Image: Flickr
Image: Flickr

Governments and finance institutions have been called upon to scale up and shift investment for sustainable infrastructure as a fundamental strategy to spur global economic growth.

New research by the Global Commission on the Economy and Climate has found investments totalling about US$90 trillion will be needed in infrastructure over the next 15 years, more than the entire stock currently in place, even under a continuous business-as-usual development.

The committee have identified the key action areas for the institutions to consider, including tackling fundamental price distortions through fossil fuel subsidy reform and carbon pricing and the strengthening of policy frameworks and institutional capacities to ensure the right projects are selected in the first place, and the right financing is used at the right time

They also outline that a transformation to the financial system through new tools like green bonds and green investment banking need to be actioned, as well as ramping up investments in innovation and development of clean technologies.

The report was launched by President Felipe Calderón and Lord Nicholas Stern as well as other Global Commissioners at an event hosted by President Luis Alberto Moreno at the Inter-American Development Bank in Washington, DC.

Felipe Calderón, former President of Mexico and Chair of the Global Commission said: “Investing in sustainable infrastructure is essential to solve all the world’s most pressing problems.

“It’s key to reigniting global growth. It’s key to reducing poverty. And it’s key to meeting the Paris Agreement. Infrastructure can be the pillar on which we build a sustainable economy, or it can crumble beneath us. It all depends on whether we get financing right, only then will capital fully shift in the low-carbon direction.”

The good news is that it does not need to cost much more to ensure that this infrastructure delivers a low-carbon economy consistent with the climate goals agreed in Paris, and fuel and other operational savings can fully offset any additional up-front investments.

Meeting these investment needs will require a combination of public and private investment, with public investment used strategically to help crowd-in or leverage further private investment, said the Commission.

The report also breaks down future infrastructure needs by sector and country groupings and finds that the global South will account for roughly two-thirds of investment, with energy and transport sectors dominating.

The report notes that a single infrastructure project can require dozens of financial institutions, all with their own demands, and take more than a decade to build. The cost of project preparation is substantial, typically 2.5–5% of total investment and the risk-return ratio for sustainable infrastructure is often too high to attract private capital.

Lord Nicholas Stern, leading economist and co-Chair the Commission: “The next couple of decades, and particularly the next two or three years, will be critical to the future of sustainable development. We can and should invest in and build cities where we can move and breathe and be productive, while protecting the natural world that underpins our livelihoods.

“We cannot continue with ‘business as usual’ which will lock in high-carbon infrastructure and create further congestion and pollution, while choking off development opportunities, particularly for poor people. This will require not only better policies but also a sea change in the financial system itself to make it fit for purpose for the scale and quality of investment we now need. The development banks, both national and international, should be at the center of this: the growth story of the future.”