Financing Sustainable Infrastructure
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 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:
- Sustainable Asset Valuation (SAVi), a simulation tool to calculate the costs of risks and externalities of infrastructure projects. SAVi is built on systems dynamics and project finance models that are customized to projects, portfolios and policies.
- Inventory of credit enhancement instruments for infrastructure, an online inventory of over 100 credit enhancement and de-risking instruments and more than 60 instrument providers.
- Sustainable Infrastructure Finance Portal reporting on news and views of the infrastructure finance.
- Second Opinions for Green and Sustainability Bond Frameworks
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.
Infrastructure Banks: Solutions and best practices
This discussion paper features infrastructure bank best practices and recommendations for countries exploring similar models to support their infrastructure pipelines.Read More
Contracts for Sustainable Infrastructure: Ensuring the economic, social and environmental co-benefits of infrastructure investment projects
This report defines sustainable infrastructure, outlines its expected characteristics and co-benefits, and presents why governments must and how they can integrate sustainability into public–private partnerships (PPP) and other infrastructure contracts.Read More
Biodiversity and Infrastructure: A better nexus?
In this brief, the World Wide Fund for Nature (WWF) and the International Institute for Sustainable Development (IISD) provide initial policy guidance for parties to consider prior to COP 14 in Egypt on how biodiversity mainstreaming can be reconciled with the infrastructure sector.Read More
Financing Infrastructure – How can multilateral development banks avoid crowding out institutional investors?
David Uzsoki takes a look at the role multilateral development banks should play in financing infrastructure.Read More