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Marie Lam-Frendo Global Infrastructure Hub Chief Executive Officer

When the G20 Leaders gathered in Indonesia in November 2022, they faced unparalleled multidimensional crises. The world is experiencing the after-effects of the pandemic, escalating climate change, war in Ukraine, and other issues. Combined, these issues are creating a challenging economic environment that is slowing global recovery and stalling the achievement of the UN’s Sustainable Development Goals (SDGs).

The current situation calls for us to remember that infrastructure is a backbone solution to a healthy climate, safe and resilient societies, and equitable economic recovery. Indeed, infrastructure investment has a strong impact on economic growth, being more effective than other types of public spending. A 2020 Global Infrastructure Hub (GI Hub) study found that the economic multiplier for public investment (including infrastructure) is 1.5 times greater than the initial investment in two to five years.

However, simply investing in any infrastructure is not enough to achieve the positive effect of the investment. The investment needs to be in sustainable infrastructure to achieve global climate targets and the SDGs.

The G20 is improving the sustainability of infrastructure through multilateral action that supports sustainable infrastructure development in G20 countries and around the world. Increasingly, G20 governments have been placing sustainable infrastructure investment at the forefront of their policy initiatives and economic recovery plans, including the Inflation Reduction Act 2022 in the United States, the Long-term Strategy for Low Carbon and Climate Resilience 2050 in Indonesia, the Saudi Green Initiative, and the National Infrastructure Strategy in the United Kingdom.

This trend is also evident in the GI Hub’s analysis of infrastructure stimulus announced by G20 governments postpandemic: 30% of the stimulus is related to the low-carbon transition. However, this is far from enough, and governments cannot fund the transition alone. Estimates show that roughly USD2.6 trillion is required annually through to 2030 to meet the SDGs and stay on a path to net zero by 2050. →

→ We need to reduce the shortfall of investment in sustainable infrastructurethe sustainable infrastructure investment gap. Closing this gap could require more than three times the current level of investment in clean energy, and 70% of the spending required is needed in emerging markets and developing economies (EMDEs). Unfortunately, our latest analyses show private investment in infrastructure is declining in middle-and low-income countries where it is needed most. Globally, private investment in infrastructure has been stagnant for eight years running.

Reversing these trends must be a priority for both the public and private sector: without scaling up private investment achieving climate targets will remain a challenge. The task now is to attract private investors to drive forward sustainable infrastructure investment.

This is one of the major infrastructure priorities for the G20 and we’ve been working closely with its Infrastructure Working Group to support the advancement of this work. The G20/GI Hub Framework

on How to Best Leverage Private Sector

Participation to Scale Up Sustainable Infrastructure Investment, recommends acting on four opportunity areas as a priority.

Priority 1: Infrastructure plans and pipelines

Private investors are aligning their infrastructure investments with the SDGs. They use long-term infrastructure plans to evaluate opportunities and government priorities and to better understand and manage risks, related to market uncertainty, political risks, and stranded assets.

As such, long-term infrastructure plans need to exist, and need to showcase how governments plan to meet the SDGs. But in 2019, we found that 38% of countries still do not publish national infrastructure plans and 28% do not publish pipelines of projects – what needs to change for these countries to seize the opportunities that infrastructure plans create? The framework recommends the following actions:

• International financial institutions and other networks to support governments in the development of long-term infrastructure plans that achieve SDGs and related targets.

• International organisations (IOs) and multilateral development banks (MDBs) to gather and share data on infrastructure investment trends, performance, and gaps specific to countries and sectors.

• IOs to identify approaches and mechanisms that enable the inclusion of resilience, social, and governance (including just transitions) measurement into investment decisions.

CASE STUDY: Brazil’s Infrastructure Monitor

In May 2022, the Brazilian government published a digital platform which provides a summary of infrastructure investment projects, historical investment series, scenarios, and projections of investment indicators. This published pipeline supports the government’s plan to promote and highlight the importance of private investment and promotes a methodology to help infrastructure practitioners assess the sustainability of projects.

Priority 2: Definitions and data for sustainable infrastructure

There is no one-size-fits-all definition for sustainable infrastructure and there are a multitude of data disclosure standards. Investors are telling us that the proliferation of sustainable infrastructure definitions and data disclosure standards is leading to more complex project preparation and reporting, which in turn makes it harder to finance infrastructure projects – particularly in EMDEs. Better comparability and interoperability of these definitions and standards would improve transparency and better ensure the achievement of ESE objectives while minimising greenwashing. On the flip side, data disclosure standards are needed to provide clarity on physical and transition risks and avoid the greater negative impact of potentially stranding assets. Rather than suggesting new definitions or standards, we believe the solution is better comparability and interoperability between existing definitions for sustainable infrastructure and data disclosure standards. To help drive this forward, the framework recommends the following actions:

• Collaboration between MDBs, national development banks (NDBs), G20 governments, infrastructure asset rating providers, IOs, networks, initiatives, and investors to create better comparability and interoperability with other global standards.

