Sustainable Infrastructure

On June 14, in the UK more than 100 prominent business leaders, co-ordinated by the UK Green Building Council (UKGBC), wrote to Prime Minister, Boris Johnson, calling for a new Planning Bill to align directly with and support the country’s net zero target and ambitions for nature set out in the Environment Bill.

Two days earlier, on 12 June, the G7 group of most powerful economies launched a new global infrastructure initiative, titled Build Back Better World (B3W), a partnership aimed to narrow the US$40 trillion infrastructure gap needed and exacerbated by the COVID-19 pandemic.

At the same time, a public consultation on a framework was launched for a proposed global Sustainable Infrastructure Label (SI Label) for developers and operators to demonstrate the positive impact of an infrastructure asset. The SI Label is being developed under a finance industry-led initiative called Finance to Accelerate the Sustainable Transition: Infrastructure (FAST-Infra), launched in early 2020 by the Climate Policy Initiative (CPI), HSBC, IFC, OECD and the World Bank Global Infrastructure Facility (GIF).

With many national governments now seeking in a post Covid-19 economy to “build back better”, the translation of this political and regulatory will into actual infrastructure projects is now paramount.

But it is not easy. As well as turning a profit and serving the needs of growing populations and future generations, infrastructure projects are now tasked with addressing the impacts of climate and preserving natural capital services. This is a multifaceted balancing act.

Moving away from traditional infrastructure models towards a focus on impact and outcomes as opposed to purely outputs is the fulcrum for the sustainable infrastructure transition. The need to deliver net zero emissions will require all sectors to review building projects, land and energy use. This ‘industry reimagining’ coupled with a core message from the United Nations Sustainability Development Goals (SDGs) that “no one should be left behind” in terms of building out future projects has added a further dimension to the industry’s expected responsibilities.

The concept of The Built Environment, advocated by many of the leading industry associations connected to infrastructure, is the premise that the built and natural environments are complex and rely on interconnected systems that should be considered as a whole, not individually. Its focus is on the collective outcomes that these combined services provide to enable people and nature to flourish for future generations. The Built Economy is a system of systems. This re-thinking of the infrastructure lifecycle for planning, building and operating assets gives opportunity for new business models to be adopted and new entrants to enter the market. As a result, multibillion-dollar opportunities for existing and new companies and investors are emerging.

With governments and intergovernmental organisations taking the lead to guide investment priorities around ESG criteria, the industry is pivoting to sustainable infrastructure.

With rapid urbanisation and the need for resilient infrastructure, there is no global shortage of demand for smart and green cities, sustainable energy technologies and smart infrastructure delivery. However, companies must factor in greater stakeholder participation to fully deliver projects, while addressing the needs of the wide spectrum of beneficiaries. That will also require clear reporting and accountability.

The importance of system-level data as well as more granular corporate data and reporting will become key to track outcomes, including environmental and societal concerns. Greater skill in risk identification, assessment and mitigation will be priority areas.

Moving forward, companies must look to quantify the financial, physical, regulatory, reputational and transitional risks of climate change and societal impacts on their infrastructure assets and related businesses.