“Infra 3.0: Better Finance, Better Infrastructure” finds that we could save $1 trillion a year by improving infrastructure productivity.
This Taskforce concept paper provides a framework to drive efficiencies, generate cost savings and create new ways of delivering traditional, sustainable and innovative models of infrastructure – ensuring we invest “smarter” and reduce the total SDG financing requirement.
This will be possible by scaling up what we call “Infra 3.0” – an approach to infrastructure delivery which is highly distributed, digitised and “service” based, and which captures the benefits of new technologies, economic clusters and natural solutions to increase asset resilience and connectivity.
Investing in sustainable infrastructure is critical to deliver the SDGs: We need to invest $6 trillion a year into infrastructure to deliver the UN Sustainable Development Goals (SDGs) and achieve global climate action under the Paris Agreement. A majority of this investment is needed in emerging markets. We are falling short by around $2.5 trillion every year; half of which is expected to come from the private sector. Blended finance solutions which use development capital to mitigate investor risks will therefore play a crucial role in attracting more private capital for this agenda.
Global infrastructure investment needs could be reduced by $1 trillion a year by investing “smarter”. While we urgently need to scale infrastructure investment around the world, we also need to invest “smarter” by increasing the productivity of new and existing infrastructure or reducing the total cost of the service through an infra-light model. This could deliver huge savings and cut total investment needs by up to $1 trillion per year, almost halving the annual infrastructure gap of $2.5 trillion per year.
Infrastructure productivity can be increased by optimising traditional (Infra 1.0), scaling sustainable (Infra 2.0) and catalysing service-based (Infra 3.0) infrastructure investment. First, it is critical that we improve the delivery of traditional Infra 1.0 – with a focus on efficiency and optimising O&M. Second, we urgently need to accelerate investment into low carbon, climate resilient Infra 2.0. Where possible, this should mean replacing Infra 1.0 assets at the end of their life with Infra 2.0. Finally, catalysing investment for Infra 3.0 could capture further cost reductions through five core infra delivery models: distributed, digitised, shared services, economic clusters and natural solutions.
Infra 3.0 can deliver cost savings and generate new revenue streams by capturing the benefits of new technologies, financial innovation or natural solutions. Infra 3.0 could therefore accelerate delivery of the SDGs and help meet essential infrastructure needs. Infra 3.0 could also potentially lower the total cost of the infrastructure investment required in Infra 1.0 and Infra 2.0 by providing an efficient alternative in certain contexts.
Technology and innovation, policy and planning and finance will be key enablers to scale investment in Infra 3.0. Mobile phone tech platforms, AI, big data analytics and the Internet of Things can ensure quicker market penetration of a service-based approach to infrastructure delivery, lowering costs and accelerating uptake. Local planning capacity to set policies which will incentivise Infra 3.0 investment will also be critical, alongside new financing strategies and partnerships to share risk. Financial innovation will make it possible to pay for services on a more commercial and/or bundled basis.
Bold leadership from governments, the development finance community, entrepreneurs and investors will be required to drive the Infra 3.0 agenda. Efficient and ambitious policies across the three models of infrastructure delivery, a wave of financial innovation, and new business models, partnerships and tech platforms will be needed to reimagine infrastructure investment to capture the benefits of Infra 3.0 and reduce the total SDG investment requirement.
Who is pioneering Infra 3.0
“The One Planet Summit is championing the Infra 3.0 approach [by] mobilising leaders from the public and private sector to drive concrete action - especially focused on nature based solutions as an insurance against climate-related disruption, inclusive social development and accelerating the financing of sustainable, low carbon infrastructure.”
- Minister Brune Poirson, Secretary of State to the Minister for the Ecological and Inclusive Transition, France
“We are already seeing Infra 3.0 as a game changer to deliver the SDGs and, as SYSTEMIQ, turning the theory into practical solutions. For example, we are helping to develop the world’s first Sustainable Special Economic Zones in Nigeria, Ethiopia and Kenya. We are incubating community-based waste management systems to stop plastic flowing into the seas around Indonesia, turning it instead into valuable feedstock for recycling. And we are working with natural capital firms like Bio-Carbon Engineering who can cut the cost of reforesting degraded land by 90% or more. All these are forms of Infra 3.0.”
- Jeremy Oppenheim, Founder, SYSTEMIQ, Chair of the Blended Finance Taskforce
“Getting mainstream institutional capital to begin investing at scale into climate-related sectors and opportunities in emerging markets is the Holy Grail of climate finance and of addressing the SDGs. And that’s exactly what we seek to do with the Climate Finance Partnership, a first-of-its kind partnership between governments, philanthropies, BlackRock and its institutional investor clients.”
- John E. Morton, Managing Coordinator of the Climate Finance Partnership and Senior Advisor to the Blended Finance Taskforce
“Ocean Unite, AXA XL and several partners are championing an increase of investments in nature, [which is] a key element of the Infra 3.0 approach. [We are doing this] through the development of an initiative designed to advance innovative financial tools and products that reduce coastal vulnerability and build resilience to ocean risk. It will leverage investments into natural solutions like insuring coral reefs - [the] natural sea walls that protect coasts from storms, are biodiversity hotspots and are mega-vaults for carbon storage.”
Karen Sack, President and CEO of Ocean Unite
“Infra 3.0 will mean we can gain significant cost savings and increased resilience at the same time – for example if we go beyond thinking about providing and building low carbon and climate resilient roads and think more in terms of low carbon climate resilient transport services. If one takes the view of the economic value and resilience of the transport services you can invest much more selectively. The World Bank has done some work on this with rural roads in India. ”
John Roome, Senior Director for Climate Change, World Bank