Study identifies rapid growth in support for sustainable infrastructure, but warns that funding gap impedes growth

New report measures the momentum towards mobilizing private capital and the role of development banks

The Inter-American Development Bank (IDB) and Mercer, a global consulting leader in advancing health, wealth and careers, today announced the launch of Building a Bridge to Sustainable Infrastructure: Mapping the global initiatives that are paving the way, areport that provides an overview of the importance of sustainable infrastructure, the challenges in coordinating investment for sustainable infrastructure projects and potential solutions to alleviate current obstacles. The report highlights how industry initiatives are focused on overcoming the key barriers to sustainable infrastructure and how to leverage this momentum to support the pace and scale of change needed to ensure that the sustainable investment funding gap is addressed.

“With the Paris Agreement entering into force, the need to accelerate investment in sustainable infrastructure becomes imperative,” noted Luis Alberto Moreno, President of the IDB. “This will require clear long-term signals to investors as well as effective tools and instruments to mobilize capital. There is an important role for development banks in convening such collaboration.”

The private sector, specifically institutional investors such as pension funds, investment managers and insurance companies, are potentially a significant source of funding for sustainable infrastructure projects. Despite an environment of record low interest rates and a large pool of global savings, most countries have chronic infrastructure deficits. The funding gap reflects the range of existing barriers facing private-sector financing of sustainable infrastructure, such as a lack of clarity around pipelines of bankable projects; lack of standards for sustainable infrastructure, which can increase transition costs; and uncertainty regarding regulations and policies.

Building a Bridge to Sustainable Infrastructure considers ways to more effectively bridge the sustainable infrastructure funding gap by identifying activity in both the public and private sectors to support financing of infrastructure that is planned, built and maintained to provide services that promote socially, economically and environmentally sustainable and inclusive growth.

Thirty initiatives were identified either as having sustainable infrastructure as a core focus, supporting investment in infrastructure and having scale, or strong potential for scale (through membership or partnerships).

• Five of the thirty programs were categorized as “Influencers,” meaning they provided thought leadership and research relating to sustainable infrastructure or sought to influence public or industry policy and/or the financial system to align infrastructure investment plans with nationally determined climate goals.
• Thirteen programs have been listed as “mobilizers,” which work with governments to develop bankable sustainable infrastructure projects and/or convene investors to channel more funds into such projects.
• Finally, twelve projects were identified as “tool providers,” which enable integrated environmental or social analysis of infrastructure projects into the investment and monitoring process, resulting in increased risk-adjusted returns and improved environmental/social outcomes.

A key finding of the report is that while there are many initiatives working to promote investment in sustainable infrastructure there is a need for improving collaboration. The report calls for four main steps: i) clarifying the principles for sustainable infrastructure investment; ii) committing to sustainable infrastructure; iii) “convening the conveners”; and iv) encouraging collaboration.

“Investment in infrastructure is crucial to promoting economic and social growth. As populations grow and urbanize, the need for infrastructure also increases. At the same time, many countries have also agreed to ambitious frameworks for sustainable development and combating climate change, as per the UN’s Sustainable Development Goals and the Paris Agreement respectively. We need to take all of this into account in a thoughtful, strategic way.” said Jane Ambachtsheer, Partner and Chair of Responsible Investment at Mercer.