A new resource at a pivotal moment: PPP Climate Toolkit for Infrastructure

Climate change is at a critical tipping point globally and we must act now to limit global warming to 1.5 degrees Celsius.

We know the pathway to net zero requires a significant increase in global investments across infrastructure sectors and beyond, not just to mitigate greenhouse gas emissions, but also to build resilience to the climate change impact and loss already seen around the globe. Estimates of investment needs range from $3 trillion to $5 trillion annually by 2030. This, coupled with increased fiscal constraints of governments due to the impacts of COVID-19, opens the door to new opportunities and challenges to crowd-in private sector solutions, innovation, and finance to find new pathways to Paris Agreement goals.

To address the infrastructure finance gap—hardest felt in developing countries—while simultaneously building climate-smart pathways, the World Bank, International Finance Corporation (IFC), Public-Private Infrastructure Advisory Facility (PPIAF), and Global Infrastructure Facility (GIF) have partnered to develop Climate Toolkits for Infrastructure PPPs (CTIP3). The joint effort leverages on the World Bank Group’s collective strength in both public and private sector instruments and relationships to facilitate the integration of climate mitigation and adaptation considerations throughout the PPP project lifecycle.

Admittedly, we’re just starting to scratch the surface of this new way of working. And certainly, there’s a need to demystify the vocabulary surrounding climate and infrastructure from a bankability perspective.

We’re excited to launch this toolkit, which we hope helps moves the conversation about creating viable pipelines of climate smart investment into action. This toolkit is intended to enable both governments and advisors to address key questions on “how to” mainstream climate considerations into real infrastructure and PPP projects. 

The topic is moving so quickly, with only increasing urgency, leaving many of us still struggling with basic questions: What exactly should private sector investors be doing? How does climate fit into their investment program? What should governments ask investors to do?

Indeed, climate mainstreaming in infrastructure and PPP projects must start on the government side so that it can be addressed early in planning.  To put a finer point on this: climate considerations can and should be seen as a competitive advantage.

This toolkit helps public officials and their advisors better align interests and incentives towards climate-smart investments and tap into the tremendous private sector financing capacity.  Decision makers need to ensure that investments can offer benefits across the agendas of sustainable development, climate mitigation, and adaptation without risking project affordability and bankability.

The toolkit starts off with an important introduction to the enabling environment of climate-smart investments, providing a quick overview of the global climate landscape. It’s then structured in phases, following the traditional PPP preparation cycle. Throughout the four phases (project selection, preparation, structuring, tender process), critical considerations are explored, and key steps laid out.

We also emphasize the importance of the climate-gender nexus in sustainable infrastructure PPPs. Not only do women and girls tend to be more negatively affected by climate change in terms of loss of livelihoods as well as access to education and health services—they also have untapped potential as productive agents of change to create more sustainable, prosperous societies.
 

These are the topics toolkit users will explore:

• Methodologies, standards, and frameworks for assessing climate risks and greenhouse gas emissions; and designing adaptation and mitigation measures and options into PPPs
   
• Designing for climate uncertainty and exploring value-for-money considerations against the backdrop of climate vs. affordability considerations
   
• Innovating to allow for optimal risk allocation and contractual predictability in an environment marked by uncertainty, focusing on contract flexibility to accommodate uncertainty and likely shifts in market standards like force majeure, insurable events, dispute resolutions and beyond 
   
• Translating climate decisions into project requirements and technical specifications to be integrated within the contractual structure and the tender documents, focused on climate and sustainable performance, key performance indicators (KPIs), reporting, and certification requirements  
   
• Exploring and enhancing opportunities to tap into new and innovative financing options: climate and sustainable finance, blended finance, and more 
   
• Pushing beyond least-cost consideration in tendering to consider climate credentials, investments, and plans to ensure asset resilience against loss from climate events
   

This toolkit is the first of a series on sustainability and PPPs. From here, we’ll release sector-specific toolkits that will allow all of us to enter into more detail, including examples of KPIs and of climate items to consider when hiring an advisor for a PPP project.

Our aim is to pull the wealth of information flooding the market together in a digestible way that’s motivating, actionable, and iterative as developments occur.

Please, be in contact via the comments below so we can ensure our fingers are on the pulse of what users need.

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