IDB releases call to action for government, MDB and investor cooperation to sharply increase sustainable infrastructure investment

New report presents recommendations to unlock investment

The Inter-American Development Bank (IDB) and Mercer, a leading global consulting firm, issued Crossing the Bridge to Sustainable Infrastructure Investing, a report that focuses on the imperative for sustainable infrastructure in Latin America and the Caribbean and around the world.

The world needs an additional $2 to $3 trillion in annual infrastructure investment, particularly in developing countries, but not in the infrastructure of the past. Tomorrow’s infrastructure must focus on projects that are sustainable, low-carbon and climate resilient in order to achieve the economic, social and environmental objectives embodied by the Paris Agreement and the Sustainable Development Goals (SDGs).

“Public-private collaboration is key to address the challenges between now and 2030,” noted Amal-Lee Amin, Chief of the IDB’s Climate Change Division. “Sustainable infrastructure is crucial to addressing climate change, improving the economic competitiveness of our countries, and improving the quality of life.”

This report provides a realistic assessment of the significant gap between political commitments globally to sustainable development, and what is happening on the ground in terms of project pipeline availability and current investor mindset on sustainable infrastructure, based on interviews with leading institutional investors.

Although there has been progress in incorporating environmental, social and governance (ESG) criteria and climate considerations into infrastructure investment at the transaction level, the report concludes that the “top-down” thinking about the transformational change required has not yet translated into the investment pathways that must accompany successful implementation of the Paris Agreement and the SDGs.

Crossing the Bridgeoutlines a set of complementary actions needed to move aggressively beyond the status quo, focused on four key stakeholder groups: governments, multilateral development banks (MDBs), institutional investors and infrastructure industry initiatives. The three point call to action includes the following:

1. Convene the Conveners: Existing infrastructure investment industry initiatives should harmonize and standardize their approaches to support an accelerated and consistent approach to sustainable infrastructure investment.

2. Internal Alignment for Success: Governments, MDBs, investors and industry initiatives should explicitly align their organizational strategies to international commitments and structure incentives to deliver on those commitments.

3. External Collaboration for Success: A series of key collaborative interactions must take place between stakeholder groups to optimize links in the infrastructure financing cycle—including more coordinated project planning, clearer due-diligence processes, and investment strategies that consider alignment with countries’ nationally determined contributions (NDCs) under the Paris Climate Agreement.

“The field of sustainable investment has evolved rapidly over the past five years,” noted Jane Ambachtsheer, Mercer Partner, “however, sustainable infrastructure hasn’t been a core focus for many investors. We expect this to change.”