The Environmental Defence Fund (EDF) published a report establishing a framework to support state and local governments to catalyse private investment towards sustainable infrastructure that can help mitigate the effects of extreme weather events.
The report is called ‘Investment Design Framework’, and is part of a larger report which is called ‘Unlocking Private Capital to Finance Sustainable Infrastructure’, that indicates an innovative roadmap that facilitates private-public partnerships to fill critical public funding gaps.
Namrita Kapur, Managing Director of EDF + Business and Head of EDF’s Sustainable Finance programme said: “Hurricanes Harvey and Irma just wiped out an estimated $200 billion of economic value and caused widespread devastation – an alarming wake-up call for governments to invest in sustainable infrastructure now to help protect communities from the impacts of future storms”.
“This new report highlights the economic benefits of investing in sustainable infrastructure and gives governments a how-to guide for getting started”.
According to the American Society of Civil Engineers, it is estimated that a $3.3 trillion will be needed by 2025 to upgrade or repair existing infrastructure and avoid future negative economic impacts.
However, there is currently a funding gap of $1.4 trillion for this goal to be met, and by 2040 it is expected that the funding gap will reach $5 trillion.
The report, produced by Meister Consultants Group for EDF, highlights the benefits incorporating natural infrastructure approaches in coordination with more traditional structures or systems such as seawalls or levees.
Natural or green infrastructure approaches can incorporate elements such as sand dunes, wetlands, salt marshes, or permeable pavements that can help regulate floods, control stormwater runoff, increase coastal resilience, and reduce erosion.
To address the funding gap, the report draws from best practices across the world and innovative methods to attract financial resources for sustainable infrastructure projects.
Some methods include green bonds, pay for success models used in environmental impact bonds and public-private partnerships focused on sustainable outcomes.
For example, the DC Water and Sewer Authority (DC Water) is used as a case study as it uses the US’s first issued Environmental Impact Bond.
The in-depth research identified four key elements to put forward the creation of projects attractive for private capital.
Firstly, robust funding models should include stable revenue streams, meaning that the social and environmental values should be properly monetised.
Secondly, there must be consistent and comparable performance metrics measurement to increase the project’s value.
Risk management is the third key element since quantifying, mitigating and distributing risks is critical for attracting private investment.
The last element is effective stakeholder engagement, underlying that the right stakeholders with innovative expertise increase the likelihood of success.
Alfred Griffin, President of the New York Green Bank said: “This report offers practical suggestions for unlocking private sources of capital to increase the sustainability and resilience of our country’s infrastructure and leverage critical - but scarce - public dollars”.
You can access the full Unlocking Private Capital to Finance Sustainable Infrastructure here.
You can access the Introduction to the Investment Design Framework here.
You can read the Executive Summary of the report here.
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