A major new report published this week by the Global Commission on the Economy and Climate has called on governments and financial institutions to scale up and shift investment for sustainable infrastructure in an effort to not only address climate issues, but also in an effort to reignite global growth and reduce poverty.
The new report, The Sustainable Infrastructure Imperative: Financing for Better Growth and Development, identifies the main barriers currently restricting financing sustainable infrastructure, and goes on to lay out an agenda for unlocking the massive amounts of capital required. Specifically, the report explains that the globe is already on track to invest $90 trillion in infrastructure over the next 15 years — a figure representative of more than is in place in our entire current stock — and that the cost to transition solely to investing in sustainable infrastructure is not that much more.
“Investing in sustainable infrastructure is essential to solve all the world’s most pressing problems,” explained Felipe Calderón, former President of Mexico and Chair of the Global Commission. “It’s key to reigniting global growth. It’s key to reducing poverty. And it’s key to meeting the Paris Agreement. Infrastructure can be the pillar on which we build a sustainable economy, or it can crumble beneath us. It all depends on whether we get financing right, only then will capital fully shift in the low-carbon direction.”
The report was published this week at an event hosted by President Luis Alberto Moreno at the Inter-American Development Bank in Washington, DC, and launched by President Felipe Calderón and Lord Nicholas Stern as well as other Global Commissioners.
“The next couple of decades, and particularly the next two or three years, will be critical to the future of sustainable development,” said Lord Nicholas Stern, leading economist and co-Chair the Commission.
“We can and should invest in and build cities where we can move and breathe and be productive, while protecting the natural world that underpins our livelihoods. We cannot continue with ‘business as usual’ which will lock in high-carbon infrastructure and create further congestion and pollution, while choking off development opportunities, particularly for poor people. This will require not only better policies but also a sea change in the financial system itself to make it fit for purpose for the scale and quality of investment we now need. The development banks, both national and international, should be at the center of this: the growth story of the future.”
The report identifies infrastructure as including both traditional and natural infrastructure — from energy to public transport, and forest landscapes to wetlands. Explaining further:
“Sustainability means ensuring that the infrastructure we build is compatible with social and environmental goals, for instance by limiting air and water pollution, promoting resource efficiency and integrated urban development and ensuring access to zero- or low-carbon energy and mobility services for all. It also includes infrastructure that supports the conservation and sustainable use of natural resources, and contributes to enhanced livelihoods and social wellbeing. Bad infrastructure, on the other hand, literally kills people by causing deadly respiratory illnesses, exacerbating road accidents and spreading unclean drinking water, among other hazards. It also puts pressure on land and natural resources, creating unsustainable burdens for future generations such as unproductive soils and runaway climate change.”
The Global Commission identifies four action areas to finance sustainable infrastructure at the scale required:
- 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.
- 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.
- 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.
- Ramp up investments in innovation and deployment of clean technologies to reduce the upfront costs of sustainable infrastructure.
Sustainably addressing the oncoming infrastructure needs will require a combination of private and public investment, with the report identifying public investment as needed to strategically help crowd-in or leverage further private investment.
“Our action agenda in this report knits together sustainable growth with development gains,” said Commissioner Ngozi Okonjo-Iweala, former finance minister of Nigeria. “It makes clear that the role of governments, the private sector, and development banks varies depending on a country’s stage of development. And it’s an especially exciting opportunity for the developing world, where we are just starting to build fundamental infrastructure, to show real leadership thanks to the opportunities to skip over the inefficient, polluting systems of the past.”
The full report has been made available to read here, where you can also find links to download the report and additional information.
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