2020: infra gets the ‘green’ light
Not a day has gone by so far this decade where a politician or corporation has not announced a plan to invest vast sums into sustainable infrastructure.
It is easy to be cynical as politicians and companies pledge to outspend or outwit their rivals, as they realise the extent to which citizens and consumers view infrastructure investment and addressing the effects of climate change as both interlinked and essential.
However, it is evident that many in the infrastructure sector are mobilizing as they sense that, perhaps for the first time, whoever the policymakers are- or will be in the near future- the case for infrastructure investment has been won and that the time to get shovels in the ground has arrived. While those outside of the sector are increasingly looking for a way in which to reap the benefits of infrastructure as an asset class.
In January the European Union and US Congress each backed plans to invest USD1trn in sustainable infrastructure. While Member States and US States have unveiled their own investment plans on a daily basis.
Several committees including the Ways and Means Committee and the Senate’s Subcommittee on Transportation and Safety heard testimonies on financing and funding infrastructure with ever stronger backing for P3, albeit with the age old mantra ‘P3 is not a panacea’ ringing out.
While in Brussels, EU Commission Executive Vice-President Valdis Dombrovskis told a High-Level Conference on implementing the European Green Deal this week:
“Public finance needs to lead the way, but the private sector needs to provide the scale. We need it to help attract capital from across the board – equity, loans, project finance – so that we reach our climate-neutral goal, by investing in economic activities that mitigate climate change.”
What is most encouraging for the infrastructure delivery sector is that there is a realisation in Brussels and Washington that this vast investment cannot be funded and financed by the public sector, or the private sector - but only by public-private partnerships.
Following on from the European Parliament vote to support the European Green Deal, Anna-Marie Slot, global sustainability partner at law firm Ashurst, said: "The focus on regulation related to sustainability goals is only accelerating. Delivery of the outcomes set out in the proposed European Green Deal will require more than MEPs commitment - industry participants and companies have the opportunity to be on the front foot in creating market driven solutions to the climate neutral challenges."
To help figure out what the impact of the Democrats’ Moving Forward Framework (and Republicans actually agreeing to its principles) I asked an eminent expert and perpetual realist on US infrastructure policy what the latest attempt to get bi-partisan agreement on Capitol Hill means.
Jones Lang LaSalle Managing Director Jill Jamieson commented “it reflects a well thought-out approach to infrastructure. It’s not perfect, but the focus on maintenance, full funding, resiliency and performance incentives is a step in the right direction. That said, USD760bn over five years will not address our needs, which are more than 5-times that. What is missing from this document is how this gets paid for and that is usually the point of contention that paralyzes these sorts of plans.
Jamieson added: “I applaud DeFazio’s efforts, even though I don’t necessarily agree with all the details. One never knows what will materialize in an election year and some may be hopeful that this Moving Forward Framework will result in something concrete. Nevertheless, there’s a long pot-holed road ahead before this could become law and get funded, so it’s best not to get too excited.”
AIAI's executive director, Lisa Buglione commented: "AIAI is pleased that leaders in both the House and Senate are advancing their proposals for infrastructure investment. We agree the time is now to act, and look forward to our continued engagement as the debate advances."
Policymakers in New Zealand and Australia have also announced sustainable infrastructure investment plans, with images of the devastation caused by wildfires in the latter widely cited by leaders in Washington, Brussels and Davos as to why this ‘green’ investment needs to happen immediately.
Meanwhile, Spain’s Ferrovial is the latest global industry titan to announce a focus on sustainable infrastructure. Ignacio Madridejos, CEO of the group said Wednesday “Ferrovial is preparing to take advantage of the transformations of all types that our society is experiencing in order to lead a new industry cycle in sustainable infrastructure, where we are acknowledged leaders”.
The plan arose from a “reflection on the technological, demographic, mobility, and sustainability transformations that are affecting the industry”, coupled with worldwide infrastructure needs.
What was refreshing in that announcement, in Madrid this week, was the open recognition that “this unique situation offers great opportunities” for Ferrovial “to adapt to the new competitive environment and generate value for all our stakeholders”, and not for CSR or ESG reasons alone.
However, the most refreshing discourse in 2020 is the potential for infrastructure investment through public-private partnerships to address the effects of climate change where it is felt most acutely- Emerging Markets.
Earlier this week, European Commission President, Ursula von der Leyen, on behalf of the European Union, and International Monetary Fund's Managing Director Kristalina Georgieva concluded a new Financial Framework Partnership Agreement that will boost their cooperation to tackle key challenges including climate change, and help countries achieve the Sustainable Development Goals.
What is most refreshing about the discourse between governments, multilaterals and the industry in 2020 is increasing transparent about what the opportunities are for their respective domestic infrastructure delivery sectors in Emerging Markets.
The UK government is more bullish than ever on the benefits of PPP (albeit just not in the UK) and the potential of “deep” UK expertise.
Meanwhile as the US International Development Finance Corporation (DFC) CEO, Adam Boehler, travels to El Salvador this week “to discuss opportunities” following visits to Colombia, Guatemala, Indonesia and Vietnam already this year, the US Department of State has released a fact sheet on its Blue Dot Network for infrastructure financing.
It states: “The United States, Australia and Japan’s new Blue Dot Network will serve as a globally recognized seal of approval for major infrastructure projects, letting people know that projects are sustainable and not exploitative.”
Adding: “Once fully up and running, the new network will bring together governments, the private sector and other organizations behind a set of high-quality global infrastructure development standards.”
One thing is for sure, 2020 will see familiar industry names in unfamiliar territories. Exciting times indeed.