Sustainability and Social Investment: Community Microhydropower Systems in the Dominican Republic

Abstract

Sustainability remains an underestimated concept when assessing the impact of philanthropic and social investments in communities due to the difficult task of conciliating human development, economy, and environmental protection. Currently, financial cost-effectiveness is one of the main criteria for decision-making. However, under a social investing and climate justice framework, monetary valuation of impacts is never enough to assess the complexity of livelihoods. A multi-stakeholder approach, based on common objectives and synergy among entities, is key for sustainability and social investments. Public institutions, private sector, international cooperation, and local civil society organizations work together in the development of initiatives that promote integral development. In the Dominican Republic and Haiti, community microhydropower systems have proved to be an effective model of social investment, climate justice, and sustainability. The response to a social need, such as access to electricity, has turned into a means for promoting a different approach, based on community empowerment. This article contains the experience of the successes and challenges of more than 50 community microhydropower systems, managed by local groups, which are working and demonstrating the meaning of sustainability and the positive nonmonetary impacts of social investing, opening future opportunities to expand the present 5% of private investment.

1. Introduction

The origins of sustainable development as a concept go back to the birth of environmental movements in the second half of the XIX century, which began with a romantic emphasis on nature and the importance for human beings to understand it. Its genesis dates back to the Industrial Revolution in England, as an attempt to awaken awareness about air pollution produced by the industries that had had rapid and sudden growth, in the context of a weak legal framework [1, 2, 3].

The discussion about the need of preserving the quality of natural resources joined previous debates on the durability of several raw materials, as well as on the degradation of the environment because of its use. That was the case when there was shortage of certain products and materials or the occurrence of local environmental problems associated with uncontrolled exploitation [4]. Some examples date back as far as Egyptian, Mesopotamian, Greek, and Roman civilizations, several thousand years before Christ, when evidence was collected of deforestation, salinization as well as soil loss linked to overexploitation of land resources in specific areas [4]. In more recent times, we can cite the shortage of wood caused by its excessive use in boat building, which severely threatened Europe in the XVIII century [4].

As a consequence of these episodes, the term “sustainable use” began to appear in forestry, as a way to guarantee the durability of wood exploitation, balancing the cutting of old trees with seedling planting [5].

Additionally, concerns over the excessive use of certain natural resources acquired other nuances in XVII and XVIII centuries, when different authors warned about the consequences of the overconsumption of natural resources, being The Tragedy of the Commons by Lloyd [6] and the Essay on the Principle of Population by Malthus [7] two of the most iconic.

In fact, this new perspective introduced a global vision into the debate, pointing out the existing contrast between a model based on unlimited growth of natural resources consumption and their inherent natural limitation in terms of volumes and times of recovery, not only at a local but also at a planetary scale. In this context, the XX century took place, with an exponential growth of studies that revealed the global climate crisis [8, 9, 10, 11, 12, 13].

Currently, despite the progress made defining a world framework around sustainable development and the assessment of environmental and social impacts, which includes the introduction of new goals [14] and standards (e.g. International Finance Corporation (IFC), performance standards), its implementation remains something difficult to achieve, simply because it is not compatible with the current economic model based on infinite growth and nature’s exploitation. The discussion remains focused on profit and return of investment.

To propose an alternate vision, we must reshape the current economic decisions through a wider lens of social, economic, environmental, and political sustainability. This includes a multi-stakeholder approach, where cooperation and synergy at different levels are two cornerstones. Private sector is a key stakeholder, since smart and forward-thinking entrepreneurs are an essential component for the change. They have a key role in identifying feasible ways to reduce environmental impacts and improve life conditions for local people, while working to generate economic and financial benefits [15]. This is possible when companies introduce the environment and local communities into the decision-making process [15].

The Dominican Republic hosts a series of characteristics that have fostered the development of alternatives and new narratives in local climate action, sustainable development, and social investment. The weakness of the Dominican national electric system, which does not guarantee neither universal access to electricity nor continuity of the service, promotes the emergence of alternative solutions which turn into innovative models for local sustainable development financed through social investment and sustained through a multi-stakeholder approach [16].

