban Development Ministry has announced names of 98 cities that will come up for development in the first phase of building smart cities.1Top foreign and Indian companies will work together to draw up plans for these cities. Srei Infrastructure is among the top consulting firms that are working on plans to develop these smart cities across India.2

Plans for Shivamogga

Srei has been assigned Shivamogga, Karnataka; the company will be developing plans for this smart city along with Navayuga Spatial Technologies and RSP Design Consultants.

The planning process

Firms that have been selected for development of plans for smart cities will work under the supervision of local urban bodies as well as state governments. The planning work will be done based on review of previous plans and the interventions that were undertaken in the past. The plans for smart cities will contain action plans for area development and will include financial plans for the entire life cycle of the proposal.

Assessment of plans

Every smart city plan will be evaluated at the second stage of the ‘city challenge’ competition; this will enable the government to shortlist 20 top ranking cities for allocating finances during the current financial year.

Conclusion

1- http://indianexpress.com/article/india/india-others/central-govt-announces-98-smart-cities-naidu-terms-them-safe-investments-for-pvt-firms/
2-http://economictimes.indiatimes.com/news/economy/infrastructure/37-consulting-firms-to-prepare-smart-city-plans-for-88-cities/articleshow/49242050.cms/

 
 

Liquidity in bonds – how it impacts investors

Debt is generally considered to be a relatively safer investment. This is predominantly because of lower volatility and reasonable predictability of returns when compared to equities. But, as with every other investment, there is some element of risk in bonds too. One of the major risks that debt investors face is liquidity risk. Here is more about it.

What is liquidity?

Liquidity refers to the ease with which an investment can be converted into cash or its equivalent when needed. An investment should be capable of turning into cash in a reasonably quick time and with minimum financial impact.

What is liquidity risk?

It refers to the risk that an investment cannot be converted into cash when needed. It is imperative that any investment must come handy at the time of need. What use is it, if it cannot pay one’s hospital bill or son’s college fees at the right time? Even if adequate assets are available, it does not serve its purpose because it cannot be converted into cash or its equivalent.  Liquidity in bonds is usually provided either by the issuer (through call and put options) or by other potential buyers in the secondary market.

Corporate bonds and liquidity 

Corporate bonds are issued for a specified tenure after which the issuer will redeem them as per the agreed terms. But before the maturity date, bond holders will have to sell the bonds in the secondary market if they want liquidity. When monetary policy or other market conditions have created a tight liquidity environment, money becomes dear and bond yields tend to rise. Further, there is more demand for money when liquidity is tight and this may leave very less money in the bond market. Therefore, weak liquidity is unfavourable to debt markets in general and bond holders in particular.

Conclusion

Not every aspect of an investment is within the control of the investor. An investor can at best control his own behaviour, expectations and actions but cannot possibly control the financial market. Liquidity crises do tend to crop up now and then. An investor cannot do much about it. So the best thing investors can do is invest in higher rated bonds. This would provide a reasonable level of protection to bond holders against liquidity risk.

 
 

Buddy Jokes

JOKES

1. They say that Money can talk. Well, mine just waves goodbye

2. Son: Dad, there is a small get together in school tomorrow and you are invited. Please come.
Dad: What do you mean by SMALL? Who all will be there?
Son: Only YOU, ME & PRINCIPAL…

3. Sometimes we need to forget some people from our past, for one simple reason - they just don't belong to our future.

4. “A budget is telling your money where to go instead of wondering where it went.”
– Dave Ramsey

5. "The only exercise I've done this month is running out of money."
– York Uni

 

Buddy Quiz

Multiple choice:

1. Greenhouse gases include:
a. carbon dioxide, methane, hydrogen oxide, etc.
b. sulphur dioxide, methane, nitrous oxide, etc.
c. carbon dioxide, methane, nitrous oxide, etc.

2. Global warming is the average rise in the temperatures of:
a. earth’s oceans and land areas.
b. earth’s land and mountain areas.
c. India’s oceans and land areas.

3. The Urban Development Ministry has announced names of _______that will come up for development in the first phase of building smart cities.
a. 98 cities
b. 58 cities
c. 80 cities

4. Debt is generally considered to be a relatively:
a. risky investment.
b. unsafe investment.
c. safer investment.

5. Bonds with _________ are more prone to such liquidity crises.
a. medium credit rating
b. lower credit rating
c. higher credit rating

Answer: 1: c; 2: a; 3: a; 4: c; 5: b.