Briefing Paper

Sustainable Infrastructure and the Multilateral Development Banks: Changing the Narrative

By , , , ,

Construction Worker on Bamboo Scaffolding

The growing risks from climate change impacts means that all new infrastructure must be compatible with the Paris Agreement and the Sustainable Development Goals (SDGs). Luckily, new solutions are emerging driven both by technology change and the low-carbon revolution. But current infrastructure policy and regulation is too fragmented to effectively manage the interlocking risk driven by climate change, or to take advantage of cross-sectoral technological solutions. Incremental policy changes are not enough – fundamental institutional reforms are needed.

Given that most new infrastructure will be built in developing countries, Multilateral Development Banks (MDBs) have a key role to play in addressing the sustainability challenge; both in assisting governments with creating an effective enabling environment and through providing various innovative financial instruments that increase participation of the private sector.

In this briefing E3G assesses the landscape of reports, analysis, initiatives and tools focused on sustainable infrastructure. It finds most interventions are focused at the project level - and in many cases are focused also at the downstream end of the project cycle. While these efforts are important, what is now needed is systematic governance reforms. MDBs and other international financial institutions (IFIs) can help to strengthen existing activities; and can also promote more fundamental institutional and policy reforms. Recommendations for development finance institutions (DFIs) and other IFIs to help ensure infrastructure that is built in the next few years is economically, socially and environmentally sustainable include:

  • Shift from project-level to national or international-level reforms to support sustainable infrastructure, for example through support for 2050 planning processes;
  • Systemically use innovative finance mechanisms to mobilise private finance for sustainable infrastructure and initiate bankable projects; and find mechanisms to pay for institutional changes to deliver sustainable infrastructure;
  • Transform existing infrastructure including putting energy efficiency first and recognizing energy efficiency as infrastructure;
  • Strengthen and improve existing infrastructure safeguards as well as building institutional capacity to do sustainability assessments;
  • Strategically identify gaps in the existing portfolio;
  • Better tie the benefits of sustainable infrastructure to other co-benefits and sustainable development goals;
  • Build the capacity of staff and clients to keep track of latest trends and technologies.

Finally, recommendations for government and other international stakeholders working on sustainable infrastructure include:

  • Strengthening national-level interventions to support sustainable infrastructure – either substantial strengthening of existing government capacities or cross linking to non-government capacities;
  • Strengthening city and local-level planning and institutions for long term infrastructure investment;
  • Ensure initiatives for sustainable finance are aligned with the sustainable infrastructure imperative;
  • Shift from an incremental to a more structural approach to sustainable infrastructure;
  • Sustainable infrastructure needs to be linked to reduced macroeconomic risk;
  • Create incentives and send market signals for the paradigm shift within the system and within institutions.

Download the briefing paper

Sustainable Infrastructure and the Multilateral Development Banks: Changing the Narrative [PDF, 469KB]