One of these solutions are community microhydropower systems, which, under the coordination of Guakía Ambiente and the Small Grants Programme (SGP/GEF/UNDP), transform local opportunities and social investment into integral development, based on the empowerment of women and men and the synergy among diverse stakeholders.

This essay discusses the increasing presence of social investment practices by the private sector in these initiatives [16]. By examining the main experiences and lessons learned obtained in more than 20 years of implementation, the document is intended to introduce the case study of microhydropower systems installed in the Dominican Republic and border region of Haiti, specifically focusing on the central role of social investment inside a multi-stakeholder scheme of intervention, as a catalyst of a sustainable model.

The results and conclusions are based on the analysis of technical documents and previous essays, which was complemented with the interview of members from Guakía Ambiente and the Small Grants Programme.

2. Discussion

2.1 Social investment and its link to sustainability

The concept of social investment has changed over the years and has been paired with many other concepts such as responsible investment, Environmental, Social, and Governance (ESG) investments, among others. Multilateral organizations and investment groups have developed their own definitions for social and responsible investment practices. However, most of them are aimed at reducing social conflicts, gaining reputation and maximizing profits in the long term. For example, the International Finance Corporation (IFC) developed the concept of community investing to “help companies gain a social license to operate, access land, reduce project and reputational risks, boost productivity, meet government requirements or global standards, and/or successfully compete for the next venture.” [17].

The same approach is used when speaking of ESG funds, where asset managers seek to keep the returns similar to traditional investments and do not necessarily aim at community development and sustainability at a local level [18]. Recovering the arguments from the previous chapter, this article seeks to understand social investment as something that directly impacts positively and empowers local populations, addresses climate challenges, and contributes to a long-term sustainability vision of a country.

The focus of the current document is not to discuss the concept of social investment, and it will use the definition launched by the United Nations Global Compact, which is broad enough to encompass different nuances regarding this complex and widely discussed concept [19].

Social investment was defined in 2010 by the United Nations (UN) as “the practice of making voluntary financial and nonfinancial contributions that demonstrably help local communities and broader societies to address their development priorities.” In order for an investment to be considered responsible and social, it must be purposeful, accountable, respectful, and ethical [20].

Additionally, this article focuses on the nonmonetary and nonprofit side of social investing. Private companies, foundations, and international cooperation make these investments for a wide variety of objectives. One of them is sustainability and climate action.

The urgency of actions to address the climate crisis needs creative solutions that do not necessarily give a monetary return to investors. However, there are several proxy indicators that can help to quantify the nonmonetary impact of social investments. For example, the number of hectares reforested and under community watershed management brings general benefits to air and water quality that are hard to express in monetary terms but largely contribute to the climate objectives of foundations and some private investors.

2.2 Community microhydropower systems as social investment for sustainability

In this context, social investors have looked for initiatives that align with their sustainability objectives. In the Dominican Republic, a wide network of community microhydropower systems has developed thanks to these investments. In this section, the article will dissect this model of decentralized community power generation and its links with sustainability and social investment.

Located in the Caribbean, the Dominican Republic is a Small Island Developing State (SIDS) [21], which is highly vulnerable to the impacts of climate change [22], with high inequality and significant levels of poverty [23]. It is also one of the Latin American countries with the highest economic growth considering only the Gross Domestic Product (GDP) indicator [24].

In this context, in 1998, a pilot project of a microhydropower system was implemented seeking to address the lack of access to electricity of 70 families of the rural community of El Limón, located in the Southeastern portion of the Cordillera Central, the main massif of the country. From then on, the number of community microhydropower systems have grown exponentially in the country: 60 systems of this kind were built in the Dominican Republic and another one in the border region of Haiti, with a total combined installed capacity of 1.5 MW [25]. This ample network of micro-grids gives electricity and empowers more than 5000 households and 20,000 people in climate vulnerable mountainous areas with marginalized populations (Figure 1). In the process, over 70 square kilometers of land were restored and/or are being conserved in the direct and indirect area of influence of the microhydropower systems, while it is estimated that more than 25,000 tons of CO₂ are absorbed and/or their emission avoided annually.

