There is a growing consensus among G20 countries as to the importance of sustainable infrastructure, the permanent assets that a society needs for the orderly operation of its economy, as a driver of growth, jobs, competitiveness, and sustainability.
Whenever a well prepared new railway line, road, or water treatment plant is completed, the economy benefits directly through job creation during construction and users’ productivity tends to improve over time as a result of enhanced economic and social output.
OECD and IMF analyses have shown that for every dollar of investment in infrastructure there is a x1.6 multiplier in the form of a boost to short-term employment combined with a longer-term productivity gain to the economy.
Infrastructure also plays a central role in meeting other development objectives, and this includes the green agenda. Given the long lifecycle of infrastructure assets, policy and investment decisions in sustainable infrastructure today will have lasting implications for climate and the UN Sustainable Development Goals (SDGs) broadly.
The financing gap
Despite its importance, there is a major financing shortfall for infrastructure investments.
The GI Hub’s Global Infrastructure Outlook findings indicate the average annual infrastructure investment gap from 2022 to 2040 is US$ 650 billion, increasing at an average pace of 3% annually.
Bridging the infrastructure gap is a top priority of the G20 investment agenda, and is a critical component of the Paris Agreement and the SDGs.
Quality and sustainable infrastructure
We are in the midst of a global infrastructure boom and the infrastructure investment choices made now will, for decades to come, determine emissions levels, quality of life, and economic growth.
The EBRD is committed to delivering sustainable infrastructure. This means infrastructure that is high quality, green, and future ready.
The Green Economy Transition (GET) 2021-25 is the EBRD approach for helping its region build green, low carbon and resilient economies, through sustainable infrastructure and beyond. As part of the GET approach, the EBRD committed to aligning its activities with the Paris Agreement (“Paris alignment”). This support is delivered through a combination of policy and investment activities.
In 2019, the G20 set forth six voluntary, nonbinding principles that provide a strategic direction for infrastructure investment. The QII Principles build on the consensus that infrastructure is a significant driver of economic prosperity and that well-built and sustainable infrastructure maximizes the positive impacts of these high-priced investments.
The QII Principles:
According to the G20, applying these principles enables countries to pursue infrastructure investments that maximize the economic, social, environmental, and development impact of infrastructure—the foundation for achieving sustainable, resilient, and inclusive growth.
The role of International Finance Institutions (IFIs)
While IFIs represent only a small percentage of the financing for infrastructure projects, they play a critical role in building capacity, strengthening institutions, assisting with project pipeline and improving project design and structures in order to attract private capital. IFIs lower transaction costs, project risks and they support the institutional and legislative reforms needed to encourage the rules of law. In short, they ensure that projects are sustainable and welfare enhancing.
As supported by the G20, IFIs have doubled down on efforts to crowd-in private finance, setting a target of 25-35 per cent increased mobilisation per year. Such investments must feature the highest possible quality infrastructure standards as well as an integrated, systematic approach. The MDBs’ joint action include formulating quantitative ambitions for high-quality projects, encouraging bankable financing structures, catalysing private resources, fostering collaboration between new and existing IFIs and DFIs, and strengthening project preparation.
