In April, we were visited by Daniel Wiener, President of the Board of the Global Infrastructure Basel (GIB) Foundation. With over 30 years of experience in sustainable development, the economist and entrepreneur has found a new way to assess the quality of infrastructure by creating the GIB. The GIB Foundation is a nonprofit foundation located in Switzerland. Its goal is to promote sustainable and resilient infrastructure with a focus on developing countries. We are eager to share what we found out about the foundation’s work.
Mr. Wiener, how would you present the GIB Foundation and its activities?
DW: Well, first of all, you can create good and bad infrastructure. A bad infrastructure is one that isn’t functional, isn’t efficient, that wastes energy or isn’t located in the right place. GIB is a nonprofit Swiss foundation that is dedicated to creating sustainable and resilient infrastructure — that is, good infrastructure: cost-effective, well governed and environmentally sound. You can look at it from an economic point of view as well, through efficiency. In general terms, one could say that sustainable and resilient infrastructure is something that has a lot to do with the population’s participation in planning and operations of an infrastructure. We all know that Parisians love their Métro. It is a “love brand” because it is so well kept and functional and helps to keep the environment clean. A very traditional example of sustainable and resilient infrastructure in Switzerland would be protection against avalanches. They were originally developed in order for people to be able to live in valleys that were at risk. Very often, this sort of infrastructure is provided by the municipalities in Switzerland: people work together to design their protection against natural disasters and vote to install them, and we see that they are often very well maintained. It is a good example because many Swiss regions wouldn’t be inhabitable without those resilient provisions.
What does infrastructure refer to?
DW: Infrastructure is everything that supports our lives and enables the economy to function. It is very often part of the public sector: roads and railroads, schools and hospitals are all part of infrastructure. In a broader sense, you could also consider any urban development as infrastructure. So, generally where we move around and what we need to live together.
What is resilience and how do you distinguish it from sustainability?
DW: Since 1986, sustainability has been defined by the Brundtland Commission as developing an economy, culture, or country in a way to be able to hand it over to the next generation in good shape. Resilience comes from the insurance realm; it means that we want to keep what we built safe. For example, in case of a flood, it would imply protecting oneself or something against it beforehand. For this, we apply the precautionary principle. And if something happens, we want to make sure that what is damaged is fenced in and that the recovery is smooth and quick, with as few additional fatalities or injuries as possible. We believe sustainability and resilience are crucial when we want to create new infrastructure, not just for societies but also to create added value for investors. That is why we created the SuRe® Standard for Sustainable and Resilient Infrastructure.
Can you tell us more about how the SuRe® Standard works?
DW: The SuRe® Standard encompasses 65 criteria divided into 14 themes across environmental, social and governance factors. Some of the key elements of this standard are inclusiveness, transparency, accountability, environmental safeguards like climate change mitigation or biodiversity, and social inclusion. You need to have reliable and thorough information and to include people from the region that is covered by that infrastructure. One could think that infrastructure is purely technical, but it isn’t: it is very social and environmental. Inclusive development of infrastructure has made Switzerland successful. It can make other countries successful as well.
We didn’t start by taking Switzerland as an example to create the SuRe® Standard, though; we started by thinking about what infrastructure should be like and then developed an international multi-stakeholder process involving experts and people from around the globe, and brought them to Switzerland to find out the best ways to provide good infrastructure. The results showed it was something we had been doing in Switzerland for a long time. When we discovered that, we were probably more surprised than anyone else.
Can you give us an example of a project where the SuRe® Standard was used?
DW: We are applying the standard to projects on all continents, but let’s start with a Swiss example. Switzerland is currently discussing a new infrastructure which would mitigate the bottlenecks of freight transportation, which is blocked on the way because of traffic, while contributing to congestion as well. Logistics are a very important feature of an economy, comparable to the blood running through the veins: it makes a big difference whether it functions well or not. This new project is designed to make sure that the arrival time of goods in Switzerland returns to predictability. We applied the SuRe® Standard to find out what could be improved. The results show that it is a very good project from a sustainability and resilience point of view. Now our assessment helps us to understand why it is important to build this infrastructure.
How can the market be affected by the SuRe® Standard?
DW: The idea is that all of the provisions that come from that standard will decrease the potential financial risks of the project. De-risking facilitates presenting a project to investors and can be an incentive for them to offer their support. It also helps the project owner because a lower risk level implies a cheaper credit rate. It is very important because infrastructure is typically 80% capital investment. Infrastructure is very asset heavy; the overall costs are mainly determined by the assets and not the operations. It is a long-term and localized project. Since infrastructure is entrenched in one place, it has to last a long time. Therefore it makes sense to manage environmental, social and governmental issues, considering that you cannot move railroads, hospitals or subways. People have to be included in the process and it has to be transparent: we have to know where the money goes and who will benefit from it. The main achievement of the SuRe® Standard is that it is simple to use, in spite of the complex reality of infrastructure deployment.
From the beginning, we had the idea that if you channel money in the right direction you can do better for the investors and for the people. The right direction is given by projects that have a high score in our standard. A good investment is one that has higher returns. We have to keep in mind that there are different value chains of investment; the risk is transferred to different people. For example, in the beginning you have a so-called equity investor, an owner, who takes on the risk of planning and designing the project, as well as putting up the infrastructure. He or she will assess how the project does in relation to the standard. Then this person will turn to the market to raise money. You have to borrow money, for example, by taking out a loan. And that is where Credit SuRe® comes in. Like a credit rating agency, Credit SuRe® is a credit rating capacity from a sustainability and resilience standpoint. With a high score, investors will understand that the project is de-risked in regard to sustainability and resilience and that will result in lower borrowing rates.
Finally, whom would the GIB Foundation like to reach?
DW: Anybody who develops an infrastructure, small or big, private or public, it doesn’t matter. Our approach applies to mainstream good infrastructure rather than having it dictated by the market. It doesn’t make sense to have 5% good infrastructure and 95% bad. It’s not a question of the market; our aim is to create a good infrastructure that serves the sustainability and resilience goals. The World Economic Forum and the OECD have calculated that 80% of the Sustainable Development Goals (SDG) are going to be delivered through infrastructure. Global Infrastructure Basel would like to help and encourage infrastructure developers to keep their projects in line with the SDG. When applying the SuRe® procedure to a project, it becomes part of the solution.