Figure 1.

Basins where community microhydropower systems are working [16].

Far beyond being a mere localized project, these systems promote an alternative to the energy transition in the Dominican Republic, where local stakeholders are active subjects in the fight against climate change. Decentralizing the power grid and giving the control of electricity flows to local populations promote empowerment and organization skills among men and women.

Moreover, the process of project implementation together with local communities is an example of how a just energy and people centered transition can be carried out. In fact, the starting point of the project is a specific and expressed need of a local group to solve their access to electricity. The solution to this need comes from a participatory process, where the community and its interests are at the center of the implementation, interacting synergically with other numerous external stakeholders.

Through a learning-by-doing process, community members and organizations train their abilities and acquire new skills. This way, the project turns into a capacity building experience, where people are free to learn and test their knowledge in a protected environment.

2.3 Nonmonetary benefits of social investments in community hydro

Nonmonetary benefits arising from these microhydropower systems are multiple. Most of them are hard to express in terms of monetary value, such as empowerment or capacity building. This difficulty is present even in costs internationally linked to policy, such as the social carbon price, which can range from lows as 25 to highs as 800 dollars per ton [26, 27].

Due to the complexity of interlinked environmental, political, and social systems, quantifying community and environmental benefits is probably not the best strategy to assess the positive impacts and assign a value of return to the social investments in these initiatives. For instance, community microhydropower systems are based on community capitals and the promotion of sustainable livelihoods [28, 29, 30, 31, 32, 33], instead of the promotion of mere financial capital gains or profit.

Following this idea, we can analyze the benefits through quantitative data of environmental and social improvements, as well as qualitative indicators. The scope of this article is not to generate a system of qualitative and quantitative assessment of the impact of community hydropower systems. However, this section will disclose several of the social and environmental benefits that can be used to further build a robust assessment system.

One of the most general benefits from the social investment in community microhydropower is the advancing toward the accomplishment of climate goals and more specifically of working toward a just energy transition. It is also implemented under a perspective of Nature-based Solutions (NbS) that brings together efforts of numerous stakeholders, who make synergy to reach a common objective (Figure 2).

Figure 2.

Sustainable model from the community microhydropower systems.

Community microhydro systems contribute to carry out interventions that “protect, sustainably manage, and restore natural and modified ecosystems that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits,” aligned to the definition that the International Union for Conservation of Nature (IUCN) provides for NbS [34].

The following Table 1 summarizes the categories and proposes basic initial indicators where community microhydropower systems impact, which can be used as nonmonetary success indicators in terms of social investment:

Category	Indicators
Decentralized generation from a renewable energy source	Number of isolated mini-grids implemented. Number of hydropower turbines installed. Number of community-based management systems established.
Energy efficiency	Number of people trained on energy efficiency that implement virtuous behaviors in their communities. Percentage of households with breakers limiting consumption.
Productive use of energy	Number of enterprises developed in communities after the installation of a microhydropower system. Increase in revenue from sustainable tourism. Decrease in unemployment rate in communities.
Forest conservation and watershed management	Increase of forested land. Improvement of water flow. Improvement of water quality. Sediment control. Number of community-based environmental control systems. Area of ecosystems restored. Increase in biodiversity.
Capacity building	Number of Community-Based Organizations (CBOs) that implement effective administration and local finance management. Number of local technicians, especially young people, trained and working. Number of people and households that implement environmentally friendly practices.
Local empowerment, gender equality, and social inclusion	Change in time women spend doing chores. Increase in the number of women dedicating to productive activities. Increase in the number of women and young people having institutional roles in their communities. Reduction of migration rate from rural communities. Number of conflicts solved through participatory mechanisms. Number of intercommunity networks established and operating.
Socio environmental and economic benefits	Reduction of household energy expenditure. Increase in entrepreneurship. Improvement of productivity. Development of sustainable livelihoods. Number of initiatives replicated and/or scaled up. Statal savings for electricity generation.
Climate change mitigation and adaptation	CO2 emissions avoided. CO2 absorbed. Number of practices established to protect against extreme events. Reduction of the impact of extreme events.

