10 October 2016

Report highlights investment in infrastructure needs

Report highlights investment in infrastructure needs

According to the Global Commission on the Economy and Climate, over the next 15 years, US$90 trillion needs to be invested in infrastructure.  As a result, it calls on governments and finance institutions to scale up and shift investment for sustainable infrastructure as a fundamental strategy to spur growth.

In its report entitled “The Sustainable Infrastructure Imperative: Financing for Better Growth and Development”, the organisation also finds that in order to meet these investment requirements, a combination of public and private investment, with public investment used strategically to help crowd-in or leverage further private investment, is essential.  It classifies 'sustainable onfrastructure' as that which:
  • Enhances access to basic services
  • Promotes environmental sustainability
  • Supports inclusive growth
In the reportn the authors note that a single infrastructure project can require dozens of financial institutions, all with their own demands, and take more than a decade to build. The cost of project preparation is substantial, typically 2.5–5% of total investment. And the risk-return ratio for sustainable infrastructure is often too high to attract private capital.  As such, it has identified four action areas to finance sustainable infrastructure at the scale required:
  1. Tackle fundamental price distortions through fossil fuel subsidy reform and carbon pricing. Fossil fuel subsidies amounted to around US$550 billion in 2014, skewing investment away from sustainable options;
  2. Strengthen policy frameworks and institutional capacities. Better planning and governance can ensure the right projects are selected in the first place, and the right financing is used at the right time;
  3. Transform the financial system through new tools like green bonds and green investment banking, and by greening the existing financial system, including through corporate climate risk disclosure;
  4. Ramp up investments in innovation and deployment of clean technologies to reduce the upfront costs of sustainable infrastructure.

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