New report presents recommendations to unlock investment
The Inter-American Development Bank (IDB) and Mercer, a leading global consulting firm, issued Crossing the Bridge to Sustainable Infrastructure Investing, a report that focuses on the imperative for sustainable infrastructure in Latin America and the Caribbean and around the world.
The world needs an additional $2 to $3 trillion in annual infrastructure investment, particularly in developing countries, but not in the infrastructure of the past. Tomorrow’s infrastructure must focus on projects that are sustainable, low-carbon and climate resilient in order to achieve the economic, social and environmental objectives embodied by the Paris Agreement and the Sustainable Development Goals (SDGs).
“Public-private collaboration is key to address the challenges between now and 2030,” noted Amal-Lee Amin, Chief of the IDB’s Climate Change Division. “Sustainable infrastructure is crucial to addressing climate change, improving the economic competitiveness of our countries, and improving the quality of life.”
This report provides a realistic assessment of the significant gap between political commitments globally to sustainable development, and what is happening on the ground in terms of project pipeline availability and current investor mindset on sustainable infrastructure, based on interviews with leading institutional investors.
Although there has been progress in incorporating environmental, social and governance (ESG) criteria and climate considerations into infrastructure investment at the transaction level, the report concludes that the “top-down” thinking about the transformational change required has not yet translated into the investment pathways that must accompany successful implementation of the Paris Agreement and the SDGs.
Crossing the Bridgeoutlines a set of complementary actions needed to move aggressively beyond the status quo, focused on four key stakeholder groups: governments, multilateral development banks (MDBs), institutional investors and infrastructure industry initiatives. The three point call to action includes the following:
1. Convene the Conveners: Existing infrastructure investment industry initiatives should harmonize and standardize their approaches to support an accelerated and consistent approach to sustainable infrastructure investment.
2. Internal Alignment for Success: Governments, MDBs, investors and industry initiatives should explicitly align their organizational strategies to international commitments and structure incentives to deliver on those commitments.
3. External Collaboration for Success: A series of key collaborative interactions must take place between stakeholder groups to optimize links in the infrastructure financing cycle—including more coordinated project planning, clearer due-diligence processes, and investment strategies that consider alignment with countries’ nationally determined contributions (NDCs) under the Paris Climate Agreement.
“The field of sustainable investment has evolved rapidly over the past five years,” noted Jane Ambachtsheer, Mercer Partner, “however, sustainable infrastructure hasn’t been a core focus for many investors. We expect this to change.”
About the IDB
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source oflong-term financing for economic, social and institutional development in Latin America and the Caribbean.The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people.
- John Ferriter