How can we ensure infrastructure investment supports climate mitigation and adaptation, resilience, and inclusive outcomes during challenging economic times?
Infrastructure is essential to realising the UN Sustainable Development Goals and Paris Agreement targets. It enables the delivery of critical public services and is the backbone of the economy in advanced, emerging, and developing markets. Also, infrastructure is responsible for most global greenhouse gas emissions.
To leverage the full potential of infrastructure investment – especially during challenging economic times – governments, investors, multilateral development banks, and project developers should foreground transformative outcomes as they develop and finance infrastructure projects.
What is transformative infrastructure, and what are transformative infrastructure outcomes?
We define transformative infrastructure as infrastructure that delivers transformative outcomes. Transformative outcomes go beyond economic development (e.g. job creation and economic growth) to have the greatest impacts on the most pressing global challenges, including the climate crisis, social inequality, adaptability, and resilience. Aspiring for transformative outcomes through infrastructure planning and investment is especially important during times of economic shock and uncertainty to ensure that these investments achieve the greatest benefits and ‘bang for buck’.
In 2021, the GI Hub was asked by the G20 to identify and map COVID-related infrastructure stimulus to transformative outcomes (see our COVID-19 Stimulus InfraTracker). We identified 13 transformative outcomes that infrastructure can achieve, which are listed in the table below.
| Transformative outcome | Definition |
|---|---|
|
Affordability and access to services |
Infrastructure that improves affordability of tariffs and infrastructure services for low-income groups, thereby enabling universal access to basic services. Reference: GI Hub, Inclusive Infrastructure (2019) |
|
Circularity |
Infrastructure that supports circular economy outcomes, either in the way the infrastructure is developed and delivered (circular infrastructure), or by enabling broader circular economy activity through infrastructure (infrastructure for circularity). Reference: GI Hub, The Role of Infrastructure in the Circular Economy (2021) |
|
Cyber-security |
Infrastructure that increases the security of digital infrastructure (including hardware, networks, and data) against unauthorised access or malicious attacks, ensuring confidentiality, integrity, and availability of information. Reference: US Cybersecurity and Infrastructure Security Agency, ‘What is CyberSecurity?’ (2021) |
|
Digital connectivity |
Digital infrastructure that improves skills, enhances quality of life, drives education, and promotes economic wellbeing across society. Reference: Australian Digital Inclusion Index (2016) |
|
Digitalisation |
Infrastructure that integrates material, machine, and digital and data technologies across its lifecycle to improve services other than digital connectivity. |
|
Disaster and climate adaptation |
Infrastructure that increases the ability of individuals, institutions, businesses, and systems within a community to survive, adapt, and grow despite the chronic stresses or acute shocks they experience. ‘Stresses’ and ‘shocks’ include but are not limited to impacts of climate change, natural disasters, and pandemics. Reference: Reference: Resilient Cities Network |
|
Disruptive innovation |
New products or services that challenge established or incumbent products and services by addressing new market needs and making the offerings more widely accessible and affordable. Reference: Harvard Business Review, What is Disruptive Innovation? (2015) |
|
Environmental regeneration |
Infrastructure that supports rehabilitation or restoration of environmental assets or biodiversity |
|
Inclusive mobility |
Infrastructure that increases access and safety to transport modes for underserved communities. |
|
Job creation and economic growth |
Infrastructure can support sustained and inclusive economic growth that can drive progress, create decent jobs for all, and improve living standards. Reference: United Nations, Sustainable Development Goal 8: Decent work and economic growth |
|
Low-carbon transition |
Infrastructure that supports the transition to net zero emissions of carbon dioxide. Reference: World Bank Group, Decarbonising Development (2015) |
|
Pollution reduction |
Infrastructure that supports reduction of air, water, noise, and land pollution (other than that covered under 'low-carbon transition’). |
|
Social cohesion |
Infrastructure that supports community wellbeing, fights exclusion and marginalisation, creates a sense of belonging, promotes trust, and offers its members the opportunity of upward mobility, enhancing the capacity of communities to respond to shocks and stresses. Reference: OECD, Perspectives on Global Development 2012: Social Cohesion in a Shifting World (2012) |
What types of infrastructure are governments planning to invest in?
Infrastructure stimulus packages like those listed here recognise the transformative potential of infrastructure investment, and major legislation like the US Bipartisan Infrastructure Law and the EU Recovery Plan for Europe is investing significantly in infrastructure.
Between February 2020 and August 2021, in the wake of the COVID-19 pandemic, G20 central governments announced a total of about USD3.2 trillion in infrastructure stimulus. Much of this stimulus sought climate and equality outcomes: 30% related to the low-carbon transition, 20% to affordability, 17% to digitalisation, and 16% to inclusive mobility.
We’ve continued analysing government investment in infrastructure. In 2022 we examined how much governments are planning to invest in infrastructure through their budget cycles. We found that G20 central governments budgeted almost USD1 trillion for infrastructure investment, equivalent to around 1% of total G20 GDP or 4.6% of total G20 central government budget expenditure. Inclusivity was the most targeted transformative outcome of these planned investments. About half of the planned investment in infrastructure targets at least one inclusive outcome. You can see more findings and explore the data with our interactive InfraTracker.
What are the next steps to transform the future of infrastructure?
Governments, MDBs, and their partners continue to plan and develop infrastructure projects leading up to the 2030 SDG and Paris Agreement milestones. These investments must continue to strengthen economies while also removing social inequalities and transitioning to an environmentally sustainable and digitally-enabled infrastructure future.
All infrastructure investments can achieve economic development outcomes such as job creation and economic growth. When combined with long-term considerations of sustainability, inclusivity, and resilience, infrastructure can also achieve transformative outcomes.
A major challenge to achieving these outcomes is the sustainable infrastructure investment gap which, by some estimates, could be as high as USD3 trillion in annual investments needed by 2050. Closing the gap could require more than three times the current level of investment into clean energy, and 70% of the spending required to get on track for 1.5 °C is needed in emerging markets and developing economies (EMDEs).
In this context, private sector participation in scaling up sustainable infrastructure investment is more important now than ever before. The G20 / GI Hub Framework on How to Best Leverage Private Sector Participation to Scale Up Sustainable Infrastructure Investment was created as the flagship priority of the Indonesian G20 Presidency’s 2022 Infrastructure Working Group. It drew on extensive consultation with the public and private sectors, including private investors, to identify and prioritise multi-year actions that can help increase private sector investment in sustainable infrastructure and infrastructure that achieves the SDGs and Paris Agreement targets. The four pillars of action needed to scale up investment in sustainable infrastructure are:
- Setting long-term national infrastructure priorities and targets for sustainable infrastructure
- Defining sustainable infrastructure and setting data disclosure standards for sustainable infrastructure
- Strengthening legal, regulatory, and policy environments to support the implementation of sustainable infrastructure
- Developing and using new financing mechanisms and technological innovations to support at-scale implementation of sustainable infrastructure.
Details about these pillars and the specific actions within each are available in the Framework, and explored in more detail on our Sustainable Infrastructure website.