Infrastructure is the backbone for economic development, as our region gets more and more exposed to natural disasters and social conflict, and some of them to lower levels of investment and economic stagnation, we cannot help wondering if we are making the right infrastructure investment choices today. We are beginning to realize that sustainability is fundamental to the economic and financial viability of ANY infrastructure project. Sustainability does not make a project more expensive, it saves a lot of money thanks to resource efficiency and avoided costs during its lifecycle. Unpacking all of this “cause-effect” dimension is the work that we have been focusing on at the Inter-American Development Bank (IDB). A powerful recent evolution in thinking on this topic is that sustainability is not a cost, but it is an opportunity.
Let me elaborate a bit further on what I mean by OPPORTUNITY, both at the project and macroeconomic levels:
- At the macroeconomic level: when we first started thinking about sustainability, focusing specifically on the climate dimension, many finance ministers asked, “why are we doing this?” “is it not going to be costlier to us as an economy, if we make a project more sustainable? If we make our investment strategies focused on this sustainability dimensions?” And the answer to all those questions is NO. Sustainability presents an important opportunity for economies to shift to a better growth pathway. If we invest in sustainable infrastructure, we are producing the foundations of better- and high-quality economic growth. We are also laying the basis for economically dynamic, vibrant, and resilient cities where people can breathe clean air. Sustainable infrastructure will also help us preserve our ecosystems and natural resources. Sustainability, therefore, is not a cost but moreover an important opportunity for a better growth pathway.
- At the project level: we are used to thinking about environmental, social, and corporate governance (ESG) standards as a way to make sure a project does not harm. After years of tracking ESG at the portfolio level, we have now realized that if you focus on sustainability at the project level, that project will end up producing much better outcomes. So, financiers now see the business case for well prepared sustainable projects.
To make the business case for this transition even more resoundingly imminent, we are being blessed with the tremendous power of innovation. The cost of putting sustainably out there has really made this opportunity even more attainable and affordable. We see falling costs in every sector, not only renewable and battery storage but also in production, the power of digital planning, and 3D printing. Innovating will bring competitive advantage to our region; showing us better pathways for protecting valuable natural resources and improving land use. These two being powerful resources of better inclusive sustainable growth. Those countries that get on the innovation and sustainability wagon will do better than those countries that stick to the old ways of planning and delivering fossil fuel-based infrastructure.
Having said that, I am aware the road ahead is still long, too much infrastructure is still built on the old ways and we are building too little of sustainable infrastructure AT SCALE.
If we look at Latin America right now, investment levels of public infrastructure (transportation, energy, water, health, and education) are roughly only about a third of investment in Asia, however, because our region has this big catch up to do there is a tremendous opportunity to do it right, to plan, prioritize, design, build better projects, and leapfrog and gain competitive edge. Taking advantage of all the already proven sustainable business models out there will help Latin America thrive.
Latin American countries can really achieve this change and shift to a better economic pathway for the future by focusing on the important role of policy and institutional foundations to build infrastructure. If we start focusing on the quality and sustainability elements of infrastructure projects at the time of building a project, it is already too late. We need to design clear strategies and plan ahead of time. Those countries that have done best, are the ones with long-term strategic thinking about growth and infrastructure, so it is very important for each Latin American country to have a sustainability forward-looking thinking and reflect that into their national infrastructure plans and national investment plans.
So, I asked myself again, should Latin America care about sustainable infrastructure? And the answer is a firm and loud YES! We firmly believe innovation plus sustainability is the competitive advantage agenda in the 21st century. The first countries to implement this will be more resilient and more economically powerful since they will have effective natural resources management systems (water and energy), and they will deliver better jobs and opportunities for their citizens.
At the IDB we are committed to supporting Latin American with this transition, ultimately improving people lives in our region. For that, we are no longer focusing on why but more on how? How do we do it? We are developing sustainable project preparation tools, resilience tools and mapping global and local policies which will help us achieve this shift. The good news is that there is already tremendous work done in every single of our member countries and hence the reason why the IDB is organizing a Regional Sustainable Infrastructure Conference in Lima, Peru on November 20th and 21st, to share concrete measures of how to incorporate elements of sustainability in (1) the institutional context (2) planning processes, and (3) design and procuring of projects.
The conference is open to the public and free of charge. Join our effort to shift Latin America to a sustainable growth pathway!