Table 1.

Basic indicators to measure the nonmonetary success of social investment.

Using merely traditional financial indicators, community microhydropower systems might not be the best financial option. However, if we use the previous indicators and, at the same time, we are able to quantify the climate and social benefits, they might as well be profitable. For example, the costs associated with a typical 20-kW system are $300,000, of which around 75% is not refundable if you consider only economic indicators. This means that, if we want to apply a social investment framework, we must build new nonmonetary ways of quantifying returns of investment, which includes the previous indicators.

2.4 A multi-stakeholder approach of sustainability and social investment

In this process, the role of the private sector and its social investments in the community microhydropower systems has been progressively growing in the country and becoming a significant component of the implementation of the projects. Likewise, this interaction among civil society organizations, community members, government officials, and private entities has strengthened the Corporate Social Responsibility policy of several national companies and is becoming central to their social and business agenda.

Among them, the action of the Popular Group (Grupo Popular) stands out. It is one of the main financial groups of the Dominican Republic, which has been increasing its action in these initiatives through the Popular Foundation (Fundación Popular), the entity responsible for its social investment agenda, coming across an effective scheme to contribute to integral interventions, overcoming the limitations of specific projects outside of a strategic framework.

Each community microhydro project is financed through concessional investments, basically different types of nonrefundable investments such as seed capital, grants, and donations. Nevertheless, this has not stopped private investors, such as Grupo Popular, to step in and assign a social investment budget to fuel the energy transition and community development. The framework private firms are using to assess the impact of their investments that are not monetary and rely on the idea of community development and sustainability.

To this day, we can estimate that the total investment made in the implementation of microhydro projects under this scheme exceeds 17 million dollars. The social investment from the private sector is around 5% of it, with a significant increase in its participation during the last 10 years. There is still plenty of opportunity for social investors to increase their participation in these projects.

The participation of the private sector in these projects is an alternative to reduce the risks associated with their implementation. Moreover, multi-stakeholder approaches can fuel a virtuous circle of local development based on social investment and sustainability.

Access to basic services, like electricity, is an essential assumption for development. Nevertheless, sustainability is rather strictly linked to social and environmental processes and dynamics that can be promoted among human groups and their territories. According to this perspective, each project can lighten a path to implement coordinated multi-stakeholder processes, aimed to reach wider sustainability goals.

From this point of view, empowerment of people and local organized groups should become a guiding principle for each of the stakeholders who take part in the process, from private entities to government officials. There should be a common effort to strengthen personal and community self-esteem: during the process, people, individually and as a part of a human group, should internalize that they can reach previously planned goals.

These interventions contribute to educating people to freedom, providing them the opportunity to acquire knowledge and instruments that allow them to make decisions and contribute to the development of the social group they belong to. Confidence, especially inside the community, is a key issue: the intervention should help to overcome the common situation where people show more confidence toward outsiders than toward their peers.

Another important triggering factor is the promotion of solidarity among and within stakeholders. The principle according to which maximizing individual benefit would maximize the collective one has revealed all its limitations, especially when it is applied without a vision of social well-being and sustainability, transcending the idea of only seeking economic benefit. The most successful and sustainable societies are those who adopt synergic strategies and invest in their own development. This includes mechanisms of mutual support, which allow people and communities to overcome individual and collective challenges, generating a sense of belonging to the social group and the environment where they live. Solidarity is a key element to increase the positive impacts of social investments, since it promotes a spiral of continuous improvement.

From this point of view, this model of intervention contributes to improving cost-effectiveness, promoting appropriate distribution of the tasks and available resources, avoiding duplicity, and facilitating the elaboration and implementation of middle- and long-term plans.

