Hundreds of trillions of dollars are needed for infrastructure investment over the next few decades. A new campaign, The Green Bond Pledge, has launched to encourage cities, governments and corporations to fund this need through bond issues aligned with climate and emissions goals.
At the Climate Bonds Initiative event in London, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) Christiana Figueres called on cities, governments and corporations to commit to the use of green bonds for infrastructure investment. She said,’ “When green investments move from business plans into budgets and balance sheets a wealth of opportunity will be unlocked across the value chain. Organizations committing to the Green Bond Pledge will benefit from these opportunities and help the necessary acceleration of capital flows … to deliver a sustainable future for everyone.’
The Pledge is based on the premise that public and private sector bonds financing long-term infrastructure and capital projects need to address and incorporate climate risk and impacts. Green bonds contribute to environmental and climate outcomes and their use signals that these factors have been deliberately incorporated into the financing planning and deployment of new projects and developments.
Upgrading infrastructure and developing new for the fourth industrial revolution, increasing infrastructure resilience and providing support for increasing numbers of urbanites is going to cost hundreds of billions. In 2017 the World Bank launched its Global Infrastructure Outlook, a country-based online tool and report developed by the Global Infrastructure Hub with Oxford Economics, which forecasts infrastructure investment needs across 50 countries and seven sectors to 2040.
By 2040, the global population will grow by almost 2 billion people – a 25% increase. Rural to urban migration is expected to continue with the urban population growing by 46%, triggering massive demand for infrastructure support. The Outlook forecasts that global infrastructure investment needs to reach $94 trillion by 2040 to keep pace with profound economic and demographic changes across the world.
Add in the UN Sustainable Development Goals (SDGs) of universal provision of clean water, sanitation, and electricity, and the total cost rises to $97 trillion. The analysis reveals a shortfall in needed spending of $18 trillion – 19% of the forecasted need. Closing the gap and meeting the SDGs will require spending as a proportion of global GDP to grow from the current level of 3% to 3.7%.