Background and aim of the financial and economic feasibility analysis

The financial feasibility analysis aims to demonstrate to potential financiers the opportunities associated with Nature-based Solutions (NbS) investments in the Mekong Basin. This analysis identifies potential financial cashflows through a high-level assessment. However, focusing solely on financial feasibility proves too restrictive for the shortlisted measures, as they yield limited financial returns. Additionally, most of the  stakeholders who were interviewed, consider not only financial feasibility but also economic feasibility. Therefore, the financial feasibility analysis should encompass both financial and economic aspects. The difference between financial and economic feasibility is as follows:

• Financial feasibility = project feasibility from the perspective of the funder(s); includes only tangible cashflows (expenses and revenues) for those who fund the project (which can include funding for which no return is expected, such as donations), provides investment rationale or business case for stakeholders that fund the project.

• Economic feasibility = project feasibility from the perspective of society, can include tangible and intangible societal benefits from a broad range of stakeholders, provides investment rationale mainly for governments, international financial institutions and funders providing grants and donations.

An important aspect in financial and economic feasibility – and in the context of this project – is the scale at which NbS measures are considered. For many funders, projects need to have a certain scale to be viable, and this scale differs by type of funder. For instance, a private investor would only consider investing in projects between $3 to $20 million, while an international financial institution would be interested to finance projects or programmes with a value of over $100 million. On the other hand, individual stakeholders involved in the measures, such as farmers, look at the impact a project has on the income and expenditures of their households. In addition, the benefits of implementing measures at regional or basin scale – in particular the environmental, climate adaptation and resilience benefits – are different when compared to individual project scales. As a consequence, the costs, benefits, and resulting financial and economic viability differs when different scales are considered.

Hence, in this report, the financial  and economic feasibility analysis aims to show potential funders (e.g. governments, international financing institutions, private investors, philanthropical organisations, etc.) the viability of NbS investments through a high-level cost benefit analysis disaggregated by scale and type of stakeholder.