Sustainable Infrastructure Fund: Attracting Institutional Investment to Drive Sustainable Development
| Author | Daniel Wiener,André Schneider |
| DOI | http://doi.org/10.1111/1758-5899.12042 |
| Date | 01 May 2013 |
| Published date | 01 May 2013 |
Sustainable Infrastructure Fund: Attracting
Institutional Investment to Drive Sustainable
Development
Andr
e Schneider
Vice-president, Global Energy Basel Foundation, CEO and Chairman,
Andr
e Schneider Global Advisory
Daniel Wiener
President, Global Energy Basel Foundation, CEO, ECOS
What is the issue?
Confronting the sizeable challenges posed by climate
change mitigation and adaptation and by resource scar-
city and energy security will require massive financial
investment in a fundamental reconfiguration of the core
infrastructure that supports modern society.
For example, in order to stop the growth of CO
2
emissions by 2020, according to projections from
Bloomberg New Energy Finance, we will need to invest
over $300 billion in the coming years. Notwithstanding
that this example only covers sustainable energy devel-
opment, beyond this we will also need to develop:
environmentally friendly and affordable social housing;
sustainable water production and management; sustain-
able waste management; sustainable mobility, and many
more things. And we have to understand that if these
issues cannot be addressed in a timely manner, then
we will not be able to deliver a decent life environment
and/or social improvements in many countries and, in
the worst case, we will run a major risk of collapse.
The significant need for sustainable infrastructure is
perceived, but it is also evident that the main underlying
challenge is in financing such infrastructure. This
becomes increasingly clear when we see that up until
today the majority of such projects were financed by
governments in the developed world or by development
banks in developing countries (which were also funded
by governments). In the current situation, with the severe
debt crisis in the developed world, such financing will
become more and more difficult to obtain and hence we
need to find new sources of financing.
At the same time, institutional investors continue to
look for new and alternative investment opportunities in
the current financial climate. Sustainable infrastructure
projects could offer just such an option; one that is more
aligned with the risk profile sought by institutional inves-
tors. Institutional investors, like pension funds and insur-
ance companies, represent over $60,000 billion in assets
(with over $15,000 billion for pension funds alone).
1
They
are seeking stable-return, low-risk and long-term invest-
ment opportunities; in a world where social responsibility
is more and more important, they are looking for pro-
jects that have a strong impact on assuring a sustainable
future. Creating an asset of sustainable infrastructures, as
an asset class and investment fund, would allow the fun-
nelling of these important funds into sustainable infra-
structures, which by definition are long-term and with
stable returns, as typically they deliver crucial services to
society. This would also allow investors to further social
engagement though their investments.
Such a fund or funds could become a major investor
in sustainable infrastructure projects and allow the tar-
gets of sustainable infrastructure, such as renewable
energy, sustainable mobility and sustainable waste man-
agement (including the recuperation and transformation
of waste into other products like energy), to be met. This
would prove an important boost in addressing the most
pressing challenges of the world, such as climate change,
and also allow developing countries to start on a more
sustainable growth path, thus reducing the likelihood of
passing through (or even avoiding entirely) the high-
energy/high-emission phase that most developed coun-
tries are only now starting to exit. Finally, such a fund
would also become a major driver in making pension
funds much more stable as they would be less depen-
dent on more volatile assets such as shares or hedge
funds.
Yet as it stands today, there are only very limited
investment tools available to allow interested institutional
©2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:2 doi: 10.1111/1758-5899.12042
Global Policy Volume 4 . Issue 2 . May 2013
216
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