9 July 2018
SDG Knowledge Weekly: Finance, Infrastructure and Sustainable Investment
Photo by IISD | Lynn Wagner
story highlights

The Global Infrastructure Hub (GI Hub) released updates to its Global Infrastructure Outlook and InfraCompass Reports, in addition to a blog series on Financing Cross-Border Infrastructure Projects.

Allianz reviews environmental, social and governance (ESG) data in a report on natural capital risk exposure, while a research article in Sustainability considers which sectors impact on which SDGs.

A report by UN Environment’s Financial Inquiry into the Design of a Sustainable Financial System reviews measures taken to green the financial system.

A Devex report reviews trends among emerging donor countries.

With the international community beginning its two-week review of progress towards the SDGs at the UN High-level Political Forum on Sustainable Development (HLPF), this week’s brief looks at means of financing the Goals, with a focus on infrastructure.

Finance is often considered a key opportunity to bridge between the climate and development agendas, serving both desired outcomes at once. A blog post by Tancrède Voituriez, Institute for Sustainable Development and International Relations (IDDRI), reviews discussions on financing for development (FfD). He notes that although the Addis Ababa Action Agenda (AAAA) may not feature new decisions or goals, like the SDGs and Paris Agreement on climate change, the wider roadmap set forth does not comprise a weak document. Voituriez emphasizes that discussions on finance take place throughout a range of international fora, from the G20 to the biodiversity agenda, and that the AAAA enables actors to work towards the common goal of increasing funds for sustainable development in a manner that aligns with their own priorities. To hold actors accountable and take stock of progress, Voituriez calls for a new summit on FfD to be organized in 2020.

Investing in sustainable development—shifting energy systems, scaling up technologies, building resilient infrastructure—often entails high initial costs that are repaid over time. A blog post by Jackson Ewing and Avia Nahreen, The Brookings Institution, asks whether the SDGs and climate finance are a “catalytic agent or empty vessel?” Drawing attention to the finance targets under SDG 13 (climate action), Ewing and Nahreen outline approaches that have been taken to fund clean infrastructure, stressing that policy context is critical: public incentives, de-risking mechanisms and other barrier reductions are needed, especially in developing countries. They highlight the value of multi-stakeholder engagement and public-private partnerships to drive climate finance, highlighting that the Green Climate Fund (GCF) is designed to steer finance towards climate mitigation and adaptation projects, but flag that the amount of capital mobilized falls “far short” of the amount needed.

Infrastructure can deliver both climate and development benefits, if done sustainably. The Global Infrastructure Hub (GI Hub) is a G20 initiative launched in 2014 to support both public and private investments in quality infrastructure. A GI Hub report, the ‘Global Infrastructure Outlook,’ forecasts infrastructure investment needs and gaps, showing a US$15-18 trillion dollar gap between the report’s 2017 release and 2040. A new update to the report focuses on ten countries participating in the G20 Compact with Africa (CWA), noting that the gap is greater in African countries. The update’s analysis finds that in these ten countries alone, meeting the targets on universal access to clean water, sanitation and electricity under SDGs 6 and 7 would cost US$621billion between 2016 and 2030, with the majority (US$460 billion) relating to electricity.

A second GI Hub report, authored in cooperation with KPMG, looks at 49 countries’ capability to deliver infrastructure, identify reforms and share best practices. Titled, ‘InfraCompass: Set your infrastructure policies in the right direction,’ the report is “the first systemic audit of infrastructure data to verify which policies and practices increase the flow and quality of public and private infrastructure investment.” It finds that better governance and reduced corruption, high regulatory quality and simplified permit procedures contribute to strong performance in emerging economies. The report’s annexes feature country-by-country analyses as well findings for participating CWA countries.

The GI Hub is also publishing a six-part blog series on the theme, ‘Financing Cross-Border Infrastructure Projects.’ Part one unpacks projects’ bankability while part two examines project planning and prioritization. Separately on financing infrastructure, the OECD, UN Environment Programme (UNEP, or UN Environment) and World Bank Group are launching an initiative on, ‘Financing Climate Futures: Rethinking Infrastructure.”

On investment, a research article published in Sustainability maps 30 environmental, social, and governance (ESG) issues identified by the Sustainability Accounting Standards Board (SASB) to the SDGs, in order to ascertain which issues are most important to which Goals. Titled, ‘The Relationship between Investor Materiality and the Sustainable Development Goals: A Methodological Framework,’ authors from the Universities of Siena and Oxford also review SASB’s 79 industries spanning ten broader sectors to assess which have the highest impact on particular SDGs. Through SDG and ESG Relevance Indices, the authors measure the relevance of SASB’s issues to the Goals, and the ability of each sector to impact on progress towards them.

A report by Allianz Global Corporate & Specialty (AGCS) reviews ESG data for more than 2,500 companies to assess their natural capital risk exposure. AGCS looks at seven types of risk for the five factors of natural capital (biodiversity, greenhouse gas (GHG) emissions, non-GHG emissions, waste and water) across 12 sectors, classifying the sectors as being either in a “danger zone,” “middle zone,” or “safe haven.” The report finds the oil and gas, mining, food and beverage and transportation sectors to be in the danger zone, and only one sector—telecommunications—as being in the safe haven. The automotive, chemical, clothing, construction, manufacturing, pharmaceutical and utilities sector are all in the middle zone. The report also outlines how these risks can materialize, and steps companies can take to mitigate them. An Allianz press release is also available.

At the global level, UN Environment’s Financial Inquiry into the Design of a Sustainable Financial System released a working paper in May titled, ‘Greening the Rules of the Game: How Sustainability Factors Are Being Incorporated Into Financial Policy and Regulation.’ The report aims to consolidate research on and measures taken by policymakers towards sustainable finance. It finds that although the number of national and sub-national sustainable finance measures has doubled and international measures have quadrupled, less than half of these measures are mandatory. The authors note a need for continued work on classifying interventions such that they are designed and evaluated in a comparable and consistent manner, international norm-building and standard-setting, and cross-country comparisons, among other areas.

On public finance, Devex’s ‘Emerging Donors 2.0’ report looks at the “new breed of development funders” such as BRICS countries (Brazil, Russia, India, China and South Africa), the United Arab Emirates and Turkey, among others, which are changing the field of development finance. The report notes that foreign aid from emerging donors increased by 47% between 2010 and 2015, and represents 6% of official development assistance (ODA). These donors are pooling capacities and experience, the report finds, through institutions such as the China-led Asian Infrastructure Investment Bank, and BRICS-led New Development Bank. While cooperation across institutions aims to streamline aid delivery and emerging donors are reporting aid data with increased frequency, the report notes that transparency does not yet extend to procurement data, and it is therefore difficult to examine whether aid contracts are open to international bidders.

The SDG Knowledge Hub also publishes regular updates on Climate Mitigation and Adaptation Finance, as well as Institutional Finance. Last week’s Institutional Finance Update also focuses on infrastructure, and reviews new investment plans and partnerships not covered in this brief.

Additional issues of the SDG Knowledge Weekly can be found here.

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