Building Bridges just launched a series of webinars that will take place throughout the summer in the lead-up of the 2022 edition that will be presented from October 3-6. For its opening panel, Building Bridges lined up leading experts in the field of infrastructure investment to explore new approaches to promote sustainable infrastructure investment.
Guest speakers stressed the need for the creation of an enabling environment to facilitate investments in emerging countries and address the investment gap. They also emphasized the importance of adopting an “all hands on deck approach” from both the public and private sector, and the issue of further optimizing existing innovative solutions currently left aside.
Cinthya Pastor, Director of Economics at the Global Infrastructure Hub, outlined the private investment stagnation being witnessed in infrastructure since 2014. She underlined a durable trend suggesting that private investors prefer to direct their funds to high-income countries where renewable energy projects get mostly funded. In medium and low-income countries, transport and non-renewable energy infrastructure are the main investment targets, thus exacerbating the existing sustainable investment gap.
This highlights the urgency to find solutions to ease the capital flow coming from the private sector towards developing countries, and this can only be done through a better coordinated approach in Imad Fakhoury’s view, Director of the Infrastructure Finance, PPPs & Guarantees Group at the World Bank:
“It takes collective work, led by the client governments of these countries, in partnership with the private sectors, international organizations, and civil society, given the size of the challenge and the time frame we are facing to deliver on the 2030 Agenda.”
He further exemplified how critical the situation is in emerging and developing countries. He indicated that this group of countries would have to spend the equivalent of 4,5% of their GDP annually on infrastructure to close the current investment gap, and an additional 2,7% on operations and maintenance, further demonstrating the need for more robust commitments from the private sector in assisting public authorities in transitioning our economies.
Fakhoury also stressed the fact that private investments in emerging countries only amount from 10% to 15% of total investments in infrastructure at the moment. However, he pointed out that the recurrent excuse of the scarcity of capital is not founded as there is approximately USD 120 Trillion worth in assets being managed by the private sector that could easily be redirected to help emerging countries close the infrastructure investment gap.
In the same vain, David Uzsoki, Sustainable Finance Lead and Senior Advisor at the International Institute for Sustainable Development, pointed out that the pretext of the lack of existing innovative solutions is simply deceitful. In fact, innovative solutions do exist but are underused or misunderstood by policy makers. During the panel, he mostly focused on nature-based infrastructure (‘NBI’) projects, such as sand dunes that can be leveraged to prevent cities from being flooded, and argued that by swapping only 11% of our “grey” infrastructure into NBIs, it would be possible to globally save the equivalent of USD 248 Billion. He added that NBIs are usually 50% cheaper than common infrastructure projects, making more capital available to be directed to emerging countries.
However, he also noted that new actions need to be undertaken to establish innovative financial instruments to monetize the potential of NBIs, and make these solutions more attractive worldwide. What is certain in Uzsoki’s opinion is that “ignoring the role nature-based infrastructure can play in closing the infrastructure investment deficit would be a mistake.” He stressed that true political leadership and targeted regulations have to become the norm to unleash the full potential of NBIs.
Jean-Francis Dusch, CEO and Global Head of infrastructure at Edmond de Rothschild, and Jérôme Leyvigne, Managing Director at BlackRock Infrastructure, also addressed the tremendous opportunities that infrastructure investment can generate for the finance industry all across the globe.
Watch the full discussion