n the first week of November, the Berlin-based Economic Policy Forum’s Emerging Economies Think Tank Alliance for High Quality Growth hosted a dialogue in Beijing on ‘Sustainable Infrastructure Development—Challenges and Opportunities for Emerging Economies’. Gateway House is a member of this network, which produces papers for governments and national policy-makers to inform top-end national and international policy processes—such as those at the BRICS, G20, and COP21. Gateway House’s Gandhi Peace Fellow, Rajni Bakshi, attended the dialogue. Her reflections on the discussions:
For a concept that still lacks a commonly agreed-upon definition ‘sustainable infrastructure’ is slowly but steadily acquiring heft with governments and private investors.
At the same time, in a world where over 2 billion people lack access to basic infrastructure like electricity and roads, many policy-makers and construction companies across the world have treated sustainability as an avoidable complication.
The change in this attitude is being driven by two compelling realities:
- The Sustainable Development Goals (SDGs), to which all members of the United Nations are now committed, cannot be met without ensuring access to reliable and affordable infrastructure—including electricity, roads/railways/ports, hospitals, schools, and healthcare facilities.
- Those who already take these facilities for granted, the ‘global north’, must contend with the increasing financial cost and environmental toll of maintaining or expanding infrastructure.
In this context ‘sustainable infrastructure’ is that which is socially inclusive, low carbon, low maintenance, and bankable. To the uninitiated this combination of requirements may seem daunting. But as the discussions at the Beijing dialogue hosted by the Economic Policy Forum (EPF) showed, many of the building blocks for infrastructure that meet these criteria are already in place.
A steady upswing in Socially Responsible Investing (SRI) is one helpful factor. A recent report released by the United Nations Principles of Responsible Investing has decisively ended the debate on whether fiduciary duty is a legitimate barrier to investors integrating environmental, social, and governance (ESG) issues into their investment decisions. The report, titled
Fiduciary Duty in the 21st Century, argues that “Failing to consider long-term investment value drivers, which include environmental, social and governance issues, in investment practice is a failure of fiduciary duty.”
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This position is a consequence of many companies finding that both social inclusion and environmentally sustainable practices lower risks and infuse greater efficiency in their operations. The opposite tends to delay or even derail projects. For example, the China International Contractors Association, a trade association with more than 1,500 members, adopted guidelines for social responsibility in 2010.
While it is true that actual practice on the ground often does not conform to these guidelines, there is pressure from investors to change this approach. Thus the rise of companies like Singapore based Sustainalytics, which provides research to investors who apply ESG criteria in their due diligence.
Much now depends on what priority the Asian Infrastructure Investment Bank and the New Development Bank give to including sustainability criteria in their infrastructure investments. Ideally, they need to do more than build upon the work already done by the World Bank, the Asian Development Bank (ADB) and the Inter-American Development Bank (IDB) in this sphere. The new banks have an opportunity to raise the bar still further—treating sustainability like an insurance policy that seems expensive only till you benefit from making a claim.
Knowledge about the mechanics, technology, and business models underlying sustainable infrastructure is growing both through the work of academic research of think-and-do tanks and the experience of private sector companies. For example, the IDB has an infrastructure sustainability award, the ‘Infrastructure 360°’. Details of the shortlisted companies are a storehouse of best practices, which is steadily growing every year. Over three years this initiative has got 147 applicants, representing 18 countries, involving $84 billion in infrastructure assets.
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There has also been impressive work in developing metrics to track sustainability design and implementation. For example the Zofnass Program for Sustainable Infrastructure at Harvard University has created the Envision Rating System to assess how a project has improved, or depleted, the quality of life of the local community, and to what degree it has enhanced the natural environment, particularly in ways that are also climate friendly. Similarly, the Mexican think tank CIDAC applies elaborate qualitative and quantitative criteria for determining the sustainability of projects.
All this good news is clouded by factors that are beyond the mechanics of sustainability and in the realm of macro public policy. For example, do large solar and wind farms that occupy hundreds of acres of land, possibly displacing local people to feed a grid, qualify as sustainable infrastructure? When a combination of factors makes grid-related renewable energy companies more attractive to investors, it will take social venture capital and government investments to not disadvantage decentralised renewable energy. Besides, these will rate much higher on most sustainable infrastructure ratings.
The core challenge before a network like the EPF is to raise the big questions in the corridors of power, particularly as the One Belt One Road (OBOR) initiative, which runs through 60-plus countries, is rolled out by China. Should the focus of OBOR be on long-distance connectivity that serves the interests of global trade, which is mostly in the hands of large companies? Or should its main priority be to serve and empower local communities, most of which are otherwise lacking in even basic amenities? And in either case can the projects aim to enhance rather than deplete the environment?
All these, and more, questions were part of the dialogue in Beijing. Experts from different countries, including the Chinese officials who participated, were clearly wiling to collaborate in favour of sustainable infrastructure.
There is little doubt that sustainable infrastructure is the path to the future. But there are no bets on the extent to which the short-term compulsions of governments as well as the private sector will continue to create infrastructure that is unsustainable and serves a small segment of society while putting an avoidably heavy burden on eco-systems.
