Investing in Sustainable Infrastructure

Abstract

Sustainable business is underpinned by sustainable and resilient infrastructure defined as infrastructure that integrates environmental, social and governance (ESG) aspects into a project’s planning, building, and operating while ensuring resilience in the face of climate change or shocks. Currently, trillions of dollars of infrastructure investment are needed to meet our needs globally. Governments, constrained by debt and deficits, do not have the necessary means to meet this global infrastructure gap. Large institutional investors are increasingly filling this void. As they do so, these investors are beginning to take environmental, social, and governance issues into account in their infrastructure portfolios. This chapter explores the shift toward greater consideration of ESG in infrastructure investment. It looks at the drivers of these phenomena and some of its implications. It examines new financial instruments emerging in the sector such as Green Bonds and Community Benefit Public Private Partnerships. But integrating ESG in infrastructure investment is not without its challenges. Given that these large institutional investors have a fiduciary duty to serve their beneficiaries in both the short and long term, incorporating sustainability in infrastructure investment raises tensions between the need for profitable financial returns and the need to contribute to a healthy and sustainable planet. These challenges are explored in greater depth at the close of the chapter.