Crossing the Bridge to Sustainable Infrastructure Investing: Exploring Ways to Make it Across
Mercer; Inter-American Development Bank (IDB)
The world needs more infrastructure, particularly in developing countries. But not just any infrastructure. To achieve the economic, social and environmental objectives embodied by the Paris Agreement and the Sustainable Development Goals (SGDs), this infrastructure must be sustainable, low-carbon and climate resilient. At the same time, investors' interest in and allocations to infrastructure are gradually increasing driven by a combination of factors (such as low yields in traditional asset classes and inflation protection). Together, these should be positively reinforcing developments. However, current allocations and volumes of investments still fall short of the estimated $6 trillion per year required to support economic development. Although a variety of stakeholders -from governments to multilateral development banks (MDBs) to institutional investors- have articulated support for Sustainable Infrastructure (SI) investment, progress to date has been patchy. To better understand what is happening on the ground, review the barriers and identify tangible next steps to address the funding gap for SI, the Inter-American Development Bank (IDB) commissioned Mercer to undertake a multiphase project beginning in mid-2016. This document is a companion to the Mercer-IDB November 2016 paper Building a Bridge to Sustainable Infrastructure, which is discussed later in the report. This current paper is structured in five parts: Chapter 1 provides an overview of the SI imperative and the financing gap; Chapter 2 reviews the state of play regarding SI in the investment process, including feedback received from investor interviews; Chapter 3 discusses approaches to more fully embed SI within investment decision making; Chapter 4 presents our call to action to governments, MDBs, investors and supporting initiatives; and Chapter 5 is a short conclusion.