Financing Resilience of Transitioning Infrastructure: Understanding Demand, Mapping Solutions and Charting Pathways

Day 3, 6 May 2022, 1130 - 1300 IST

Session Annotation

The session will focus on addressing solutions for mobilizing finance in resilient infrastructure transitions. The three core issues identified for this discussion are (1) Disclosures, Tracking and Labelling of Resilient and Sustainable infrastructure; (2) Advancement of risk assessment to increase focus on climate change and adaptation-related factors into infrastructure-related risk analytics; (3) Financing future infrastructure to incorporate resilience and financial protection strategies into the investments. The session will present learning from National Infrastructure Pipelines from different geographies and economies to explore resilience implementation in the transitioning infrastructure and the way forward for actioning integration of public and private finance into infrastructure through effective risk-informed transition of infrastructure assets and systems.

Session Overview

This session looks to explore the pathways for investing in and realizing resilience while attaining infrastructure needs and goals of different types of economies.

The deliberation will focus on financing infrastructure pipelines amidst the transition to cleaner energy sources and reduced emission targets through the experiences of different countries with diverse hazard profiles, disaster risks and macro-economic factors. The session would draw out mechanisms to factor resilience into infrastructure development and financing plans such that emergent infrastructure is sustainable and conducive for the transition to net-zero.

The session proposes to look at the experiences from infrastructure pipelines. These would be deliberated and discussed with private sector financers/asset owners, academic and research think tanks working on the future of infrastructure financing, multi-lateral and inter-government donors and financers at the session.

  • Infrastructure development increasingly carves the road for social and economic development but can also be a major source of carbon emission in construction and operational processes. There is a global urgency to build infrastructure which can withstand disaster-related shocks and ensure sustainability across different types of economies, particularly in the developing world. Therefore, a clear case exists for collaboration between different economies to devise scalable, contextual and consistent financing systems which can drive investment in resilience for new infrastructure as well as pre-arrange funding to quickly restore and rebuild infrastructure when shocks occur.

In the context of financing resilience of infrastructure transitions, there are three essential topics of focus at this session.

1. Disclosures, Tracking and Labelling of Resilient and Sustainable infrastructure:

Total global infrastructure investment is around USD 2.7 trillion each year, out of which only USD 46 billion investment integrates resilience and sustainability considerations (2019/20 report by Climate Policy Initiative). Tracking infrastructure investments can help mobilize the finance needed for projects which are driven to achieve sustainability goals. The projects labelled and tracked as per their sustainability parameters will help investors have greater clarity and confidence in their investment decisions.

Reliable data related to the sustainability of any legacy, new or planned infrastructure will be a key parameter for drawing out investment guidelines for government and private investors. Standardized and consistent sustainability disclosure guidelines like Solvency II and Basel III regulatory frameworks applicable on financial disclosures can be introduced and become instrumental in devising finances for infrastructure projects which are resilient.

Discussion Point 1: What could be parameters to identify and flag projects which meet sustainability goals?

Discussion Point 2: Can different economies with varying investment and capital expenditure priorities have a consistent approach towards investing in resilience of new infrastructure?

2. Risk Assessment advancement:

Risk assessment lays the foundation for risk management decision-making and further helps ensure the profitability of investments. Traditionally risk assessment and modelling exercises have been based on historical event datasets; however, due to rapidly changing climatic conditions in recent years, it has been realized that risk assessment based on historical data is not adequate. Therefore, probabilistic risk models which factor in the near term and real-time data along with historical datasets have become essential to accurately reflect climate change effects in risk assessment analytics. The insurance industry has been at the forefront of the development and application of these models, and could therefore play a central role in making these tools accessible in the context of risk-informed and resilience-driven infrastructure investments  

Discussion Point 1: Where in the process of planning and investing for resilient infrastructure can risk assessment and modeling techniques generate value and influence risk pricing?

Discussion Point 2: Satellite imagery, earth observation and unmanned aerial vehicles can be sources of real-time data that can be used in risk assessment. Are these data points reliable, consistent, and scalable for global use?

3. Financing Future Infrastructure:

Amidst the infrastructure development gap to bridge, steering the global financial flows to infrastructure development which enables a low carbon ecosystem through its building and operational lifecycle is another challenge to address. Financial institutions have the capabilities to leverage and help different stakeholders to adopt resilience measures, as they decide where to allocate their capital and resources. So, presumably, if financial institutions align their investment decision-making with robust adaptation benchmarks the resilience pathways would become more attainable.

Discussion Point1: What are possible obstacles in public and private institutions collaborating to mobilize the finance into resilient and sustainable projects?

Discussion Point2: Stranded assets resulting from transitioning infrastructure pose a substantive financial risk, how will the transition risk be addressed by the NIPs?

Thematic Forum 6 at ICDRI will focus on risks associated with infrastructure transition and how to curtail those risks by factoring in resilience measures into transitioning infrastructure across sectors. The session will be showcasing reliable project labeling, sustainability disclosure guidelines and, risk assessment implementation as key measures and how these measures can be implemented while mobilizing private and public finance, in order to promote resilience of transitioning infrastructure.