Financing for Sustainable Infrastructure

Dear Colleagues,

Every dimension of the climate change and global development agenda must shift from business as usual to urgent to have any chance of meeting the globally agreed goal of keeping increases in average world temperature to below 2 degree Celsius, which requires a focus on the role of private capital in addressing climate change by financing sustainable infrastructure. As the 2014 New Climate Economy Report highlighted, the world needs to build around $94 trillion in new infrastructure by 2030. This would be equivalent to a doubling of the world’s capital stock, with over two-thirds built in developing countries. Around 70 percent of global greenhouse gas emissions come from carbon-intensive infrastructure. Therefore, investing in sustainable infrastructure can be good for growth and the climate. Building renewable energy instead of coal-fired power stations can reduce air pollution and lead to better health outcomes. Building compact cities with access to mass transit affects access to other key services, such as health and education. Nevertheless, budget constraints mean that public finance from governments and international organizations such as the World Bank are unable to meet global infrastructure needs. Therefore, increasing private investment into sustainable infrastructure is essential. Nonetheless, allocations of capital into sustainable infrastructure remain low—at around 1 percent by institutional investors globally. The lack of private investment is due to the high risks of investing in sustainable infrastructure. Without action to reduce these risks, private capital will continue to flow into lower-cost but higher-carbon infrastructure projects. Using public capital to reduce infrastructure risk can lower the cost of finance and boost rates of return, thereby crowding-in private sector capital.

Prof. Dr. Joshua Meltzer
Guest Editor

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• Sustainability
• Infrastructure
• Climate change
• Development
• Finance
• Climate finance
• Development banks
• Institutional investment
• Public finance
• Private finance