Governments have key roles to play in reducing legal, regulatory and policy barriers, and implementing incentives and policies to create enabling environments for more and different infrastructure financing. However, despite numerous efforts to achieve this, significant and longstanding gaps in the enabling environment for private investment in infrastructure still exist.

• Infrastructure data platforms to allow the interoperability of sustainable infrastructure data for the benefit of investors.

Priority 3: Financial and technological innovation

The last decade has seen significant innovation in finance and technology. New financing solutions can attract private investment in sustainable infrastructure, especially in EMDEs where there is uncertainty of initial returns. For example, blended finance can encourage private participation by taking the first loss or guaranteeing revenues in the early phase of infrastructure operation. Meanwhile infrastructure technology (InfraTech) underpins the sector’s ability to reach net zero - almost 50% of the emissions reductions needed by 2050 depend on InfraTech solutions that are at the prototype or demonstration stage.

The challenge is, these types of innovations are not being adopted at the pace required to make a meaningful difference to investment in sustainable infrastructure. In its 2021 report, The State of Blended Finance, Convergence found that blended finance flows decreased by 50% in 2020 and that the past five years saw only steady growth rather than the exponential growth needed. To scale up financial and InfraTech innovations and their adoption the framework suggests these key actions:

• MDBs, donors, and investors to build capacity, especially in EMDEs, to replicate successful financial innovation models that will unlock private investment into sustainable infrastructure.

• The G20 to collaborate with partners and develop guidelines to scale up de-risking, blended finance instruments, and effective partnership models involving the private sector.

• Establish and grow a global InfraTech ecosystem to share knowledge, test innovative approaches, and catalyse opportunities.

CASE STUDY: The Urban Resilience Fund (TURF)

One example of financing innovation in action is the TURF initiative which aims to facilitate large-scale private sector investment into infrastructure. Launched by Meridiam, in partnership with The Rockefeller Foundation and the United Nations Capital Development Fund, TURF is a global blended finance impact fund.

The fund supports cities to deliver critical resilient infrastructure projects in Europe and Africa and intends to mobilise EU10 billion in private investment.

Priority 4: Enabling environment for implementation

Governments have key roles to play in reducing legal, regulatory, and policy barriers, and implementing incentives and policies to create enabling environments for more and different infrastructure financing. However, despite numerous efforts to achieve this, significant and long-standing gaps in the enabling environment for private investment in infrastructure still exist.

It’s time to be serious about creating a systematic de-risking mechanism to give private investors the confidence to invest in sustainable infrastructure projects closer to investment grade. How can we finally improve regulatory frameworks, transparency, and project preparation facilities to achieve this? The framework suggests these actions:

• Establish a collaborative forum of regulators, global standard-setters, and the banking and insurance sectors to discuss the supervisory and regulatory treatment of infrastructure as an asset class and its climate-related risks.

• IOs, MDBs, NDBs, development finance institutions, domestic financial institutions, and sub-national entities (cities and innovation sandboxes) to share effective policy approaches that mobilise private capital.

• G20 members and the donor community to provide additional funding, resources, and support for infrastructure project preparation.

What we do next is critical

Looking ahead, we strongly believe that stimulating these actions will scale up private sector participation in sustainable infrastructure investment. And we consider this investment to be the central, urgent problem and opportunity in infrastructure today.

Sustainable infrastructure is an enabler of the transition to net zero and the foundation of a resilient, healthy economy. By helping enable investment to flow, we are creating a world where people can thrive in safe, equitable, and healthy communities.

Collaboration between the public and private sector, which the GI Hub supports as an independent voice at the G20, is vital to advance these actions. Work is already underway on a number of initiatives, and we welcome opportunities to collaborate and engage with partners to realise a sustainable future for all. ■

Infrastructure development can transform societies and empower future generations.

The Global Infrastructure Hub is a not-for-profit organisation and a knowledge hub for advancing the delivery of sustainable, resilient, and inclusive infrastructure.

Formed by the G20, we collaborate across the public and private sectors to produce data insights, practical tools, and programs that help our stakeholders create positive impacts through infrastructure.