Last Saturday, tens of thousands of people gathered on the Washington D.C. mall for the March for Science alongside hundreds of sister marches around the world to coincide with Earth Day. Climate change and environmental protection were high on the agenda as the planet continues to warm and countries confront an increasing number of extreme weather events.
Meanwhile, down the road at the Inter-American Development Bank (IDB), the 2017 Global Infrastructure Forum was in full swing, discussing how to deliver inclusive and sustainable infrastructure to ensure we achieve the objectives of the Paris Agreement and the Sustainable Development Goals (SDGs).
Bringing together the presidents of the multilateral development banks (MDBs) and hundreds of investors and practitioners, the Forum aimed to enhance public and private sector cooperation around infrastructure and improve alignment between relevant initiatives to deliver the trillions of dollars in investment in sustainable infrastructure needed in developing countries.
Representatives from the private sector, the United Nations, civil society, and media organizations came together with multilateral and national development banks to share ideas and experiences on how to deliver inclusive and sustainable infrastructure at scale. Some key takeaways include:
As IDB President Luis Alberto Moreno commented on during the opening plenary, how we build infrastructure now will determine whether we are able to achieve the Paris Agreement’s goal of limiting warming to well below 2 degrees Celsius and the extent to which investments will be able to withstand extreme weather events.
In the case of Latin America and the Caribbean, recent catastrophic floods in Peru, Colombia and Argentina underscore the urgent need for more resilient infrastructure. At the IDB we are currently piloting a new methodology for evaluating proposed operations for disaster risk, climate change, and resilience, with broad implementation expected next year – to ensure climate risk is integrated into infrastructure investment decision-making.
The MDBs can play a transformative role to improve the upstream planning and design essential to promote projects that can attract investment
Improving public planning and project preparation, developing green procurement systems, and setting up the right regulatory frameworks continue to be key tasks for the MDBs. Ensuring that sustainability is properly embedded in the upstream planning and design processes is also essential.
At the same time, within the MDBs greater effort is needed to strengthen internal alignment to break down barriers between sectors and ensure organizational strategies are aligned with the Paris Agreements and SDGs. The lack of a broadly accepted definition for sustainable infrastructure remains a challenge, and adds uncertainty that may prevent private sector investment.
toward low-emission and resilient economies
The lack of projects constitutes a major barrier that needs to be resolved to take advantage of the abundance of available capital. Given the experience of MDBs in preparing and executing large-scale infrastructure projects, our role can be invaluable in bringing forward pipelines of projects and convening governments, investors, and civil society.
One example of a project that included innovative financial arrangements was the IDB’s approval in 2012 of a $200 million non-sovereign guaranteed loan for the construction of a 305.5 MW hydropower plant in Costa Rica on the Reventazón River. In addition to the loan, the IDB mobilized $135 million through a bond issued through a private placement to institutional investors. The plant came online in 2016 and represents roughly 10% of Costa Rica’s total installed electricity generation capacity. The project helps Costa Rica not only reduce its carbon emission and meet growing power demand, but it also established an offset for river habitat in Central America and contributed to the protection of the hemisphere’s largest cat through the Jaguar Corridor Initiative.
To deliver on the Paris Agreement and the SDGs the
- MDBs need to increase support to borrowing member countries with better upstream planning. Sustainability criteria, in particular climate-related objectives as set out within the Paris Agreement Nationally Determined Contributions (NDCs), now need to be integrated into planning and regulatory frameworks. This requires better awareness of the domestic context, including investments needs, market constraints and regulatory issues.
- Greater resources need to be dedicated to project preparation. For example, one of the components of the IDB’s new platform, NDC Invest, is the NDC Pipeline Accelerator, which provides resources for feasibility studies, financial models, environmental impact assessments and market assessments to prepare sustainable infrastructure projects.
- We have to crowd-in more private sector financing and develop sustainable infrastructure into an attractive asset class. Institutional investors look for predictable, long-term returns. Well-prepared projects along with consistent, predictable regulatory frameworks are needed. The IDB’s new report with Mercer reveals that many institutional investors have little or no experience working with MDBs. Forging closer relationships and opening space for collaboration with investors is paramount.
* The Global Infrastructure Forum is an outcome of the 2016 Addis Ababa Action Agenda on Financing for Development. The MDBs’ Outcome Statement is available on the PPP Knowledge Lab, a joint MDB online platform.
Related PostsHow MDBs are raising their game on infrastructure development
The content of this blog does not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, staff or the governments it represents. The World Bank Group does not guarantee the accuracy of the data, findings, or analysis in this post.
Disclaimer and Editor's Note
We look forward to hear from you: Flagging a new World Bank Group consultation on the Guidelines for the Development of a Policy for Managing Unsolicited Proposals in Infrastructure Projects. Submit your feedback here - Now open through May 7, 2017.