Infrastructure commonly refers to physical facilities that provide the building blocks of a functioning society, including but not limited to transportation networks and structures, buildings and cities, water and waste-related networks and facilities, energy networks and plants, and communications networks and facilities. Infrastructure is at the nexus of economic growth, productive investment, job creation, poverty reduction, gender participation, climate change, and biodiversity. Infrastructure is essential to modern life, and in the public imagination it is hard to separate well-functioning infrastructure from modernity, economic development, and quality of life.
Infrastructure is durable, but paradoxically its durability and dependability mean that infrastructure creates risks for society and development when infrastructure fails. Media reports of natural and human-made disasters often focus heavily on damaged infrastructure as a measure of cost and magnitude, and such damages often come to encapsulate the memory of such events. In both ancient and modern times, the ruins of a sunken city, collapsed bridge, or beached ship have become symbols of past trauma and ongoing vulnerability to sudden change.
Climate change and other environmental risks pose new challenges for the world’s infrastructure. Higher and more extreme temperatures, changing precipitation patterns, and more severe weather bring obvious risk of fire, water shortages, floods, and storms. Some regions, such as Australia, California, and the Caribbean islands, are having difficulties preparing for and confronting the next season’s anticipated disaster while not yet fully recovered from the last.
Sustainable and resilient infrastructure, compared to conventional infrastructure, minimizes unintended social, environmental, economic risks and offers additional benefits. Resilient infrastructure combines three aspects: more effective preparedness and higher resistance against damages caused by natural or manmade disasters, lower human and animal suffering and material loss from such disasters, and faster recovery from damages.
Sustainable and resilient infrastructure is closely connected to meeting the Sustainable Development Goals (SDGs)—in particular, goals related to access to basic public services and environmental sustainability. In many cases, sustainable infrastructure such as public transport, renewable energy, energy-efficient buildings, and electrification of transport and other infrastructure are critical to achieving climate and energy targets at the national and international level. Chapter 2 provides further detail and examples of how this can be so.
Infrastructure investments need to take environmental, social, and governance aspects into account to meet the SDGs and Paris climate targets, and increasingly they are doing so. This trend relates both to social and political imperatives as well as to the recognition that accounting for ESG factors can reduce financial risk and thereby enhance returns, as will be detailed in chapter 3. As a result of increasing investor interest, project developers can also benefit by adapting to this trend in investor interest. Furthermore, this reduction in financial risk and enhancement of returns can also serve to attract greater private investment to help close the increasing infrastructure financing gap.
International ESG standards exist and are becoming more reliable and helpful to developers, financiers and public agencies, as will be shown in chapter. Such standards are an outgrowth of national standards and regulation in the most highly developed countries, and of globalization of finance which has tended to pressure investors and financiers to converge in their understanding of ESG risks. Increasingly, the globalization of emerging market infrastructure finance, and the role of multilateral development banks in catalyzing sustainable infrastructure investment, has made such international ESG standards relevant for emerging market countries.
Although the uptake of sustainable and resilient infrastructure standards—referred in this work also as ESG standards—is increasing, much remains to be done. Divergent opinions or levels of risk awareness, combined with inadequate incentives for long-term risk mitigation in infrastructure development, can inhibit implementation of ESG standards in any environment, particularly in less developed contexts. Simultaneously, the growing interest in infrastructure sustainability standards also leads to a significant risk of greenwashing through the development of non-credible standards. This discussion is just beginning, and in this paper we raise further questions for research and dialogue.