Investing in sustainable infrastructure

In 2015, 190 countries, accounted for more than 98 percent of greenhouse-gas emissions which resulted in adoption of the Sustainable Development Goals at the Conference of Parties (COP) in Paris. With this agreement in place the global attention is shifting toward how to implement and finance more sustainable growth coupled with shift investment both public and private, toward more sustainable projects.

 

There are already substantive changes in the financing landscape for example major multilateral development banks has committed to significantly increasing its allocations to climate finance, by as much as two to three times. A coalition of corporate leaders from around the world, the Breakthrough Energy Coalition, has pledged to invest billions in research and development of green

energy.

 

As these commitments reverberate through the markets, they will reveal stubborn challenges—and create new economic opportunities.

 

From 2015 to 2030, global demand for new infrastructure could amount to more than $90 trillion, according to the New Climate Economy’s 2014 report, Better Growth, Better Climate; the value of the world’s existing infrastructure is $50 trillion. In a sense, then, we will be literally building our world—for better or worse. Doing it sustainably will likely increase up-front capital costs by 6 percent or more for individual projects. Over a project’s life cycle, however, sustainable infrastructure can save money and generate healthy economic returns, while reducing risks and negative externalities at the local and global levels.

 

The barriers and opportunities for increasing private-sector investment in sustainable infrastructure. There are a number of areas that would benefit such as how to create frameworks for blending private and public capital, how to assess existing instruments, how to develop innovative solutions, and how to work better with business.

 

But the larger point is that building sustainable infrastructure offers great potential to improve the quality of life of people around the world while addressing climate change and other forms of environmental degradation. In addition, with the right policies and incentives, investors can make a profit financing the infrastructure needed to make these goals a reality.

 

There are many challenges to changing the design, construction, financing, and operation of infrastructure. There are no simple solutions. What there should be is a sense of urgency. In the next 15 years the world is set to build more infrastructure than the value of all the infrastructure that exists today. That will dramatically remake the global landscape and profoundly shape the trajectory of efforts to deal with climate change for decades. We can secure a better future, but only if we act quickly—and wisely.

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