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Financing Sustainable Infrastructure

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What is sustainable infrastructure? Infrastructure is the backbone to sustainable development, comprising of energy and water infrastructure, transport systems and building, as well as social and nature-based infrastructure.

None of the United Nations Sustainable Development Goals can be achieved without infrastructure, but financing it is a challenge which requires careful consideration due to the enormous impacts to the well-being of people and the planet.

Planning phases for sustainable infrastructure can be longer and more expensive than for traditional projects, since they require systemic thinking, concerted design for the environment, and expertise in project and infrastructure finance.  Using of greener and cleaner materials and technologies may involve higher performance risks, as these new solutions have yet to develop robust track records.  Design and construction phases are also periods of high risk, trial, error and experimentation; when expenditure is high, delays are common place and no stable revenues are flowing in. 

IISD defines sustainable infrastructure as assets that:

  • Lower carbon and environmental footprints
  • Steward natural ecosystems and conserve biodiversity
  • Optimize the use of nature-based infrastructure
  • Move beyond compliance on core labour and human rights standards
  • Trigger technological and industrial innovation across value chains
  • Spur investment in education, skill building and R&D
  • Increase long-term employment
  • Are financially viable
  • Crowd in domestic investors and businesses
  • Increase opportunities for foreign direct investment
  • Optimize value for money for taxpayers and investors across the asset life cycle.

IISD provides research and advisory services on infrastructure and project finance.  We help policy-makers and their many stakeholders appreciate the technical dynamics of investing in both large and small projects and help develop their skills in managing project and infrastructure finance. This includes

  • Sustainable Asset Valuation (SAVi)
  • Innovative financing strategies to blend public and private capital
  • Dedicated focus on credit enhancement instruments
  • Development of domestic bond markets
  • Strategies to crowd in domestic investors into financing infrastructure
  • Public–private partnerships (PPPs), stressing the importance of risk allocation and moreover, that PPPs can present significant stress on public balance sheets for many years to come. 

Since 2018, we have also been working on digital finance and tokenization, which promises to disrupt and democratize the financing of infrastructure in an unprecedented manner. Our preliminary thoughts are presented in the report Tokenization of infrastructure. This report examines how blockchain and other digital finance technologies can address the inherent barriers of the infrastructure asset class.

Ongoing flagship projects are:

We serve on the B20 Infrastructure Taskforce, UNECE Expert Group on PPP, the OECD Experts Groups on PPP, Green Finance and Long-Term Investment, and the Expert Network on Second Opinions (ENSO). We work closely with the Berne Union (a global association for the export credit and investment insurance industry), Credit Guarantee and Investment Facility (CGIF), Inter-American Development Bank (IADB), New Development Bank (NDB), Union Economique et Monétaire Ouest Africaine (UEMOA) and the European Bank for Reconstruction and Development.

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