Opening a new chapter in the infrastructure of Latin America
By Juan Pablo Bonilla, Manager of the Climate Change and Sustainable Development Sector, Inter-American Development Bank
In Latin America, as elsewhere, sustainable infrastructure plays a vital role in improving the quality of life and supporting economic growth. It determines our capacity to engage competitively in global trade and to grow our economies. In our cities, where 80% of the region’s population lives, infrastructure helps reduce poverty by enhancing access to basic services and facilitating access to knowledge and employment opportunities.
What many people don’t know is that sustainable infrastructure also has a lasting impact on climate resilience. Every year, natural disasters generate US$2 billion in costs in Latin America, not counting the incalculable loss of human life: in Colombia, my own country, the April 2017 rain-driven mudslides took the lives of more than 250 people. Good infrastructure is now more critical than ever to ensure that our homes become safer and more resilient to environmental shocks.
Since infrastructure is not built overnight, the decisions that we make today could have a major impact on our future climate. A new report by the OECD Investing in Climate, Investing in Growth shows that — at a global level — the next 10 years will be crucial to shift infrastructure investment onto a more sustainable path. If we do not make this shift, we may witness an escalation of the tragic events that devastated part of Colombia and Peru earlier in 2017. Major global agreements — the Paris Climate Agreement, and the UN Sustainable Development Agenda and the New Urban Agenda — all took effect in 2016, reflecting a need for a new direction — that of making infrastructure less carbon reliant and more climate resilient.
The real question, of course, is how to transform these agreements into reality. With budgetary and fiscal constraints, Latin America faces the challenge of bringing together governments, private investors and the public to finance the next generation of infrastructure projects and replace the obsolescent carbon-emitting infrastructure of today.
A critical starting point is the Nationally Determined Contributions (NDCs), the national climate plans that countries submitted when signing on to the Paris Agreement. Each NDC includes a national mitigation plan, as well as proposals on how countries will adapt to a changing climate. The NDCs, which will be reviewed, updated and improved every five years, are vital to help reinforce signals to the private sector on the need to invest in low-emission, climate-resilient infrastructure.
As the new OECD report demonstrates, development banks, both multinational and national, have a role to play in turning plans into concrete actions. For example, the Inter-American Development Bank (IDB) has launched NDC Invest — a one-stop shop that provides flexible support to countries in order to integrate NDCs into their national planning, create portfolios of bankable, sustainable projects, support new business and financial models, and reduce the investment risks associated with these projects. Our aim is to help countries to meet their commitments, and we have already begun working with Brazil, Chile, Guatemala and Mexico to this end.
The Sustainable Development Goals also provide incentives to integrate across different sectors and promote sustainable infrastructure. At the IDB, we are increasingly adopting comprehensive and inter-disciplinary solutions — health, housing, transport, biodiversity and climate — involving both the public and private sectors. An example is the Serra do Mar project in Brazil, where protected areas were created and improved along with housing, transport, education and health services for local communities, while reducing people’s vulnerability to the likes of mudslides and other natural disasters.
Together with other multilateral development banks (MDBs), we are also working to mobilise private investment for sustainable infrastructure solutions, including urban transport and renewable energy projects, as there is simply not enough money available in the public sector to achieve the scale of change we need to deliver on these vital agreements in the time available. Mobilising private capital will depend on a judicious use of concessional funds to reduce risks throughout the project cycle: from improved early planning and project preparation through construction and operations.
To be effective, we must all work together — the MDBs, governments, private sector and civil society — to build more climate resilient and low carbon infrastructure in a more sustainable world. And the time to act is now.
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Note: The OECD report, Investing in Climate, Investing in Growth, released in Berlin, Germany, on 23 May, provides an in-depth and enlightening analysis of how low-emission and climate-resilient development can be achieved without compromising economic growth, competitiveness or well-being. In Chapter 3 the authors examine the current gap in infrastructure investment, the infrastructure and technology transformations needed to shift onto low-emission, climate-resilient pathways, and the incremental capital costs involved.
References and further reading
OECD (2017), Investing in Climate, Investing in Growth, OECD Publishing, Paris.
Investing in Climate, Investing in Growth project web page
The New Urban Agenda: Key Commitments
The Paris Climate Agreement
UN adopts new Global Goals, charting sustainable development for people and planet by 2030
CAIT Climate Data Explorer: http://cait.wri.org/indc/
NDC Invest: https://www.ndcinvest.org/
IDB Serra do Mar and Atlantic Forest Mosaics System: Socio-Environmental Recovery Program, Brazil:
This evaluation applies the Envision Rating System on the Serra do Mar and Atlantic Forest Mosaics System Socio…publications.iadb.org
Originally published in the OECD Observer Online Edition