Aligning infrastructure investment decisions with long-term sustainability goals

The OECD-led Sustainable Infrastructure Programme in Asia (SIPA) provides policy makers in emerging economies with tools, policy advice and capacity building to support sustainable infrastructure development in line with the goals of the Paris Agreement.

Infrastructure sits at the heart of the climate emergency, both its causes and its possible solutions. Currently, global infrastructure systems are responsible for around 70 per cent of total greenhouse gas emissions. Given the long lifespan of infrastructure assets, decisions about their type, design and location determine the trajectory of emissions for years to come.

In fast-growing Asia, where infrastructure development needs to accelerate to meet rapidly growing demand, governments are struggling to deliver infrastructure services while avoiding negative environmental impacts. In response, the OECD-led Sustainable Infrastructure Programme in Asia (SIPA), funded by the International Climate Initiative (IKI), is taking a novel, transformative approach to aligning financial flows with the Paris Agreement, by mainstreaming climate and resilience into the infrastructure development cycle and promoting a whole-of-government approach to planning, financing and delivery.

Planning for an unpredictable future

Good infrastructure planning requires the effective risk management. SIPA has provided the governments of Indonesia and the Philippines with strategic foresight tools to future-proof infrastructure plans and increase resilience to future shocks. SIPA facilitated foresight workshops with several government departments to stress test development plans against plausible shocks and develop ‘no regret’ policies that will remain beneficial regardless of the future that emerges.

The Philippines’ National Economic and Development Authority (NEDA), the government agency responsible for the Philippine Development Plan (PDP), recognised the urgent need to prioritise climate change resilience in infrastructure plans. The OECD provided detailed input on how to strengthen resilience in the PDP, and new resilience indicators were included in the revised plan, adopted in January 2023.

Building for the future without breaking the budget

The transition ahead is daunting. The investment required is huge and national budgets are already stretched. That’s why the leveraging of private infrastructure finance remains central to SIPA’s work.

To support the decarbonisation of industrial sectors in Indonesia and Thailand, SIPA is piloting the Framework for industry’s net-zero transition. Through consultations with policy makers and local industry representatives, SIPA is identifying technologies or projects in high-impact industrial sectors that have the greatest abatement potential but face difficulties in accessing finance. In Kazakhstan and Mongolia, SIPA is supporting the decarbonisation of export-oriented industries, including policies to mobilise investment in low-carbon technologies such as renewable hydrogen.

In Uzbekistan, SIPA has focused on facilitating the use of green bonds to finance sustainable projects. Bonds are a financing instrument through which an issuer – a bank, company or government – is lent money by investors over a defined period of time against the promise of regular reimbursement payments at a set interest rate. A green bond is like a conventional bond except that the issuer is obliged to use the creditor’s money for environmentally beneficial purposes (e.g., to finance the construction of new renewable energy capacity) as defined in an issuer’s green bond framework. In 2022, the OECD organised a peer-learning workshop between SQB, one of Uzbekistan’s largest banks, and Ameriabank, a pioneering Armenian bank with a strong track record in green bonds issuance. It facilitated a direct, frank exchange between bankers on the opportunities and risks presented by green bonds. Following the workshop, SQB became the first bank in Uzbekistan to issue a green bond in 2023.

Investing in the future by investing in people

It is easy to overlook the individual in the transformation of national infrastructure systems, but the capacity of the individual determines the quality of infrastructure decisions. Since its inception, SIPA has focused on providing the right tools for decision making by delivering practical, targeted capacity building to policy makers.

In Indonesia, SIPA and its partners run annual week-long training sessions on mobilising finance for clean energy. Crucially, these training sessions aim to equip participants with the knowledge and confidence necessary to train their peers on the topics covered. In Central Asia, the OECD and the University of Central Asia have convened annual SIPA Summer Schools bringing together policy makers from across the region for multi-day, hands-on training sessions on infrastructure planning, evaluation and financing. The Summer Schools have helped to strengthen the sharing of information across the region and cemented strong professional relationships across ministerial portfolios and national borders.