2.5 Next steps in social investment in the Dominican Republic

According to the experience gained in multiple projects, the development and social investment models must reintroduce the concept of sustainability along with ethics and nonmonetary objectives and indicators. Community development is a complex and slow process, where empowerment is a key to achieving goals.

Social investment in the country has fulfilled a role of filling in the gap of financing projects on a nonrefundable basis. Most of the projects need nonrefundable investments, since the return of investment, measured only in financial terms, would render most of the projects unfeasible for a traditional financial model. However, if there was a way to incorporate social and environmental positive impacts and sustainable development in the framework of financing decisions of other institutions, it would be possible to expand the impact of social investments.

There is also a need to go further in the models of community microhydropower systems in order to create mechanisms to provide monetary returns in order to diversify the source of social investments. It is also possible to take advantage of the existing network of community microhydropower systems and their current savings networks.

There is the example of the community of Angostura, where the first project was implemented through a combination of social investment, donations by international cooperation, and seed capital. Afterward, the local economy was reshaped, and an ecotourism project was developed, as well as a simple but complete self-managed system of monthly payments to a community fund. With these resources, Angostura was able to participate in covering the costs of an expansion of the microhydropower generation, providing more than 10,000 dollars from its community fund.

3. Conclusions

The use and abuse of natural resources has become an increasingly critical issue to the human and nonhuman population, impairing the human group’s capacity to satisfy its own needs. The multidimensional climate crisis is being fueled not only by the burning of fossil fuels but also by the depletion of ecosystems. This has caused an exponentially growing pressure over the environment through unsustainable investments and projects based on a development model that is incompatible with the natural limits of the resources.

In this context, the expected solution should go through a paradigm shift based on empowerment of people and communities, strengthening of solidarity across sectors and stakeholders and finding creative solutions to social investment opportunities. Communities should acquire means and skills to participate freely, actively, and significatively in decision-making processes of development, at any level.

The evidence coming from the experience of community microhydropower systems points out that the reintroduction of ethics in decision-making is fundamental to reach sustainability. In fact, even though the first step is the development of strategies and policies based on a model that is compatible with the recovery and reposition of natural resources, the effectiveness and durability of its implementation are strictly linked to the commitment of the local population in doing so and the cooperation with other stakeholders, far beyond the regime of consequences that has been established.

Based on well-known technology, these initiatives have become a reference of just energy transition experiences, climate action, and integral watershed management, where local communities, interacting with numerous stakeholders in fair conditions, assume the role of guiding their own development, which includes the monitoring and caring of the natural resources in their territories.

Up until now the social investment by the private sector in these projects has increased, but in absolute terms it is still limited. By increasing the participation of the private sector in these climate solutions, based on synergies among stakeholders, such as government agencies, communities, and international cooperation, there is an opportunity for replicating and upscaling these initiatives. As well, risks associated with funding, timings, governance, government changes, among others, can be significantly reduced.

Nonmonetary assessments such as the ones proposed in this paper are necessary to improve the analysis of the return of the social investments, overcoming the present limits and biases of financial assessments. It is also essential to build a framework around social and environmental indicators in order to build a paradigm shift in climate investment. In this sense, Guakía Ambiente, the Small Grants Programme, and other stakeholders are working to face this challenge.

Author note

Guakía Ambiente is a Dominican-based nonprofit organization which promotes the development and empowerment of local communities through renewable energy and nature based solutions. More information at: www.guakiambiente.org.

The Small Grants Program (PPS-SGP) is an initiative of the Global Environment Facility (GEF) aimed at supporting civil society organizations with non-reimbursable funds and technical-administrative support in the development of community actions in favor of the global environment and generates well-being for people at the local level. More information at: www.ppsdom.org

Sponsorship

This work was supported by the Interamerican Foundation [Project DR-347 “Acceso a servicio de electricidad en comunidades rurales de la República Dominicana mediante instalación de cuatro sistemas micro hidroeléctricos comunitarios”].